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David Kempton: my answers to the big investment questions
Experienced investor David Kempton is clinging onto a big cash holding, but eyes profits from China.
As we move towards the new year, it is useful to reflect on the achievements of the last one. They seem hard to spot, but times have changed and in some cases even for the better.
Is Europe closer to resolution? Greece and Ireland look slightly better, but what of Spain and France with recently elected president Francois Hollande?
The US election probably got the result investors wanted, but what of the fiscal cliff?
Was the Arab Spring a success? What is next for Libya, Egypt, Syria, Iran and Israel?
Is China still cutting back or have we reached stability?
There will be reams written in the press through Christmas and into the new year, but I will remain steadfast in my beliefs of what lies ahead.
Europe’s worrying unemployment
Europe is little closer to resolution and could yet divide between the haves and have-nots. But, does it really matter as much as a year ago? I suspect not. Whilst clearly still crucially important to the UK, our exporters are doing brilliantly in their essential efforts to seek other more distant and reliable markets, as did Germany before.
I fear most for the 20 million unemployed in the euro-area, nearly 4 million of them under 25, and expect riots on our streets this winter. I like Ruth Sunderland's comment in the Daily Mail that the older unemployed get depressed and take to the bottle, the younger get angry and take to the streets.
From fiscal cliff to energy independence
The US looks better and the fiscal cliff will get fixed by being pushed out over time.
Ahead in the US we have the game changer of cheap energy independence, which brings with it great swathes of industry becoming price competitive again. Cheap emerging market-based manufacturing is coming home, with obvious benefits to the labour market, balance of payments and consumer sentiment.
Shale gas is not quite a done deal and talk of US becoming the world's biggest gas exporter by 2015 may be precipitate, but nevertheless Boston Consulting Group estimates that in three years US manufacturing costs will be 15% cheaper than those in Europe, 8% cheaper than Japan and only marginally more expensive than China. Watch the housing index next year; this is always the key barometer.
China growth translates to UK tourism gains
China has reached stability and a recent visit to Hong Kong persuaded me that the new level of Chinese state investment spending is viewed as more comfortable, whilst China’s new leadership appears keen to address the difficult and pressing social issues.
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