ALEX BRUMER: You can count on the economic “elite” of Davos to be wrong when it comes to big market calls

Will he finally get the message of the Davos elite? This year’s meeting in late spring takes place without the double pillars of US finance – the indispensable Jamie Diman of JP Morgan and the world’s largest investor Larry Fink of BlackRock.

It’s a bit like holding platinum anniversaries without a queen. Topics emerging in the Swiss mountains so far are forecasts after Covid and Ukraine about the end of globalization and how the crypt will remain.

Longtime Davos observers can be sure that regardless of the consensus of this self-electing elite, it will always be wrong.

Topics that appear at this year’s World Economic Forum in Davos so far are forecasts after Covid and Ukraine on the end of globalization and how the crypt may remain

On the eve of the great financial crisis of 2007-2009, the idea that the banking system faced an existential event, burdening the balance sheets with insignificant structured debt built on rotten US mortgages, received almost no review.

Smart hedge funds have already noticed this crack in global finance.

Former Fed Chairman Alan Greenspan’s view that the planet was a safer place because derived products spread risk turned out to be terribly wrong.

In fact, a series of financial explosions erupted that demanded global help.

The consequences in the form of new inflation are now being felt.

In 2017, opinion leaders in Davos lost consciousness in the presence of current Chinese Supreme Leader Xi Jinping as the new true voice of globalization. What has happened since then?

President Xi knocked out the stuff of democracy in Hong Kong. He sent Chinese businessman Jack Ma into outer darkness, pinned down free markets and threatened Taiwan with military flights.

He is now helping to keep President Putin afloat in Russia. None of this was predicted, as obsessed bosses and part of the Western liberal media lost consciousness in his presence.

When Davos founder Klaus Schwab presided over the events of January 2020 after Covid-19 broke China, the global pandemic and economic downturn were far from the list of risk factors facing the global economy.

And this despite the fact that much of what we buy, from our clothes to our laptops, comes from China.

So what do we do with the notion that globalization is over?

What is undoubtedly true is that the two great bursts of economic growth of today – the leap in world trade between the 1870s and the First World War and the opening of the World Trade Organization in China in this century – were great generators of growth.

The coronavirus and the war in Ukraine have taught us that an economy “just in time” when countries and companies operate without a safety net is over.

Centrica, having abandoned gas storage in 2017 in Raf, off the east coast, is now advocating for renovations. Germany is looking for energy supplies to the Middle East.

The US transferred part of the production from China and so on. But the notion that the world’s most global companies, from Unilever to Volkswagen, are pulling a drawbridge in world trade is a fantasy. Steps will be taken to make the West less dependent on Russia and other rogue states.

Another big embarrassment in Davos is the presence in large numbers of what Reuters describes as a “crypto-crowd”. This includes a bitcoin pizza kiosk on Main Street, where cryptocurrency firms predominate.

After the $ 800 billion crypto market loss in May, it looks like the latest cocktail on the Titanic.

You can count on Davos to miss or make mistakes in vital market calls.

Gas mask

Crocodile tears from Michael Lewis, head of German energy giant E.On (no, not the ingenious author behind The Big Short) over the possibility that one in five families in the UK could find themselves in energy poverty this year as a result of the sharp fuel bills.

The head of E.On did not admit how his company complicated the situation in Europe by refusing to support the work of its nuclear power plants.

Moreover, he did not admit that now in the UK there is a supersaturation of liquefied gas and wholesale prices have fallen off the cliff.

If E.On and other major energy firms really cared about consumers, they should think about how part of the benefits could be passed on by easing upward pressure on prices.

This is how competitive markets should work.


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