From Barron's Asia stocks to watch:
In its annual report to shareholders, BlackRock‘s chairman Larry Fink has a few harsh words for G7 central bankers.
“Not nearly enough attention has been paid to the toll these low rates — and now negative rates — are taking on the ability of investors to save and plan for the future,” wrote Fink.
Specifically, “people need to invest more today to achieve their desired annual retirement income in the future. For example, a 35-year-old looking to generate $48,000 per year in retirement income beginning at age 65 would need to invest $178,000 today in a 5% interest rate environment. In a 2% interest rate environment, however, that individual would need to invest $563,000 (or 3.2 times as much) to achieve the same outcome in retirement.” So imagine how hard Japan’s young people have to save since the Bank of Japan went negative in January!
Meanwhile, jobs are being replaced by machines and people are living longer, so we will see a generation of people growing older and not having enough money to live through their golden age. Fink wrote:
While the valuations of many high-growth tech firms have fallen in recent months, automation and innovation are accelerating, putting downward pressure on jobs and transforming industries. Research cited in the United States’ 2016 Economic Report of the President suggests an 83% probability that automation will replace jobs that have an hourly wage below $20.
Workers and governments must also navigate the effects of increased longevity, as large segments of the population are increasingly unable to support themselves in old age and we have yet to find effective ways to fully harness their economic potential or longevity dividend.
Here is the harshest part:
The failure of governments globally, including the United States, to develop and execute plans for long-term growth and address the dire need for investment in infrastructure distorts the role of monetary policy, diminishes employment opportunities and hurts savers by robbing them of vibrant economies to invest in.
In his quarterly review, well-respected CLSA‘s chief strategist Christopher Wood complained about that too. See my April 7 blog “CLSA’s Wood: BoJ Losing Credibility, China’s “Hard Money”.
All of these harsh public commentaries occur as the Japanese yen rose to another 17-month high this morning. So the question is: Will the BoJ double down at its next meeting later this month?
Hell, yeah, according to HSBC‘s Frederic Neumann. The BoJ will most likely not push further into negative rates as Japan will be hosting the G-7 meeting next month. But it can still buy stock ETFs big time to lure foreigners back, or just use helicopter money outright. Neumann wrote:...MORE