Agree? Wall Street Chief on U.S.’s Future: ‘China Is the One Winner in This Crisis’

[Shuimo]

June 23, 2009, 4:15 PM ET
By Michael Corkery

In case any of the attendees at the International Bar Association’s M&A conference were starting to feel a little more optimistic (http://blogs.wsj.com/deals/2009/06/23/five-ma-bright-spots-from-jp-morgans-braunstein/) about the outlook for deals this year, Roger Altman just threw out the wet blanket. And a persuasive wet blanket at that.
http://s.wsj.net/media/rogeraltman_D_20090623155235.jpgBloomberg News
Roger Altman speaks at the 2007 Dow Jones Private Equity Conference in New York.


Altman, chairman and founder of boutique investment bank Evercore Partners, told a room of 200 M&A lawyers and bankers here at the Waldorf Astoria that the global financial crisis has put the “Anglo-Saxon model of free-market capitalism out of favor.”
“A new period of state intervention, re-regulation and creeping protectionism has begun. Globalization itself is reversing, and the idea that everyone wins in a globalized market has been undermined,” Altman said.
That is going to lead to less cooperation internationally and more instability in “flashpoint” nations such as Russia and Iran.
Back in the U.S., Altman expects a “subnormal recovery,” with annual economic growth in 2010 and 2011 of a measly 2%, not the more-optimistic estimates of 3.2% and 4% that the White House expects in those years. Consumer spending will remain depressed, as Americans keep shedding debt and losing jobs.
Also, don’t be fooled by the recent uptick in corporate refinancing and securities offerings, says Altman, who was a deputy Treasury secretary under President Clinton. Most U.S. companies that aren’t large enough to access the capital markets still can’t obtain loans because bank lending is severely constrained.
So, is there any place to find deals?
Yes. China. Evercore recently created a joint venture with a large Chinese securities and financing firm. He said the firm’s thirst for profit “make us look like quasi-socialists” by comparison.
Altman expects more M&A between Chinese companies and more cross border deals with China. He said the type of protectionist issues that arose amid Cnooc’s failed bid for U.S. oil concern Unocal a few years ago “will be overcome.”
“China is the one winner in this crisis,” Altman said. Its economic growth is picking up again and its financial system is largely unscathed. As for the rest of the world, it is going to a “long, painful” slog.
Remarked one European M&A lawyer after the speech: “If I wasn’t depressed before, now I am.”
http://blogs.wsj.com/deals/2009/06/23/wall-street-chief-on-uss-future-china-is-the-one-winner-in-this-crisis/ (http://blogs.wsj.com/deals/2009/06/23/wall-street-chief-on-uss-future-china-is-the-one-winner-in-this-crisis/)

[2Sheds_Jackson]

China has wound up holding several trillion US dollars, which we can devalue at our whim. Tens of thousands of Chinese factories have closed because of the lack of foreign orders for those goods. I'd hardly say they're "unscathed".

I'd also point out that bankers were the ones who drove the US economy to the brink, so I don't exactly look to them for economic advice. Just because some jagoff banker sees the next opportunity to exploit the system is in China, that's no indication of the soundness of their economy. It only means he figures he can get in, make his money, and get out before it all collapses.

[tea drinker]

Nice post 2 sheds.

The financial regulators were asleep at the wheel in most countries, FFS they couldn't even hold onto the depression era safeguards.... against depressions.

As for Altman's Russkie prediction, they are losing some ground, but not enough so far that prudent spending can't contain.

I'm getting quite worried about the amount of control China is getting in worldwide infrastructure, enough to kill an economy overnight. And most likely their bids are state discounted (anti competitive)
Agree about Chinese business, they are sharks, too many scandals about recycled waste used as baby food and what not. But Western business now make it difficult to buy non chinese products. Some kids toy stores don't have any cuddly toys not made in China - hardly helping the local economies is it?

[sinophile]

“China is the one winner in this crisis,” Altman said. Its economic growth is picking up again and its financial system is largely unscathed. As for the rest of the world, it is going to a “long, painful” slog.

Altman has so many more zeroes in his paycheck than I do that I hesitate to disagree with him. But I do disagree. I don't see a trade (or deal) in China right now or in the next 2 years minimum. Their going to suck wind same the US IMHO.

[Shuimo]

China has wound up holding several trillion US dollars, which we can devalue at our whim. Tens of thousands of Chinese factories have closed because of the lack of foreign orders for those goods. I'd hardly say they're "unscathed".

I'd also point out that bankers were the ones who drove the US economy to the brink, so I don't exactly look to them for economic advice. Just because some jagoff banker sees the next opportunity to exploit the system is in China, that's no indication of the soundness of their economy. It only means he figures he can get in, make his money, and get out before it all collapses.

Well, if we are all losers, then the one who suffers the least losses counts as the only winner, what do you think?rofl

In an odd way, we Chinese think the longer the current crisis lasts, the better the situation for China!rofl

I hope this is not too difficlut an idea to grasp!:bash:

[Shuimo]

Nice post 2 sheds.

The financial regulators were asleep at the wheel in most countries, FFS they couldn't even hold onto the depression era safeguards.... against depressions.

As for Altman's Russkie prediction, they are losing some ground, but not enough so far that prudent spending can't contain.

I'm getting quite worried about the amount of control China is getting in worldwide infrastructure, enough to kill an economy overnight. And most likely their bids are state discounted (anti competitive)
Agree about Chinese business, they are sharks, too many scandals about recycled waste used as baby food and what not. But Western business now make it difficult to buy non chinese products. Some kids toy stores don't have any cuddly toys not made in China - hardly helping the local economies is it?
WHy should you worry about China growing big?
China is just a big powerful country!
Why should you expect China to be small like Chile or insignificant as Chad?:bash:
WE believe we still take too small a share in the world's economy, particulalry in comparison with the US.

Calm down!
China is just on the road for rejuvination!:)

[Ordie]

We take anything from Wall Street with a grain of salt nowadays.

[Shuimo]

We take anything from Wall Street with a grain of salt nowadays.

that is good!
So do us Chinese with anything said by Americans!rofl

[FullMetalJackass]

We take anything from Wall Street with a grain of salt nowadays.


Agree with you on that. And anything from the current leadership as well. They are all selling us down the river.

[fooj]

Altman has so many more zeroes in his paycheck than I do that I hesitate to disagree with him. But I do disagree. I don't see a trade (or deal) in China right now or in the next 2 years minimum. Their going to suck wind same the US IMHO.

I completely agree, I rode the emerging markets bubble up and got out just in time. I don't see a China play for awhile yet. China still has positive growth, they are a country of net savers and their banks are solvent but they're in this nasty dollar trap that they can't get out of fast enough before the USD goes terminal.

I agree with Shuimo though, the winner is the regional economy that has been hurt the least and it's probably China.

My money is in commodities.

[sepheronx]

The biggest aspect that China has over a lot of countries from this crisis, is that once it is over, china will have one the largest (if not already) development infrastructure in the world. Because of foreign investments and because of the other countries, China was developed into what it is. If US kept on investing in their own country, they would not have been in this mess. If US kept on providing work for their people and invested a lot into each state, each city, each town to make sure that everyone has what they need and can provide back to the government with both goods and tax money, then this would not be a problem.

China may have a lot of money from the US in their bank. They may hold a huge portion of the world with their money. But in the end, the world can turn around and say "no, we don't owe you anything, what are you going to do about it?" and China would be in big trouble (just like Brazil did to the IMF). But China has the capabilities of being a big power due to the infrastructure created for them, and the know how to develop what they have already, into something better.

Just my $0.02

[ronnieraygun]

the bcci guy? huffing wonder woman's panties again?

yeah, i get it. the us is spending money faster than it can be printed and the chinese own a lot of our debt.


Globalization itself is reversing, and the idea that everyone wins in a globalized market has been undermined...who actually believed in "globalization" with a straight face anyway besides a few call center owners in India.

[fooj]

The biggest aspect that China has over a lot of countries from this crisis, is that once it is over, china will have one the largest (if not already) development infrastructure in the world. Because of foreign investments and because of the other countries, China was developed into what it is. If US kept on investing in their own country, they would not have been in this mess. If US kept on providing work for their people and invested a lot into each state, each city, each town to make sure that everyone has what they need and can provide back to the government with both goods and tax money, then this would not be a problem.

China may have a lot of money from the US in their bank. They may hold a huge portion of the world with their money. But in the end, the world can turn around and say "no, we don't owe you anything, what are you going to do about it?" and China would be in big trouble (just like Brazil did to the IMF). But China has the capabilities of being a big power due to the infrastructure created for them, and the know how to develop what they have already, into something better.

Just my $0.02


China will have to take a haircut on their USD denominated foreign reserves and accept the inevitable losses. I don't see it any other way. I think they are cutting their losses and doing what it can now to reduce it's reliance on the USD by promoting future growth via new bilateral trade agreements, massive infrastructure spending and gobbling up as many commodities as it can.

The problem with the US is they killed their manufacturing base and turned from the worlds biggest creditor nation into the worlds biggest debtor nation in one generation.

[Ordie]

that is good!
So do us Chinese with anything said by Americans!rofl

Including myself?

[Ordie]

I completely agree, I rode the emerging markets bubble up and got out just in time. I don't see a China play for awhile yet. China still has positive growth, they are a country of net savers and their banks are solvent but they're in this nasty dollar trap that they can't get out of fast enough before the USD goes terminal.

I agree with Shuimo though, the winner is the regional economy that has been hurt the least and it's probably China.

My money is in commodities.

The Chinese government's legitimacy is based on positive economic growth and stability. (Not free elections)

Therefore, the government will prop up its economy at any costs, including manipulating its stock market.

[fooj]

The Chinese government's legitimacy is based on positive economic growth and stability. (Not free elections)

Therefore, the government will prop up its economy at any costs, including manipulating its stock market.


I can buy that. The CCP fears it's own people more than outsiders. I understand it as an unwritten social contract. We, the government, will allow you, the people, the right to prosper and grow wealthy, make as much dosh as you please, but in return you will cede absolute political power to us. An interesting piece of social engineering.

I don't doubt the Chinese government would prop it's own economy up at all costs, they certainly have the will and the means to. I think China will be a good investment in the long run, but the Chinese markets are still embryonic and not so unique that they aren't immune to global systemic fluctuations in the short term.

[Fat Lazy American]

Who promoted Roger Altman to Wall Street Chief? And why is this news? For chrissake the guy wrote a gloom-and-doom China-is-rising front page article for the Jan/Feb "Foreign Affairs". But when he tells it to a bunch of M&A lawyers, whoa, stand back!


So, is there any place to find deals?

Yes. China. Evercore recently created a joint venture with a large Chinese securities and financing firm. He said the firm’s thirst for profit “make us look like quasi-socialists” by comparison.And remember, kids, when rushing all of your capital to China, be sure to use CITIC Securities International Partners for all your mergers and acquisitions needs. They make Americans look like quasi-socialists!

At least Altman is putting his money where his mouth is. By partnering with a government-owned Chinese company.

[Ordie]

I think China will be a good investment in the long run, but the Chinese markets are still embryonic and not so unique that they aren't immune to global systemic fluctuations in the short term.

Perhaps so.
But I as an investor I would not be totally confident in China unless I have legal protections under the rule of law.

I need to know if my contracts would hold up in the law of court if I'm challenged by the bureaucracy or party members.

If not, then I would reconsider Shanghai and move to Hong Kong as my base of operations.

[Mackie]

Well, I would agree with the title if we would have the same priority - democracy.
It's always easy to develop, let me say 3% of the country, show it as your power to the world and cop down the rest of the population.
BTW:
I recommend the last reports about Tibet. Western reporters saw the free region. A very sporty folk. Masses in sport suits ;-)

[acosta]

nope. China is Never the winner of the crisis. its people suffer material loss, and factories laid off workers from rural area... tragic...

[Shuimo]

nope. China is Never the winner of the crisis. its people suffer material loss, and factories laid off workers from rural area... tragic...

All lose!
WE lose the least!rofl

[Shuimo]

The biggest aspect that China has over a lot of countries from this crisis, is that once it is over, china will have one the largest (if not already) development infrastructure in the world. Because of foreign investments and because of the other countries, China was developed into what it is. If US kept on investing in their own country, they would not have been in this mess. If US kept on providing work for their people and invested a lot into each state, each city, each town to make sure that everyone has what they need and can provide back to the government with both goods and tax money, then this would not be a problem.

China may have a lot of money from the US in their bank. They may hold a huge portion of the world with their money. But in the end, the world can turn around and say "no, we don't owe you anything, what are you going to do about it?" and China would be in big trouble (just like Brazil did to the IMF). But China has the capabilities of being a big power due to the infrastructure created for them, and the know how to develop what they have already, into something better.

Just my $0.02

Wow, what you said is precisely what my gov has been doing!rofl

China already has a massive infrastructure network!rofl
With the advent of the crisis, we are energetically pushing the construction to a new height!:bash:

Express way network expanding, high-speed railway network construction, power-grid updrading, agricultural facilities improvement, industrial base renovation, social security net building............

Wow, my gov has so many things to do with so much money to spend!woot

[hskywalker]

In an odd way, we Chinese think the longer the current crisis lasts, the better the situation for China!rofl

You have no idea what is happening in private sector. Some people's life are influenced. And the stupilus package whatever that is doesn't help everyone.

[Shuimo]

You have no idea what is happening in private sector. Some people's life are influenced. And the stupilus package whatever that is doesn't help everyone.

Of course I know!

Job cuts and drastic decreased orders from the outside!

They simply need to be hard tried in these trying times!rofl

[fooj]

Perhaps so.
But I as an investor I would not be totally confident in China unless I have legal protections under the rule of law.

I need to know if my contracts would hold up in the law of court if I'm challenged by the bureaucracy or party members.

If not, then I would reconsider Shanghai and move to Hong Kong as my base of operations.

Yah, I wouldn't consider any direct investment in China at the moment whether it be equities or real estate. It's like a regulatory wild wild west over there. I've heard so many horror stories. I'll stick to leveraged ETFs for now or companies that do the bulk of their business in China.

[Laworkerbee]

that is good!
So do us Chinese with anything said by Americans!rofl

As we will do with regards to your posts as long as you keep acting like an asshole.