China and EMEA

Isn't it easy, obvious and satisfying to blame issues on someone else? We did it in school ("the teacher hates me") and the US did it on a host of countries, Germany, Japan and now China related to trade issues ("their currency is undervalued or being manipulated on the world market").

But look at the facts - China has made consistent investments in emerging markets including Eastern Europe, Africa and Middle East (EMEA) region even during the difficult 2008-2009 period to emerge as the dominant investor and trade partner of the region replacing the USA and almost Germany as key trade partners for the region.

This represents a strategic direction of China to secure raw materials for its production facilities - and it stays the course. They continue to invest.

Post Road Advisors performed an analysis and indicated that far from retreating in the crisis - China continues to expand trading and investment in the EMEA region (see graphic above).

The USA, on the other hand, is falling further and further behind in trade with the EMEA region. What will help? Well the devaluation of the US Dollar will certainly make things from the US cheaper - but the question is - who wants to buy US goods?

In a poll on Thursday NPR interviewed several South Koreans in the wake of Mr. Obama's visit. No speaker was remotely interested in a US car and preferred Asian - even the hated Japanese - over a US vehicle. So it seems that only Americans are willing to buy GM cars.

We got a Wayze to Go

I attended a reception last night in NYC hosted by a prominent work-out law firm and at the invitation of a good friend. It was one of the few corporate "Holiday" events that I believe will be occurring this year so I seized the opportunity.

The venue was appropriate - not ostentatious - but very nice - and the crowd was about 200 work-out/restructuring specialists. The usual big work out (WO) names were there and a bunch of private equity (PE) folks - and the usual assortment of lawyers, bankers and consultants (like me).

Some of the WO folks were busier than heck - others were seeing a declining market as companies are either liquidating or recovering. What a lot are seeing is a continuing stream of labor entering the unemployed market through continued employee shed. Thank goodness the Senate approved another extension to unemployment benefits!

On the PE side, the folks I spoke with said that they've run out of money to invest - simple as that. Some have not made an investment for a year - they just try to manage redemption calls and liquidity. Other bankers that I spoke with, especially European, are still eyeing the market but remain sceptical. Almost all headcount is frozen for this year and we'll see for next year.

The unemployment numbers will come out Friday and I predict 10.1%. I believe it will be a very subdued consumer Holiday Season - which will depress retailers. The recent reports by GM and Chrysler are great reading - where do they think they are going to pick up this magical new market share? Do you think I am selling my Toyota Prius for a Chrysler/Fiat? Interesting.

So, all in all - while there are proclamations of economic growth - we have to get real - there is still a lot of pain to work through.

Now, the areas that are actually growing (and not through artificial "cash for clunkers" programs) are Asia and the emerging markets. Macquarie is starting 3 new funds in Austria for Eastern Europe investment. Renewable energy continues to be strong.

More on that shortly.