The New Investment World: Together and Separate

Barack Obama made history today when he was elected the 44th president of the United States. A page has turned and many are breathing a sigh of relief.  With the credit market thawing and the impending change in leadership, perhaps a sense of optimism is starting to emerge. 

We need it don't we?  It feels like the sky has been falling forever when really, we've been in crisis for less than a year.

All of Asia waits to see what an Obama administration will mean as it continues to assert its influence in the global economy. Isolationist? Trading partner? Friend or foe?  Will it matter?

Of course it will.  But let's be clear -- Asia is far more independent than many in the U.S. realize. Government efforts throughout the region to establish their economies as separate entities have yielded great results. 

Still, economies are connected on a global basis.  For better or worse, each rely on the other for both growth and stability. 

In a recent research trip to Beijing, I had the opportunity to hear members of China's Central Bank and leading Asian economists talk about the credit crisis from an Asian perspective.  While there certainly is recognition that we are all in this together, the world is realizing that there are independent dynamics at work that make Asia, and its subset economies, a force to be reckoned with on their own.

Take the property market downturn in Asia as an example. Values are down. But there are fundamental differences between U.S. real estate and say real estate in China or Singapore.

For example, property in the U.S. was purchased often with little down payment.  In China, the typical down payment exceeds 20 percent.  The current China downturn looks more like a typical real estate cycle than a structural deleveraging process as it does in the United States. 

This is just one example. It's interesting how some speculate that Asia is fraught with risk. Granted Asian equities have fallen off a proverbial cliff relative to western countries, but as is always the case, careful selection matters, as one tries to minimize volatility. 

We need to recognize that independent economies and the market, together to form the global economy.  We are not alone in this anymore. Painting any economy and market, as a disconnected island is both incorrect and potentially unprofitable.

Three cheers for a cautious global strategy.  Together and seperate; welcome to the new investment world.

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