– This is the script of CNBC's news report for China's CCTV on August 11, Tuesday.
Welcome to CNBC Business Daily, I'm Qian Chen.
Global inflation rates were unchanged in June, and well below desired levels in developed nations, even as some central banks prepare to raise their key interest rates for the first time since the global financial crisis.
The Organization for Economic Cooperation and Development said Tuesday the annual rate of inflation in its 34 members was unchanged at 0.6% in June, well below the 2.0% regarded by most central bankers in developed economies as consistent with healthy economic growth.
Take a look this chart provided by BOE...
The persistence of very low rates of inflation is a worry for central bankers, since it threatens to permanently alter consumer expectations and makes it more difficult to attain 2% targets in the future.
Where does inflation go? What are the factors?
Besides commodity prices, Mark Jolley, Equity Strategist of CCB International Securities, said digital disruptors might be the next factor to bring deflationary risks.
[Mark Jolley Equity Strategist, CCB International Securities] "We got this massive force of digital disruption occuring, which is transforming everything we see, and driving down overall profitbility, causing deflationary pressure around the world. If you look at where we are at the business circle, we are very light in the up circle, probably in the next 6 months, if isn't happened already, we are going to move to the next business circle which is a down circle."
According to Mark Jolley,
1. The global business cycle is peaking now and will deteriorate into 2020;
2. We are in the early stages of a global deflation caused by digital disruption , excessive global debt and China's structural slowdown;
3. China is the only major economy able to ease significantly into the coming global downcycle.
Digital disruption is the core of our investment thesis. We have already seen a taste:
· the world's biggest taxi company owns no taxis;
· the biggest accommodation provider owns no real estate;
· the largest phone companies have no infrastructure;
· the largest retailer has no inventory;
· the largest media company creates no content;
· the largest movie house owns no cinemas and isn't on cable; and
· the largest software vendors don't write applications;
This is just the beginning of a revolution involving the digitization of consumption, of product and of production itself:
· Expected to displace 40% of current global industry;
Long term - as deflation sets in, global conditions deteriorate into 2017 and 2018
· Be overweight the industries least susceptible to digitization - pharma, utilities, oil & gas, manufacturers of consumer packaged goods (staples), health and life insurance;
· Be overweight the facilitators of digital disruption - cloud infrastructure and software services providers
CNBC's Qian Chen, reporting from Singapore.
Warren Buffet's SOTs
SOT Buffett on future deal
We'll probably be buying a few small things in the next 6 months. I mean, we are in negotiations on a couple. But in terms of deal of similar size, pretty much what we will probably do on this one is that we will probably borrow about 10 bn and use about 23 bn of our cash on that order. So we will be left with over 40 bn probably of cash when we get all through.
SOT Buffett on Precisions deal
In terms of price, earnings, multiples going in this is right up there at the top. Now when we bought Burlington that was a high PE but coming off a very depressed figure because we bought that in the Fall of 2009 when earnings were at a trough and Precisions earnings have fallen off moderately because of developments in the oil and gas field where they do some business as well as to aerospace so this is a very high multiple for us to pay.
[Macrae Sykes, Gabelli&Company] "Berkshire Hathaway is a 350 bn market cap, this is a 37 bn deal, so yes it's a [big deal for BH, but it's still a part of their bigger business. We estimate about 3.7 bn of EBITA(Earnings before Interest, Taxes and Amortization) in 2017, this will be a year out from when they close the deal, so this is about 10 times EBITA, which we think its fairly rational, not spectacular, but fairly rational for this type of business."
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