Lai See

PUBLISHED : Wednesday, 30 November, 2011, 12:00am
UPDATED : Wednesday, 30 November, 2011, 12:00am


Forget the financial crisis in Europe, try emerging economies instead

Some of you may be fretting about the ongoing financial crisis in Europe but, according to Robert Friedland, the founder and chief executive of Ivanhoe Mines, it's just a blip and in five years when we all look back it will barely register.

Speaking at Renaissance Capital's emerging markets investor conference in Hong Kong yesterday, he said: 'Europe is not important, it is barely growing. Okay, Italy is a major industrial country and makes beautiful things, Ferraris, clothes, shoes, and so on. My wife likes Italian clothes and so do the girlfriends,' he added amid guffaws.

The growth is in the emerging economies, where it just so happens most of Friedland's mines are. Europe is not important, according to Friedland. 'It's Disneyland. It's a place where the Chinese like to come and sample foie gras and cheese.'

There's going to be a policy response in Europe that is slowly getting closer. But before we get there, 'First we have to freak out, have a lot of fear, the urine has to run down your leg, the media needs to really scare everybody, then comes the policy response, that's what creates the conditions for the policy response.'

Friedland thinks we're three months away from that. He says he doesn't know how the resolution will play out but essentially what will happen is that, 'These politicians are going to destroy their currencies in order to depreciate their debt. They are going to reflate the world economy - this is really going to happen. It's a slow process. It's like watching a glacier - you don't see it day to day, then you freak out over what you read in the media.'

At this stage the euro and the US dollar will be free - there will be no interest from the banks for these currencies. 'The US will print money like crazy.' We are measuring the price of everything in the value of these useless US dollars. In five to 10 years he assured us, 'a cup of coffee at Starbucks will cost US$25 compared with 10 cents when I was a kid'.

The only rational place to put ever-depreciating currency is in productive assets in the developing world. So although he doesn't know how the euro crisis will be resolved, the outcome is very predictable. 'There are 10 billion people in the world and everyone wants everything. There are screaming imperatives to keep it all moving.'

According to Friedland, the choices facing the developed economies are those facing a man walking across a tightrope over the Niagara Falls. 'On one side you have a deflationary meltdown which is really terrible. It's much more fun to go the other way of an inflationary spiral, and that is where we are heading, and that benefits gold.'

Investing in the developing theory sounds fine in theory, but what about geopolitical risk?

Friedland said the geopolitical risk in an emerging market such as Mongolia was much lower than in countries like the US and Canada, adding, 'That redhead that runs Australia has changed all the rules.'

Friedland says he invests in emerging economies. 'We operate on the rubber knife theory. A lot of these places look really scary but they won't hurt you at all.'

It's overpriced - don't buy it

The music industry has come under fire recently, and this time Elvis Costello is taking the unusual step of telling fans to stay clear of his latest collection. The outspoken songwriter has told fans that a new boxed set is overpriced. 'We at find ourselves unable to recommend The Return Of The Spectacular Spinning Songbook as the price appears to be either a misprint or a satire,' he wrote on his website.

Costello told fans all his attempts to have the price cut had failed, so fans should buy Ambassador of Jazz - 'a cute little imitation suitcase containing 10 remastered albums by one of the most beautiful and loving revolutionaries who ever lived - Louis Armstrong. He said the box should be available for less than US$150 and 'frankly the music is vastly superior'. Mind you, this is the guy that famously sang:

I wanna bite the hand that feeds me

I wanna bite that hand so badly

I want to make them wish they'd never seen me

Lai See bets they're sorry now.

Cybercrime on the rise

More than a third of businesses and other organisations around the world were victims of economic crime in the last 12 months, according to respondents to PwC's global economic crime survey released yesterday. And nearly a quarter of victims said they were subject to cybercrime - the use of technology as the main element in the economic crime. Overall, 34 per cent of respondents said their organisations were victims of economic crime, a 13 per cent increase since 2009.