Property Going Global February 2012 | Page 24

SCOTT PICKEN PROPERTY GOING GLOBAL after Bin Laden, it had flags, and needed to connect those flags in order to develop a likely probability. Looking at photo­ raphs of the village g and compound in which the CIA felt Bin Laden might live, and when they deciphered the houses he occupied, the head of the CIA called for a meeting of all the people involved in hunting Bin Laden down. Analysts had determined the most probable house Bin Laden was in, because photos showed three women in the courtyard and only two men (flags). But, because there were three women, there was a good chance there were three men (probability). Analysts pointed out, there were no incoming cell-phone or telephone calls to the house (flag), which, by experience indicated there was a senior leader living there (probability). Based on those two points, which I called flags, the probabil­ty that i Bin Laden was in that particular house was 60% to 80%, and they went in and killed him. Our scenario-based model tries to give investors that type of range when investing in equities, buying bonds, or buying prop­ rties, let alone e choosing which market or country to invest in. That’s how this model works, and here are four scenarios we’ve developed for the global economy. By studying these scenarios and estimating their chances of occurring, we have been able to take much of the uncertainty out of investment in foreign mar­ ets, business or k property, or to, at least, give our investors a good sense of where to go and where to invest. hard times in America, we’re looking at probably a 2% economic growth rate, as opposed to Europe, which is less than 1%. It will be characterised by corrugated ups and downs in the global economy. In early 2013 Clem Sunter rated the hard-times scenario at about 40%. Go to www.mindofafox.com, to get the undated probabilities. Clem Sunter’s Global Scenarios Scenario 2: Emerging Economies Grow Strong Ultra-Violet The second scenario sees the advanced economies like America and Europe continuing along at an economic growth rate of 1% to 2%, but the emerging economies – China, India, Africa and South America – growing three times faster. Obviously, the strategy in this scenario is to chase the wheels in emerging economies. Africa, for example, has a com­letely different p image now, as opposed to the European view of the continent in 2000, when economists were calling it “the hopeless continent”. Now, because of its younger demographics, many American and European companies are all over Africa. But Clem Sunter rates the probabilities at 30%. If China is propelled to grow quickly, then obvi­usly all the countries o selling to China are about to grow at a rapid rate. But if China stumbles, then everyone is going to be in hard times. So, it is important to watch China. The critical flags are its GDP growth and its banks. Scenario 1: Hard Times In the 25 years from 1982 to 2007, we’ve had a strong economy, but the second part of that economic boom was artifi­ial, because it was c essentially propelled by credit. Now it’s payback time, and we have a mortgage disaster which led to the financial crash. Now the scenario is all about sovereign debts and governments being hopelessly ill-adapted, and trying to get rid of that deficit, and pay off the debt. This will continue to have a negative impact on the global economy. So, the hard-time scenario looks at a flat growth curve, as it is in Japan and, say, 0-1% for the next 10 to 20 years. It is also based on the aging of the European population and that of Japan. The US is in better shape, as it has younger demographics. The Latino and the African-American populations in US are still growing quite quickly. When we talk about 8 Scenario 3: US Cheap Money Policy Pays Off New Balls, Please This scenario is where many analysts will be proved wrong, and the head of the US Reserve Bank is right, as the US “cheap money” policy pays off. The US goes into full recovery mode, and this drives the whole world upward. There will be a multi-polar global economy, with more &