Days until the election: 158
Goldman Sachs, the former investment bank (and now — in the wake of the financial crisis to which they so significantly contributed — just a plain old bank) may not be the first institution you’d turn to for advice.
Still, spurning a Golman Sachs tip may be misguided. After all, the reason that they are so reviled for their conduct during the subprime mortgage debacle and the reason that there are Occupy Wall Street protestors parked on their doorstep is not that their information prior to the 2008 financial collapse was inaccurate. Just the opposite.
At that critical moment Goldman Sachs possessed very accurate information, moreso than the rest of us, and that is where the problem started, because they kept that information to themselves and started selling off subprime mortgage assets that they knew perfectly well were going to tank and drag whoever owned them into financial oblivion. Then, just to make matters worse, they went out and bought insurance coverage that was essentially a bet that those assets would fail, so that when their customers lost their shirts, Goldman Sachs made yet more money, a practice for which they are now being sued.
If you never really understood what happened in the terrifying financial maestrom that hit the world in late 2008, or if you’ve forgotten, take a quick look at the video below for a fairly down to Earth refresher. Really, watch it, it’s worth it.
And in case you’re scoffing and imagining that this guy is some raving hippie in disguise, remember that (a) none of the facts I’ve just listed are in dispute, and (b) Dylan Ratigan, the guy in the video, used to be the Global Managing Editor for Corporate Finance at Bloomberg L.P., a company that accounts for fully one third of the global financial data market — not exactly a rabid anti-capitalist.
Okay, so point made, but really, who wants to talk about Goldman Sachs today? It’s a beautiful sunny day outside (at least it is where I am) and this is a blog about Mexico, not about Wall Street.
All true, but Goldman Sachs recently made a pronouncement about Mexico that may be worth some attention. Before discussing it, however, I wanted to remind you of the distinction between the company’s moral culpability and the accuracy of its information. It may recently have conducted itself in a manner that gives new meaning to the adjective “venal” (or to the compound noun “scumsucking devil-spawn” if you prefer), but its intel is generally pretty good, so when they speak we might want to listen.
And what is Goldman Sachs saying about Mexico?
Well, Jim O’Neill, the guy who originated the economic concept of the BRIC (as well as coining that nifty new addition to the economic lexicon) to describe the booming (and inter-related) ecomonies of Brazil, Russia, India, and China, and who is currently the chairman of Goldman Sachs Asset Management, says Mexico is headed for better times.
According to a report entitled “Goldman Sachs: Turkey and Mexico Will Be The Next Big Thing” on Kapitall.com:
In an interview with Tracy Corrigan, Editor-in-Chief of The Wall Street Journal Europe, O’Neill says of the 8 high-growth economies (the fours BRICs, Korea, Mexico, Turkey and Indonesia), “Their aggregate dollar GDP will be probably double that of Europe and the US put together” in the next year.
“Istanbul, in my opinion, arguably the most exciting city in this whole European-Middle Eastern-Africa time zone, and then oddly I find myself thinking about Mexico, which had a really bad decade… But as China gets wealthier and wages rise there, maybe Mexico gets huge benefits from that, so I wonder if Mexico could really positively surprise.”
The global middle class is growing rapidly, he says, and it’s a good story for everyone. Growing demand will be felt in many economies, and these emerging economies could benefit most.
You can watch the full interview, entitled “Jim O’Neill Picks the Next BRICs,” here. You can find an in-depth article by O’Neill here (the title “Jim O’Neill: Welcome to a future built in BRICs” doesn’t indicate that the content is related to Mexico, but it’s a prominent player in his overall thesis.)
And just in case you think Jim O’Neill is a voice in the wilderness, check out Kenneth Rapoza in Forbes with his hyperbolically-titled article “Emerging Markets To Crush Developed Economies For Decades, Says BlackRock”, who reports:
Investing in emerging markets has changed dramatically over the last few years. These countries, led by the BRIC — Brazil, Russia, India and China — have shown dramatic financial, economic and political development. Their governments also have a healthier balance sheet than those in the core economies. And demographics favor nations like Brazil, India, Mexico and Indonesia in particular.
Now, gaining prosperity through sheer numbers and by catching China’s cast-off low-wage industry is not necessarily the way one wants to get rich, but maybe it’s better than not getting rich at all.
So with all the bad press Mexico is getting these days, let’s hope that this time Goldman Sachs is not only correct, but is also playing straight with us. And even if we can be forgiven for mistrusting Goldman Sachs as an institution, maybe we can rely on Jim O’Neill — who has quite a reputation to protect — to provide accurate information.