Lunch Panel: Global Financial Markets: Nouriel Roubini and Mike Milken Debate Where We've Been Where We're Going

Transcription

1 Lunch Panel: Global Financial Markets: Nouriel Roubini and Mike Milken Debate Where We've Been Where We're Going Wednesday, April 28, 2010; 12:15 PM - 2:15 PM Moderator: Matthew Winkler, Editor-in-Chief, Bloomberg News Speakers: Michael Milken, Chairman, Milken Institute Nouriel Roubini, Professor of Economics and International Business, Stern School of Business, New York University 1

2 Recession Ends: What Leads, What Lags Unemployment Payroll Employment Existing Home Sales New Home Sales Housing Starts April 1960 Feb Dec 1969 Nov Nov 1973 March Jan 1980 July July 1981 Nov July 1990 March March 2001 Nov Average Source: National Association of Home Builders.

3 Gross public debt (%GDP) Advanced economies PIIGS: Portugal, Ireland, Italy, Greece, Spain Source: European Commission. 3

4 1974 The most important t year in financial history since World War II.

5 Comparison: and Dow Jones Industrial Average, Dow Jones Industrial Average, Date: April 19, ,547 on March 9, on Dec. 6,

6 High-Yield Bond Pricing 1970s and 1980s Low Pi Price Date Range High Pi Price Date Range LTV Corp Grolier McCrory Rapid American Continental Illinois Realty Trans World Airlines (TWA) Gulf & Western City Investing Source: Datastream

7 High-Yield Bond Pricing Low Price 2009 Price 4/19/2010 Jefferson Smurfit Corp Clear Channel Freescale Semiconductor Lear Corporation Lyon William Homes Hovnanian Enterprises Michael s Stores Burlington Coat Factory Harrah s MGM Grand Source: Datastream

8 Current Home Ownership Rates 75% 70% 65% 60% 55% 50% U.K. Canada U.S. Denmark France Japan Germany Sources: EuroStat, HUD, Milken Institute.

9 Historical U.S. Home Ownership Rates 70% 65% 60% 55% 50% 45% 40% Sources: HUD, Historical Statistics of the United States, Milken Institute.

10 The prices of residential real estate in Houston (in real terms) declined 40% from OFEHO Housing Index / FRB study

11 Foreclosures in Houston 30,000 20,000 10,000 1, Source: Harris County Foreclosure Listing Service

12 Annual U.S. Bank Failures Source: FDIC

13 When Lenders Make Non-Recourse Loans Heads they lose -- Tails they lose If prices rise, the borrower keeps the gain If prices fall, the borrower can walk, sticking the lender with a long-term depreciating asset If interest rates rise, the value of the loan depreciates as the real average life of the asset is extended If interest rates fall, the borrower prepays

14 Obesity Rates: U.S. vs. World U.S. Mexico U.K. Germany France China Japan 2002MEN 36.5% 2005 WOMEN 41.8% 24.0% 34.3% 21.6% 24.2% 20.9% 20.4% 78% 7.8% 6.6% 1.6% 1.9% 1.8% 1.5% Source: World Health Organization / Estimated obesity rates for people aged 15 years and older / 2005

15 President Richard Nixon At the end of this decade, in the year 1980, the United States will not be dependent on any other country for the energy we need. State of the Union, January 30, 1974 Percentage of Oil 36.1% from Foreign Sources

16 President Gerald Ford We must reduce oil imports by one million barrels per day by the end of this year and by two million barrels per day by the end of Percentage of Oil 36.1% 37.1% from Foreign Sources State of the Union January 15, 1975

17 President Jimmy Carter Beginning this moment, this nation will never use more foreign oil than we did in 1977 never. Tl Televised Speech July 15, 1979 Percentage of Oil 37.1% 40.5% from Foreign Sources

18 President Ronald Reagan While conservation is worthy in itself, the best answer is to try to make us independent of outside sources to the greatest extent possible for our energy. Percentage of Oil 40.5% 43.6% from Foreign Sources Press Breakfast February 19, 1981

19 Percentage of Oil President George Bush 43.6% 47.2% from Foreign Sources When our administration developed our national energy strategy, three principles guided our policy: reducing our dependence on foreign oil National Energy Strategy Release June 10, 1992

20 Percentage of Oil President Bill Clinton The nation s growing reliance on imports of oil threatens the nation s security [we] will continue efforts to enhance domestic energy production. 47.2% 49.8% from Foreign Sources Statement on Energy Security February 16, 1995

21 President George W. Bush Breakthroughs will help us reach another great goal: to replace more than 75 percent of our oil imports from the Middle East by State of the Union January 31, 2006 Percentage of Oil 49.8% from Foreign Sources 65.5%

22 Percentage of Oil President Barack Obama It will be the policy of my administration to reverse our dependence on foreign oil while building a new energy economy that will create millions of jobs. Televised Speech January 29, 2009 from Foreign Sources 65.5% 66.2%

23 States with the worst unfunded pension liabilities Unfunded liabilities (US$ billion) % funded California % Illinois New Jersey % 73% Massachusetts Ohio % 87% Colorado % Connecticut % Source: Pew Center on the states, February

24 Older workers staying longer in the work force Largely due to massive losses in retirement wealth Labor force participation rate (%) for older Americans > 75 years 5% 7% to 74 years 11% 18% to 69 years 19% 31% Source: The U.S. Bureau of Labor Statistics. 24

25 Source: Centers for Disease Control Between 1900 and 2000, life expectancy in the U.S. increased 54%, from 50 to 77 years.

26 Worldwide Life Expectancy Growth Years 26 Years Years 49 Years Source: United Nations Development Program

27 The 21 st Century will see a worldwide competition for human capital.

28 Immigrants in Silicon Valley More than half of Silicon Valley s science and engineering workforce is foreign-born. More than 15 percent of Silicon Valley startup companies were founded by immigrants from India. Another 13 percent had CEOs from China or Taiwan. Sources: A. Gary Shilling & Co.

29 Three Ways to Build Human Capital Education Health Immigration

30 U.S. Consumer Spending Housing 32.7% Transportation 18.0% Food 12.8% Insurance/pensions 11.2% Healthcare 5.7% Entertainment 5.1% Apparel and services 4.1% Cash contributions 3.6% Education 2.0% Personal care products 1.2% Asia Food 23% Education 15% Housing 10% Clothing 8% Other 8% Transportation 6% Healthcare 5% Communication 5% Source: U.S. Bureau of Labor Statistics/CLSA

31 U.S. Consumer Spending Housing 32.7% Transportation 18.0% Food 12.8% Insurance/pensions 11.2% Healthcare 5.7% Entertainment 5.1% Apparel and services 4.1% Cash contributions 3.6% Education 2.0% Personal care products 1.2% Asia Food 23% Education 15% Housing 10% Clothing 8% Other 8% Transportation 6% Healthcare 5% Communication 5% Source: U.S. Bureau of Labor Statistics/CLSA

32 Average Size of American Houses square feet 2,500 2,469 2,000 1,500 1, Source: National Association of Home Builders / U.S. Census Bureau

33 Average Size of American Houses square feet 2,500 2,469 2,392 2,000 1,500 1, Source: National Association of Home Builders / U.S. Census Bureau

34 Home Sizes: U.S. vs. Asia square feet 2,500 2,469 2,000 1,500 1,000 1, Hong Kong Source: Mr & Mrs Asia - CLSA Japan S. Korea India China Singapore U.S.

35 The World s Top 10 Economies Today U.S. (23.6%) Japan (8.1%) China (6.5%) Germany (6.1%) France (4.7%) UK U.K. (4.7%) (47%) Italy (3.9%) Russia (2.8%) Spain (2.7%) Brazil (2.7%) (Percent of World GDP) Source: World Bank/Angus Maddison, The World Economy: Historical Statistics (OECD)/PricewaterhouseCoopers/Milken Institute/Goldman Sachs

36 The World s Top 10 Economies Today (Percent of World GDP) 2050 U.S. (23.6%) Japan (8.1%) China (6.5%) Germany (6.1%) France (4.7%) UK U.K. (4.7%) (47%) Italy (3.9%) Russia (2.8%) Spain (2.7%) Brazil (2.7%) China (18.5%) U.S. (16.5%) India (12.0%) Brazil (4.8%) Indonesia (3.5%) Japan (3.1%) Mexico (3.0%) Russia (2.7%) U.K. (2.3%) Germany (2.3%) Source: World Bank/Angus Maddison, The World Economy: Historical Statistics (OECD)/PricewaterhouseCoopers/Milken Institute/Goldman Sachs

37 The World s Top 10 Economies Today (Percent of World GDP) U.S. (23.6%) Japan (8.1%) China (6.5%) Germany (6.1%) France (4.7%) UK U.K. (4.7%) (47%) Italy (3.9%) Russia (2.8%) Spain (2.7%) Brazil (2.7%) China (18.5%) U.S. (16.5%) India (12.0%) Brazil (4.8%) Indonesia (3.5%) Japan (3.1%) Mexico (3.0%) Russia (2.7%) U.K. (2.3%) Germany (2.3%) China (28.7%) India (16.0%) France (5.4%) England (5.2%) Prussia (4.9%) Japan (3.1%) Austria (1.9%) Spain (1.9%) U.S. (1.8%) Russia (1.7%) Source: World Bank/Angus Maddison, The World Economy: Historical Statistics (OECD)/PricewaterhouseCoopers/Milken Institute/Goldman Sachs

38 2009 The Third Greatest Year of Wealth Creation Indonesia 169% China 87% Turkey 132% Poland 80% Brazil 122% S. Africa 79% Russia 120% Mexico 70% India 120% Peru 64% Australia 108% U.K. 58% Israel 89% U.S. (S&P 500) 39% Chile 88% U.S. (Dow) 28% Date: Bloomberg / April 15, 2010