Saturday, April 01, 2006

New York Times picks up Bridgewater Associates "repricing of American assets" theme

Yesterday I wrote about the "repricing of American assets" theme as reported in The Wall Street Journal. Today the same theme popped up in The New York Times, but displaying different data. Both articles quote Bob Prince of Bridgewater Associates.

"China and U.S. Are World's Growth Engines and Its Market Laggards," blares the headline on Floyd Norris' "Off the Charts" column.

This article examines global stock market performance since Sept. 30, 2002. "Searching stock markets around the world, there appear to be only four that have performed worse -- when measured in dollars -- than the American market over that period. They are the markets in Botswana, Malaysia, Slovenia and China, with the latter being the only market to show a decline."

Why two growth engines like China and the U.S. lagged?

According to Norris, China has lagged because of its poor investor protection and strong Chinese companies listing on exchanges outside China.

As for the U.S., our trade deficit reflects the fact that companies overseas have benefited from our economic growth.

Here's what Bridgewater's Prince thinks, according to Norris. "Bob Prince of Bridgewater Associates, a money management firm, argues that a repricing of American assets is needed to continue drawing in foreign capital. He notes that the difference between American interest rates and those in Europe and Asia has been growing for more than a year."

"If that continues, it will mean that American companies have to pay more for capital — either equity or debt — than overseas competitors. That will make it more difficult for them to compete. Mr. Prince argues the trend will continue until American growth slows enough — or the dollar falls enough — to begin to cut the trade deficit and thus reduce the American need for investment from overseas."

Norris ends his article with the conclusion that worldwide stock market strength means that "even lagging areas of the world are going to start growing."



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