By Larry Berman- It was somewhat warm, yet very cold as I watched the Sunday morning Washington talk shows. Democracy and freedom are widespread and the solidarity of world leaders around the latest terrorist tragedy in France is a great uplifting thing to see. But the religious wars in the world are increasingly disturbing because it’s an enemy we can’t fight or forecast very well.
Sadly, geopolitical risks are likely to be elevated for years according to some of the best think tanks out there. Even Putin may be stressed into doing something really stupid (not that he hasn’t already) to appease the “criminal” oligarch that steals from the poverty stricken public to feed their own greed and excess all over Eastern Europe. ISIS, Al Qaeda, and others seem to be growing in strength despite all efforts to slow them down. I saw a story over the weekend where Syria is now trying to enrich uranium.
More peacefully, but market disruptive, Greece is likely to vote for an anti-EU party (Syriza) and plant the seeds for the GREXIT…and QE in any measure is not going to fix any of it. Nothing short of massive debt forgiveness will begin to fix the problem, but floating exchange rates are needed too. And if they let Greece go, Portugal and Italy are likely right behind them.
We think 2015 will be more about geopolitical risks than fundamentals and should raise volatility considerably which we got a taste of in the fourth quarter of last year.