I had the privilege of attending The Economist’s Buttonwood Gathering 2013 replete with a stacked lineup of speakers and panelists. At a conference such as Buttonwood, one of the most interesting elements is the opportunity to exchange ideas with attendees who are generally pretty brilliant in their own right. I had numerous conversations with other Gatherers on topics ranging including Mexico’s pro-market reforms, Canada’s housing bubble, the European banking environment, and much more. Measuring consensus on such topics at Buttonwood provides a great glimpse into what the “Smart Money” is thinking. Sure enough, smart money seems abundantly optimistic in Mexico’s steps toward and capacity to successfully implement said reforms, Canada’s housing bubble is very real, and the European banking environment will have to pivot from an arena of nationalistic-driven excess to centralized decency.
These are simply some topics I conversed about with fellow gatherers. The panels themselves covered a wide range of topics, from the global economy, to the emerging market landscape and today’s optimistic venture capital environment for technology. While it’s impossible to completely cover each topic and the panelists’ thoughts in this post, I want to share some of the points that were more striking and relevant to me personally in the themes and topics that I focus on.
The two-day event kicked off with a conversation on the “global economic outlook” between José Manuel González-Páramo, Robert Rubin and Nemat Shafik, moderated by Zanny Minton Beddoes. All the panelists echoed the theme that Europe was improving and a decent coefficient of global growth was moving from emerging back to developed markets. Robert Rubin took a strikingly pessimistic tone towards the US growth outlook, given his belief that the conventional narrative of a fiscal drag was overstated and the real problem remains lack of demand and therefore anemic consumption. Shafik explained how there is increasing decoupling and dispersion amongst the various emerging markets and how each unique country thought of in its own unique way. Gonzalez-Paramo mused that Europe had the greatest potential to outperform estimates in the coming months should the relevant parties continue on the path towards a formalized banking union.
The discussion on Europe offered a natural segue into the second panel covering “Europe’s Burden” with José Manuel Campa, Bruce Richards and Nicolas Veron. Véron explained how the stress tests in Europe would be completely different this time around. Rather than pure stress tests, the exercise would be an intensive Asset Quality Review (AQR) done by the ECB instead of the European Banking Authority. Richards seconded this sentiment, and noted that the EBA tests were “laughed at.” Richards further explained how Europe’s banks have $42 trillion in assets compared to a GDP of $13 trillion, far larger than the US, which has $15 trillion in assets on a GDP just shy of $17 trillion. While Europe’s economy “has bottomed” it will take time for the banks to grow out of their size problem, with the US Savings and Loan Resolution Trust Corporation wind-down offering the best analog. Richards called Europe today “the largest asset disposition in the history of the world” and said the opportunity is in the very early stages, with assets like Spanish Non-Performing Loans available for 3 cents on the dollar.
Next, Roger Altman and Thomas Horton spoke about the changing corporate landscape in the US. Altman insisted that “uncertainty” in the business community stemmed predominantly from a shortfall in demand in the econo