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Jim O’Neill Chairman of Goldman Sachs Asset Management is on CNBC talking about Goldman’s monster report and the global economy right now. On The Long Good Buy
This morning Goldman portfolio strategists Peter Oppenheimer and Matthieu Walterspiler made a bullish case for U.S. equities saying stocks are much cheaper than bonds. Jim O’Neill told CNBC he has been bullish on U.S. equities for a while:
“One is we have really low levels of bond yields, because many including policy makers do not believe things can ever return to normal. And the other one is we have people that don’t believe that world growth can do better than it did at point x in the past. Being mister BRIC in reality despite western problems the world economy’s growth rate is trending higher than it has been for 30 years of my existence. Put all of that together it is really bullish on equities.”
He said the three biggest risks to the equity market would be a sudden turn for the worse in America’s industrial arena which at the moment is seeing some structural improvements, rising oil prices, and if a change of heart from the Fed that would see a huge rise in bond yields.
Recently O’Neill said oil prices are his biggest concern, not Greece. He reiterated the argument that China is creating an economy the size of Greece every 11.5 weeks:
“Who cares about Greece? Who cares? So long as Italy is supported and Italy does the right thing people exaggerate still the global importance of all this stuff.”
O’Neill added that the structure of the European Monetary Union is flawed and many issues remain unresolved but he said he just didn’t buy the idea that any of that would be the source that put an end to the global bull market in equities.
On the BRICs
O’Neill famously coined the term BRIC to reference four key emerging markets that he says are now driving the global economy, despite recent talks of a soft-landing in China:
“The whole reason why the world economy is trending higher right now is because of the BRICs. Even though China is clearly, deliberately moving to a somewhat softer growth path. You know as the place gets bigger, its impact on the world alone becomes more and more. We are only three years of maximum, maybe two years, before the four BRIC countries become bigger than the United States. These guys between them are driving the world economy.”
He said Indonesia, Turkey, Mexico and Korea are also becoming increasingly important. He said these four countries combined with the BRICs will produce double the amount of global GDP this decade, than the U.S. and EU put together.