Global Equities Celebrate; Competitiveness as Drivers to Equality

``Once everything is in a state of flux, everything which happens is an innovation. Even when the old is repeated, it is an innovation because, under new conditions, it will have different effects. It is an innovation in its consequences … In any economic system which is in a process of change all economic activity is based on an uncertain future. It is therefore bound up in risk. It is essentially speculation."-Ludwig Von Mises

What an incredible week for world equity markets, even if our own Phisix simply meandered along! Alongside the remarkable “melt-up” momentum in the US, a significantly large segment of global equities similarly treaded on either milestone highs or within near record thresholds.

Figure1: Bloomberg: Euro Stoxx 600

Except for the Arab region, even several African bourses have been enjoying a wondrous spectacle of late. Figure 1 is a representation of European markets via the Euro Stoxx 600, a broad based capitalization-weighted index of European stocks which duplicates the Dow Jones Global Indexes Europe Index, according to the Bloomberg, is seen in new record territory.

The wonders of real-time “seamless borders” money flux or the “integration” of global financial markets enabled by the internet platform, as shown by our own region...

Figure 2: Bloomberg: Hong Kong’s Hang Seng and China’s Shanghai Index

I recall a speech from a local tycoon, Mr. John Gokongwei Sr. to a graduating batch of an elite school in 2004, where he said, ``War was the great equalizer. In that setting, anyone who was willing to size up the situation, use his wits, and work hard, could make it!”

It may not be war today, but rather technological breakthroughs and accelerating trends in globalization as possible equalizers. These developments have spurred increased competition and innovation through entrepreneurship on a global scale. While others may argue about the entrenched inequality brought about by the advent of the DIGITAL Divide, I think this view is latched upon linear projections using the outmoded past, which essentially dismisses the explosive creativity and innovative growth curve (Moore’s Law) brought about by increased competition through the burgeoning laissez faire system.

As an example, Forbes recent list of world billionaires reveals of a broadening trend of the privileged class, ``In its inaugural ranking of the world’s richest people 20 years ago FORBES uncovered some 140 billionaires. Just three years ago we found 476. This year the list is a record 793, up 102 from last year. They’re worth a combined $2.6 trillion, up 18% since last March. Their average net worth: $3.3 billion.”

Billionaire philanthropist George Soros noted of the importance of the equity markets to wealth creation when he wrote, ``The stocks market is one of the most important repositories of collateral”. And guess what, the same Forbes article of world billionaires appears to validate his perspective, according to Luisa Kroll and Allision Fass, ``Strong stock markets around the world (the U.S. being the notable exception) contributed to this surge in wealth.”

Figure 3: India’s BSE 30 and Singapore’s Strait Times

Now with surging stock markets around the world and its assumed continuity, we could see a growing roster of the elite.

While based on our faith we would love to see an egalitarian society, where everyone is “equal”, the reality yet today is that NO one is equal; not physically, mentally, emotionally, behaviorally or even spiritually. That’s what makes us distinct individuals aside from our DNA genetic codes (after being mapped we could get cloned!). Again quoting George Soros (Alchemy of Finance), ``We live in a real world, but our view of the world does not correspond to the real world.”

History tells us that numerous governments have built political structures out of this “Utopian” ideals, such as communism, socialism, totalitarianism etc.., yet, like most centralized governance system, corruption, destitution and ruination has been the typical end result.

Competition is what, I think, drives equality, because it simply brings out the best in the individual, organization or a society. Aversion or Fear of competition is usually what triggers desires for wealth redistribution via coercive taxation camouflaged by “Utopian” goals, simply because a lot of people essentially want something for nothing.

Nonetheless, this “Money-for-Nothing” attitude can be seen prevalently in the stockmarket, where the average investors recklessly chase on faddish issues and give priority to “tips”, instead of comprehending the structural dynamics of investing and risk management.

Figure 4: Bloomberg: Malaysia’s KLSE and Thailand’s SET

Figures 2, 3 and 4 shows how some key markets in Asia broke to new high grounds last week. Even Thailand’s SET following the successful ouster of its PM via a military coup, has retraced recently lost grounds.