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prophetoffactzon Dec 23, 2022 6:50am
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Crisis in biotech - Biodexa addresses needs of the time
Crisis in biotech - Biodexa addresses needs of the time
Brookfield Asset Management has $750B in assets under management & 100+ yrs experience investing in the backbone of the economy They call this “a hinge moment in history” w/profound implications for inflation, interest rates, & investing Their macro update & investment plan…
Mark Carney, Brookfield Chair argues that inflation is not just high because of energy prices and other short-term factors. Today’s inflation is broadly based. “Underlying inflation is very firm in most industrial economies with the exception of Japan.” According to Carney, The Russian invasion and energy markets are “not the whole story and, in fact, it’s not the most important component of the story.”
This hinge moment is the result of a 30 year period of: - Steady integration - Economic convergence - Deregulation - Reduced financing costs Basically global integration and easy money policies which have abruptly come to an end and caused this major hinge moment. What are the implications of this major change? #1 Shift from integration & globalization to fragmentation #2 30 years of trade integration, free flow of data, and critical technology are being “weaponized” #3 The global energy system we have is unreliable and unaffordable “We have almost 2 billion people who are living in energy poverty. It’s unsustainable.” Brookfield expects an accelerated shift towards energy sustainability and resilience. This shift requires investment which “will be a persistent element of inflation over the medium-term” Carney, makes a critical point that the behavior of Central Banks has to change because they face a different risk now than in the past. Carney says the economy is running much hotter now than it was before the 08-09 financial crisis even though the pace of economic growth is much less. It all comes down to the job opening rate (vacancy rate) being extremely high right now. The fed is trying to bring that down The fed wants to use monetary policy to bring the job vacancy rate down without causing a spike in unemployment. According to Carney, “there has never been an adjustment to vacancies of the speed consistent with this one.”
Because of the last 30 years of global integration, the fed was able to reduce the aggregate level of unemployment but reducing it in certain sectors because there wasn’t a risk to inflation (because of deflationary characteristics of outsourcing, etc) But, now that the process of de-integration has begun with shocks from COVID, fragmented trade, technology sanctions, and more, the economy began running too hot (the fed got burned). So Carney, laid out the context. And we have to remember the business Brookfield is in. They invest in infrastructure. They believe there is an investment boom coming in certain areas. However, they also believe a slowdown (recession) is coming. It’s just a matter of when Carney emphasizes that this is not 2008 or 2001. They do not expect a deep self-sustaining downturn. - Core of financial sector is strong - Not big household imbalances - Corporate sector is strong “Monetary policy has to be restrictive into and through a downturn” Brookfield believes this “hinge moment” will favor operators of high-quality renewables, infrastructure, real estate, and businesses at the backbone of the global economy” Back to biases… this is right where Brookfield operates.