How would you view India as an investment destination?
I think that India has great potential, it has enormous resources especially human resources, it has good respect for education. The people that I meet in India are impressive and disciplined and intelligent and India has a bright future. It has to get itself together and operate well. We have a group in Singapore. We are devoting significant resources and we are active in India. I am optimistic about it. I came back from my trip a few years ago very impressed and I look further to my future with India.
What is your view on China considering that China plus one policy is something which is part of the boardroom narratives now. The Chinese economy is no longer expanding the way it was. Is that a challenge that China may not be the big super power or the big driver now?
China also has a great future and they too have great resources. They are very organised. They have a benign autocratic government which makes decisions and implements them effectively and practically. It is true that their growth rate is decelerating, but it is still very high relative to the rest of the world. They can produce 6% plus GDP growth and that is much above the average for the world. The US at present is less than half that.
Now China has to make some difficult transitions. It is hard to transition from 12% growth to 6%, it is hard to transition from an economy that has been accelerated by very strong availability of financing for fixed investment and which has produced excessive fixed investment. They have to make financing less available and have less fixed investments taking place and transition to a consumption economy. They have to transition from an export-oriented economy to domestic consumption oriented economy. So, they have to make a lot of transitions but so far, they seem to be making them well. They did quite well in 2020 compared to the rest of the world and seem to be coming out ahead of much of the world in 2021.
We are optimistic on China. I always say that the US is a mature adult and India and China are adolescents. I have had lessons at home and the world with the adolescents. It is rather tempestuous and up and down and volatile but the outlook is very positive for the adolescents and that is true for India and it is true for China and we are very happy with our activities there which are substantial.
Do you think the importance of cycles gets repeated because there is no inflation and rates are low?
I am not convinced that inflation is not coming back and I am not convinced that rates are going higher. There are people who are sure that after injecting massive amounts of liquidity into an economy and running enormous deficits and increasing debts, there still will not be any inflation. I think their confidence is misplaced. I am not an economist, but I think it is hard to believe that we can have the benefits of injecting trillions of dollars in the economy and running up our debts in the trillions without any negative consequences.
Do you think right now the cycle is extending itself in Bitcoin and crypto currency?
I think that the behaviour of the cycle has been aggressive and that is for two reasons. Number one, because aggressive behaviour has been rewarded in the last 10 months and number two because interest rates are so low and we are in a low return world. If people are not content with the low returns, then they have to be active in an aggressive way to get high returns and in a low return world, that is risky.
Most people feel they have to do it because they cannot settle with returns of zero per cent on cash, 1% on treasuries, 2% on high great bonds. Most American investors need 7% or 6% or 7.5% and in order to do that in a low return world you have to be behave in a risky fashion.
On the other hand, I am not worried about the economy because I think we are at the beginning of a positive cycle and I would not encourage people to not invest but in a world where many people are behaving in an aggressive fashion in order to make a high return and low return, I would not behave in an aggressive fashion. Buffett says the less prudence which others are conducting their affairs ,the greater prudence with which we must conduct our own affairs and I think that is a good model for today.
