EDITOR'S NOTE: The long-held assertion that inflation would be short-lived and “transitory” is now believed by fewer and fewer people. At the fifth edition of the Future Investment Initiative in Riyadh, Saudi Arabia, this week, financial and economic experts lined up to knock down Jerome Powell and the Fed’s talking point that inflation is only temporary. The experts who said the contrary included Blackstone Inc. co-founder Stephen Schwarzman, Aramco’s Chief Executive Officer Amin Nasser, chairman of BlackRock Inc. Larry Fink, Pimco’s John Studzinski, and Goldman Sachs Group Inc. Chief Executive Officer David Solomon. With all these financial luminaries disputing the Fed’s assertion, it seems time to accept that inflation is here to stay.
(Bloomberg) -- Rising energy prices are likely to linger for some time, posing one of the most serious challenges to the global economic recovery and raising the potential risk of social unrest, some of the world’s top executives said on the first day of Saudi Arabia’s flagship investment forum.
“We’re going to end up with a real shortage of energy,” Blackstone Inc. co-founder Stephen Schwarzman said as the fifth edition of the Future Investment Initiative got under way in Riyadh on Tuesday. “It’s just going to cost more and it’s probably going to cost a lot more. And when that happens you’re going to get very unhappy people around the world, in the emerging markets in particular.”
Schwarzman’s warning echoed comments from Aramco’s Chief Executive Officer Amin Nasser, who said oil output capacity was dropping quickly. Meanwhile Larry Fink, chairman of BlackRock Inc, the world’s biggest asset manager, said there was a high probability that crude prices would soon hit $100 a barrel.
Global commodities prices have soared as economies recover from Covid-19 but supply chain disruptions and structural changes in the energy market are hampering supply.
Pimco’s John Studzinski said “fewer and fewer” people now think the inflation trend is temporary. Goldman Sachs Group Inc. Chief Executive Officer David Solomon said concerns were already mounting that the world would enter a period of rising inflation and slowing growth.
All items below are Saudi local time:
Vista Using Internal ESG Tools to Assess Firms, CEO Smith Says (7:26 p.m.)
Vista Equity Partners Chief Executive Officer Robert Smith said his firm has developed internal metrics to evaluate the environmental, social and governance practices of portfolio companies.
When a company falls short of Vista’s standards, the private equity firm will seek to fix the problems that exist, Smith said at the Future Investment Initiative conference on Tuesday.
“Part of what we do is enable our companies to reach their absolute best potential,” said Smith. With more than 70 companies in its portfolio, Vista can share information between firms to gain insight into best practices, he said.
Vista has also created a “sustainability leadership council” consisting of more than 150 executives of companies in its portfolio that participate in ESG evaluations, he said.
Beyond examining firms it owns, Vista is taking steps to improve its ESG performance. It has recently partnered with Clearloop, a firm that increases access to solar energy by helping companies offset their carbon footprint. Through the partnership, Smith said Vista is helping build and fund solar panels in Black neighborhoods.
Pactual, Pimco Cast Doubt on Transience of Inflation Trend (3:50 p.m.)
Andre Esteves, founder and senior partner at Banco BTG Pactual S.A. said that inflation was “definitely a concern” and that assuming that faster price gains was just a pandemic-fuelled phenomenon is now “a dangerous assumption.”
That was echoed by John Studzinski, vice chairman at Pimco.
“We don’t think it’s anymore transitory,” Studzinski said. “I heard a term last week -- it’s sustained transitory, which is a great contradiction. But I think inflation in the short term -- in the next couple years -- there are more things that will keep it up. I don’t think you’ll be asking that question a month from now. Fewer and fewer people feel that inflation is transitory.”
Moelis Says Global ‘Labor Strike’ Fuels Transitory Inflation (3:44 p.m.)
Transitory inflation is partly the result of a “labor strike” around the world, according to Moelis & Co. Chief Executive Officer Ken Moelis.
“People have enjoyed universal income without going to work,” Moelis said at the Future Investment Initiative in Riyadh Tuesday, referring to government stimulus programs aimed at addressing fallout from the pandemic.
Resulting inflation will hurt middle-market businesses the most, he said. “There will be a re-evaluation of how the response went,” Moelis said, adding that people who lost their jobs will ask whether the crisis was handled appropriately.
Kuwait’s Wealth Fund Plans to Invest in Saudi Green Initiatives (3.44 p.m.)
The Kuwait Investment Authority, which manages the country’s $700 billion wealth fund, will invest in green initiatives unveiled by Saudi Arabia as the Middle East’s biggest oil producers rally behind efforts to cut planet-warming gases.
“All these initiatives are very important to the KIA, and we will be investing in those initiatives as long as at the end, it will be for the environment and benefit of the people” of future generations, Ghanem Al-Ghunaiman, managing director of Kuwait’s sovereign fund, said Tuesday at Saudi Arabia’s flagship investment conference.
Dalio, Fink Say They’d Pay More Tax If Funds Were Spent Well (2:00 p.m.)
U.S. billionaires Ray Dalio and Larry Fink say they’re open to paying more tax if they’re sure the money will be put to good use.
“I would support anything that is going to have the effect of being spent on increasing, creating equal opportunity and greater productivity,” Dalio, the founder of hedge fund Bridgewater Associates. “If it accomplishes those things, I would support it. I’m not sure that it does.”
The executives were discussing plans drawn up by Democratic lawmakers to tax ultra-high earners. The proposal would set the so-called billionaires’ income tax at $1 billion in assets, or three consecutive years of $100 million or more in income, which would hit some 700 taxpayers.
Fink said he pays a tax rate of about 55% because he’s based in New York City.
“If we could find solutions where the money could be directed in a proper way, I have more to give,” he said.
Wall Street Banks Almost an Oligopoly, Former Barclays Boss Diamond Says (11:02 a.m.)
Bob Diamond said his former rivals on Wall Street are dominating the investment banking industry.
“If you look at the earnings that came out of the big U.S. banks recently they were phenomenal,” the ex-Barclays Plc boss said in a Bloomberg Television interview on the sidelines of the conference.
Diamond, who also founded Atlas Merchant Capital, said “the bulge bracket U.S. investment banks are just killing it” while European and U.K. firms have scaled back. “It’s almost like an oligopoly. The market environment is terrific, the advisory fees are strong.”
Goldman Sachs Chief Sees Risk of Rising Inflation and Slowing Growth (11:00 a.m.)
Golman’s Solomon said the global economy was facing inflation risks that it hadn’t seen for some time and could enter a period of higher inflation combined with slower economic growth.
“I’m not good at predicting the future but I certainly think the risk of higher inflation and slower growth based on the actions taken is higher now than it has been for a while,” Solomon said. “We’ll have to watch that very carefully.”
Fink: We’re Going to Live with Energy Inflation For Some Time (10:55 a.m.)
BlackRock’s Fink said higher energy inflation would linger for some time, with a “high probability’ of oil prices hitting $100 per barrel, due to a focus on short-term policies as the world shifts toward more sustainable power sources.
“Inflation, we are in a new regime. There are many structural reasons for that. Short term policy related to environmentalism, in terms of restricting supply of hydrocarbons, has created energy inflation and we are going to be living with that for some time,” Fink said.
“There was no policy related to the mitigation of demand, only supply, so we are going to have environmental inflation.”
BlackRock’s Fink Urges Change in World Bank, IMF Role Due to Climate Change (10:28 a.m.)
Fink said we are going to have to ‘reimagine’ the role that the World Bank and the International Monetary Fund plays in helping poorer countries tackle climate change.
“We have to reimagine the World Bank and the IMF,” he said. “We are going to have to focus on how to bring this money forward if we are going to bring the capital to get the emerging world forward on climate risk.”
Blackstone’s Schwarzman: Women Were Scared of Us So We Went to Them (10:20 a.m.)
Schwarzman said Blackstone was having trouble hiring women into its male-dominated ranks because they were intimidated by the financial industry. The firm decided in 2015 to change that and now has 50% women in its entering classes, up from 10%.
“We analyzed it and what we realized is that women weren’t applying to Blackstone. We tried to find out why and we found out that they were scared of us. I don’t think I’m very scary,” Schwarzman said.
“So what we did was we went to some of the great universities as sophomores and we met a lot of women and said jeez why don’t you do like an internship down at the firm.”
Saudi Sees World Oil-Supply Capacity ‘Huge Concern’ (10:10 a.m.)
Saudi Aramco said oil-output capacity across the world was dropping quickly and companies need to invest more in production as the kingdom opened the fifth edition of its flagship investment conference on Tuesday.
Aramco’s Chief Executive Officer Amin Nasser made the remarks in an interview on the sidelines of the conference, which marks a return to business for the world’s largest oil exporter after the pandemic disrupted last year’s event.
“The spare capacity is shrinking,” Nasser told Bloomberg. It’s a “huge concern.”
Originally posted on Yahoo Finance.