Replay: Webinar with Former U.S. Ambassador to Germany
We enjoyed a fascinating conversation with John Emerson, Vice Chairman of Capital Group and former U.S. Ambassador to Germany. Below are some highlights:
The circumstances that culminated with Russia’s invasion of Ukraine have been brewing for decades.
In 2005, Russian President Vladimir Putin declared the breakup of the Soviet Union to be the greatest catastrophe of the 20th Century, greater than the World Wars, famines, the Holocaust, etc.
Putin has said for years that Ukraine is a made-up country.
The timing for the war is not a coincidence.
Former German Chancellor Angela Merkel was tough on Putin and an expert on Russia. She left office last year.
Putin looked at the rest of the West as weak, with a number of leaders unpopular or up for reelection.
Emerson remarked on the unprecedented unity that the invasion brought about with Western nations
The U.S. has for years urged Germany to not rely on Russia in its energy policy and to spend more on its military. The 72 hours post-invasion caused Germany to sacrifice more of these policy “sacred cows” than years of negotiations. Perhaps, Germany will grow more comfortable with deficit-spending.
The war may give global energy (oil, gas, and nuclear) investment a shot in the arm.
He’s worried about a potential food security crisis due to how much of the developing world relies on Ukraine for agriculture.
He’s also worried about Russian cybersecurity attacks, particularly aimed at energy infrastructure.
Germany does not have a risk-taking culture, which may help explain why its stock market is not larger and why it hasn’t produced any large internet-based tech companies.
Only 9% of Germans own stocks.
He told an anecdote where entrepreneurs whose company failed mortgaged their house to pay back investors.
Germans love to save, which is disadvantaged in inflationary and low interest environments.
Emerson was involved in pushing Germany to develop deeper capital markets while ambassador.
Germany has many inter-generational family-owned businesses with specific niches. They do not sell stock to the public.
Emerson believes the era of unfettered globalization may be over. Still, globalization will remain strong.
China is working hard to develop the European market for its products.
Companies may become more nationalistic and sensitive to geopolitical risk.
Investors should not be pollyannish about investing in China.
Investing in China should be done with discretion and a keen understanding of companies’ susceptibility to political risks.
During periods of instability, investors must rededicate themselves to a financial plan that’s built to meet their long-term needs. Sticking to your plan is the best way to remain a disciplined long-term investor.