© Karel Brůna
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I definitely believe that financial market is more stable and banks are safer now. My view is based on higher capital to risk assets ratio in banking system, lower propensity to risk behavior on both financial and private sides of the market and real economy structural changes. On the other hand, I am afraid of growing public debt to GDP ratio, growing intervention of government into functioning of financial market and lower confidence in pure economic logic in either strategic investments or daily business decisions.
Currently Europe is slowly moving towards unified banking union, while the U.S .has been trying to implement one of the most ambitious pieces of legislation in years - Dodd-Frank Wall Street Reform and Consumer Protection Act. What other developments in the financial world do you see in the future?
I think one of the most important trend in future development in the financial market will be a reaction of financial agents to all reforms in financial market, which are based on higher regulation and supervision and higher protection of financial institutions' clients. What I especially want to analyze are all consequences of those changes for real economy, because an economic slowdown and/or higher financial leverage would inevitably influence a performance and stability of financial sector in the future. I see these assumptions must be fulfilled for future development of financial market in right way: real economy must have an access to credit in all forms at nonrestrictive price for all profitable investments/projects, free flow of foreign capital is needed for smooth financing of global current account imbalances, all segments of financial market must not be fragmented as a result of political decisions, flexibility of main financial prices (exchange rates, asset prices) is better for restoring a steady state than their political control and last but not least financial institutions should better understand what real economy really needs for future prosperity of both.
Some experts like BlackRock Inc. President Robert Kapito believes that equity market a better investment than fixed income, but where would you currently recommend investing?
In general, my recommendation would be to find companies with unique technology that enables them to supply strong product in specific market, those companies should have a long lasting growth in labor productivity, limited debt to equity ratio and well diversified portfolio of clients in all over the world. Those companies should be able to move upwards in both a turnover/profit and in dividend paid to investors.