José Ramón Iturriaga: It’s not the same


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Perhaps today, a day of reflection before tomorrow’s elections in the Community of Madrid, is a good day to get our heads out of the Manichean centrifuge that has been the electoral campaign in Madrid and get some perspective. In order to vote tomorrow – but certainly not only – it is important to park your emotions and try not to get carried away.

From an economic point of view there is little doubt which is the best option. It is not so much a matter of doing, as of, as the president of Mercadona said this weekend, that the Public Administrations do not put too many bats in the wheel. There are no easy solutions to complex problems, as extremes try to lead us to believe. Neither is a government with an interventionist rhetoric the same as another that lets it be done, no matter how much, for example, the second vice president of the Economy now presumes; music is one thing and lyrics are another. Music – or rather in this case noise – conditions. Money is fearful and populist proclamations scare it away, even though when push comes to shove, everything is flustered. Everything is much easier. If you leave it -and more so at the present time-, the market works reasonably well, economic agents do what is expected of them and things go on by themselves.

If it were for the economy (stupid!), The best option for tomorrow would have no discussion. The best example is the recent behavior of the economy both at all and, of course, in relative. Comparisons are always odious but in this case more so. That is why many have tried to take the campaign in other directions. Now we are the ones who have to decide. It is our interest above all not to get carried away. Tomorrow we see it.

Warren buffett

This weekend there was one of the events that is marked in red on the investment community calendar: the meeting that Warren Buffett holds with his investors every year. This year it could not be in Omaha or in person but it has been just as interesting. Escorted by his partner of almost 100 years Charlie Munger and surrounded by products of companies in which he invests, they answer questions from his many investors for more than three hours.

There are many lessons that emerge from their answers. With simple language and clear examples, they reel off their investment philosophy year after year. Do not invest in what you do not understand. Do not hit all the balls but the one that is clear to hit it with force. Do not get carried away by fashions …

This year it could not be otherwise, they have had to get wet with the issues that are more current. They are not very concerned about the tax increase and believe that it is childish to think that they are passed on to the final consumer. They remembered that when they started in this the Corporation Tax was above 50%. Regarding the SPACs, they did not predict a happy ending: “If they put a gun to your temple to invest, you do it, but not necessarily well.” Trading platforms (Robinhood) were also criticized. The incentives are not well established and they will never invest in something that sells “bad things” to their customers. They have no problem investing in oil companies, and that extremes are never good: “There is no perfect woman, friend or company.” Regarding bitcoin, Buffett passed word but Munger did not hold his tongue: “It is disgusting and contrary to the interest of civilization.”

The three and a half hours went a long way. They even commented on some of their portfolio positions. They considered that selling part of Apple’s position last year was probably a mistake. And despite the fact that airlines have recovered a lot since they left, they believe that they are not invertible. They currently have over $ 140 billion in cash and, obviously, zero bitcoins.

Growth differential

Last week we learned the growth data for the first quarter of the year. The strong recovery in the United States stands out – more than 6% – compared to the fall in Europe – slightly less than a 1% contraction. Logically, the different behavior has aroused some controversy – who is the handsome man who in the era of click lets out a headline like this! -. Now, this controversy is a symptom that it is not well understood what this crisis is about.

They grow more because they have been ahead in vaccines and because they have been more aggressive, especially on the fiscal policy side, but it is not possible to go much further in this analysis. If anything, what is happening there is the best indicator of what is going to happen here in a matter of weeks. As in the United States, already in the second quarter of this year, the European economies will experience a sharp recovery that will serve to put an end to a crisis that, although deep in terms of the economy, will be overcome much faster than any other similar and much earlier than history could have anticipated.

The only major sequel that this crisis seems to be leaving is the sharp increase in public debt. And it is precisely that which determines future economic and monetary policies.

We have to live for a few months with inflation somewhat higher than central banks would like, but in principle it should become a problem insofar as the base effects that will push prices up are by definition temporary and the deflationary dynamics of recent years – globalization and migration – are still fully in force. It is precisely the rise in prices that is the main risk. A miscalculation by central banks could have dire consequences. They have to try to anticipate that we are going to live for some time with inflation above the traditional objectives. As Spiderman said, with great power comes great responsibility, but everything seems to indicate that they will be up to the task.

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