Stephen Colavito Jr. Interwiu, CHILE USA ECONOMY. English /Spanish

 

 

 

By Cristián Szott

RND: What is the main strength of the American bank system?

Stephen Colavito Jr: The American banking system is not perfect, but since the great recession of 2008-2009, banks have done a better job of raising the amount of capital on their balance sheets in order to weather future problems that could arise.  This is partly due to heightened regulatory requirements under Dodd-Frank but has also improved due to tighter lending standards and better bank management.

Risks still exist inside the U.S. banking system.  The recent issues within the Repo Markets have highlighted the cause and effect of banks holding onto more capital and not making it available at critical times.  This has caused the Fed to add over 3 trillion dollars into the repo markets since September.

Banks and “Wall Street” are also targets of the progressive left as the 2020 elections take shape.  Several candidates are talking about additional regulations for the banks and even reinstating a modern version of Glass-Steagall which would essentially “break-up” the banks.

So like most global banks, the banks in the U.S. face their own challenges

RND: – What is the main investment area or market in America? Where should we invest and which are the safest investments?

Stephen Colavito Jr: This is a question that our South American clients ask us on a regular basis.  Global central banks, by taking interest rates to zero (or in some places negative) are trying to create asset inflation by forcing money into risk assets.  Just look at the dramatic change in direction of U.S. equities in the early part of 2019 after the Fed moved from hawkish stance to a more dovish stance.  This has allowed equities to continue their climb into record highs despite the fact that year-over-year (YOY) corporate earnings are flat.

So beyond the traditional stocks and bonds allocation (public markets), we have allocated clients in alternative asset classes like private equity, hedge funds and even are using volatility as an asset class.  The key is diversification, even beyond traditional public markets.

RND:  Chile and social upheaval. What should we do to maintain our economic credibility, credit rating and avoid a flight of capital?

Stephen Colavito Jr: As you know Latin America may be the new epicenter for economic stress. JP Morgan’s LATAM currency index hit a fresh 2019 low last week, with bad news coming from multiple fronts. Mexico lowered short-term rates in response to deteriorating growth, labor unions in Colombia plan to strike on Nov. 21 over pension reform, and Chile’s central bank had to intervene with currency swaps to provide USD liquidity.

Unrest and dissatisfaction with politicians are happening all over the world, however, Chile’s problems go back to Pinochet’s neoliberal economic model, which has been effusively embraced by all post-Pinochet governments from center-left to right. The system has given Chile the dubious honor of being one of the countries with the world’s highest concentration of wealth.  The problem with this economic model lies in a subsidiary state that has essentially abandoned most of the population. Markets were deregulated, and the social security system, education, and health care system were privatized.  Essential entitlements became profit centers for the few with those who needed these services left behind.  It appears the citizens of Chile have had enough as social unrest is occurring in your country.

We have seen Chilean’s move capital out of the country and into other countries (including the U.S.) in order to avoid potential asset or liquidity issues until the country can stabilize.  I am watching the unrest and hope that a temporary compromise can come quickly.  This way a longer-term solution (elections or economic change) can form to help the countries 18 million people.

Below is my bio should you need it.  You may also look on my LinkedIn.

I will email you some of my papers (attached is my latest) so you can see some of my direct thoughts on various issues.  You are welcome to use quotes from those in your article as well.

 

Spanish, /Español:

 

Por Cristián Szott

RND:  What is the main strength of the American bank system? ¿Cuál es la principal fortaleza del sistema bancario estadounidense?

El sistema bancario de USA no es perfecto, sin embargo, desde la gran recesión del 2008-2009, los bancos han mejorado sus provisiones para épocas de vacas flacas. Esto se debe principalmente a las exigencias regulatorias más estrictas de la ley Dodd-Frank, pero también a una mayor exigencia para el otorgamiento de créditos y mejor gestión en general

 

Los riesgos aún existen en nuestro sistema bancario. Los problemas recientes ocurridos en el mercado de repos han sacado a la luz los inconvenientes que surgen cuando los bancos se aferran al capital y no lo ponen a disposición de las personas en momentos de necesidad. Lo anterior ha hecho que la Fed agregue más de 3 trillones de dólares al mercado de los repos desde el mes de septiembre.

 

Los bancos y Wall Street también están en la mira de la izquierda progresista a medida que se acercan las elecciones de 2020. Varios candidatos están proponiendo regulaciones adicionales para los bancos, incluso reinstaurando una versión moderna de la ley Glass-Steagall, la que básicamente “separaría” las áreas de los bancos.

 

Así, tal como la mayoría de los bancos alrededor el mundo, los bancos estadounidenses enfrentan sus propios desafíos.

 

2.- What is the main investment area or market in America? Where should we invest and which are the safest investments?

Esta es una pregunta recurrente de nuestros clientes sudamericanos. Los bancos centrales de todo el mundo, al llevar las tasas de interés a 0 (incluso a niveles negativos) están tratando de crear inflación de activos al forzar que el dinero vaya a activos de mayor riesgo. Solo hay que ver el drástico giro que tuvieron los títulos norteamericanos durante la primera parte de 2019, en donde la Fed pasó de una posición agresiva a una más conservadora. Esto ha permitido que los títulos alcancen precios récord, a pesar que las ganancias corporativas interanuales son planas.

 

Por lo tanto, más allá de las colocaciones tradicionales en bonos y acciones (mercados públicos), hemos llevado a nuestros clientes hacia activos alternativos como capitales privados, fondos de cobertura e incluso considerando la volatilidad como una categoría de activo. La clave es la diversificación, incluso más allá de los mercados públicos tradicionales.

 

3.- Chile and social upheaval. What should we do to maintain our economic credibility, credit rating and avoid a flight of capital?

 

 

Latino América puede ser el nuevo epicentro de un terremoto económico. El índice de monedas LATAM de JP Morgan alcanzó una nueva baja récord para 2019, con malas noticias en diversos frentes. México recortó las tasas de corto plazo en respuesta al bajo crecimiento; los sindicatos colombianos planean un paro general por los fondos de pensiones para el 21 de noviembre y el banco central de Chile tuvo que intervenir para darle liquidez al mercado interno de dólares.

 

El rechazo e insatisfacción con los políticos está creciendo en todo el mundo, sin embargo, el problema de Chile se remonta al modelo económico neoliberal de Pinochet, el que ha sido profundizado por todos los gobiernos post-Pinochet, tanto de derecha como de izquierda. El sistema le dado a Chile el dudoso honor de ser uno de los países como mayor concentración de riqueza del mundo. El problema de este modelo es que el estado subsidiario ha abandonado a gran parte de la población. Los mercados fueron desregulados y se privatizaron el sistema de seguridad social, la educación y el sistema de salud. Los derechos básicos se convirtieron en centros de ganancias para algunos pocos, a costo de muchos que necesitaban estos servicios. Al parecer, los chilenos se cansaron del abuso, después de los acontecimientos que hemos visto en las últimas semanas.

 

Hemos visto la fuga de capitales desde Chile hacia distintos países (incluyendo Estados Unidos) para evitar posibles problemas de activos y liquidez, a la espera de que el país se estabilice. Estoy observando los acontecimientos y espero que se pueda llegar a un acuerdo temporal rápidamente. De esta forma se podrá alcanzar una solución a largo plazo (elecciones o cambio económico) que pueda satisfacer a los 18 millones de chilenos.

 

Stephen Colavito, Jr. Managing Director, is the Chief Market Strategist for Lakeview Capital Partners.  He is responsible for developing global investment insights and working with Lakeview’s advisors create actionable investment advice.  Stephen is also responsible for representing Lakeview’s market views across all channels as a speaker and through the companies research.

Stephen has 25 years experience in the financial services industry.  Prior to joining Lakeview, Stephen was a Managing Director and Portfolio Manager for Asset Preservation Advisors.  His leadership role was to help the portfolio management team on various investment strategies and well as creating content for the firm on various investment issues.

Stephen holds his Bachelor of Science Degree from Florida International University in Finance, and worked as one of the top institutional fixed income salesmen for Bear Stearns Co. Inc.  After Bear Stearns, Stephen was Director of Corporate Cash for Deutsche Bank and Barclays.  His team worked to provide guidance to Fortune 500 treasury teams on cash and balance sheet investments.

Stephen has been seen on business shows including Arise XChange, Bloomberg News and Fox Business.  Stephen has been a guest speaker at Texas A&M’s Mays School of Business and is a member of the Association of Financial Professionals (AFP).  Stephen is an active member of his church and the father of three daughters.

Stephen holds his series 65 and is a Registered Investment Advisor.

Quote to live by; “Successful investing is having everyone agree with you later.” – Jim Grant

 

 

Stephen Colavito, Jr. Managing Director is the Chief Market Strategist for Lakeview Capital Partners.  He is responsible for developing global investment insights and working with Lakeview’s advisors creates actionable investment advice.  Stephen is also responsible for representing Lakeview’s market views across all channels as a speaker and through the companies’ research.

Stephen has 25 years of experience in the financial services industry.  Prior to joining Lakeview, Stephen was a Managing Director and Portfolio Manager for Asset Preservation Advisors.  His leadership role was to help the portfolio management team on various investment strategies and well as creating content for the firm on various investment issues.

Stephen holds his Bachelor of Science Degree from Florida International University in Finance and worked as one of the top institutional fixed income salesmen for Bear Stearns Co. Inc.  After Bear Stearns, Stephen was Director of Corporate Cash for Deutsche Bank and Barclays.  His team worked to provide guidance to Fortune 500 treasury teams on cash and balance sheet investments. 

Stephen has been seen on business shows including Arise XChange, Bloomberg News, and Fox Business.  Stephen has been a guest speaker at Texas A&M’s Mays School of Business and is a member of the Association of Financial Professionals (AFP).  Stephen is an active member of his church and the father of three daughters.  

Stephen holds his series 65 and is a Registered Investment Advisor.

Quote to live by; “Successful investing is having everyone agree with you later.” – Jim Grant

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