The Sunday prior to the U.S. presidential election, I flew west to start a trip to the Asia/Pacific region. I stayed in Blackhawk to watch the outcome. After months of hearing about the swing states and importance of Ohio, I anticipated a late evening. But when the votes were counted it became very clear that, with the exception North Carolina, Governor Romney had lost every swing state to President Obama, who was re-elected by a wide electoral vote margin. There will be no transition, as the Democrats will remain in control of the Executive Branch and the Senate, and the Republicans will continue to control the House.
Quickly, everyones attention has returned to the fiscal cliff. I, for one, am assuming that there will be a compromise that involves both increased revenues through tax increases as well as expense cuts, particularly for entitlement programs, with most of the focus being on Medicare and Social Security. The compromise will not result in a dramatic increase to our current GDP growth, around 2% annually, but the U.S. should avoid recession in 2013, although at this pace the unemployment rate will remain high.
On Wednesday afternoon I boarded a flight to Hong Kong. We chose Hong Kong several years ago for our Asia/Pacific office location based on the large number of asset management firms that have their Asia/Pacific headquarters there. We hosted our annual CEO luncheon at the Asia Society and introduced our clients to our newest team member, Billy Tsang. In addition to our Hong Kong team, I was joined by Daniel Enskat, Senior Adviser for Strategic Insights global business.
We continue to see a much faster growth rate and demand for our Strategic Insight research offerings and marketing services in the Asia/Pacific market, when compared with Europe, although off of a smaller base. We were pleased to see, though, that the U.K. pulled out of its recession in the third quarter, propelled by Queen Elizabeths Diamond Jubilee and the summer London Olympics. I am anticipating that the U.K. will have modest growth in 2013, but will outperform the Eurozone, which will remain in recession as they continue to wrestle with the staggering debt loads of many of their members.
Once I arrived in Hong Kong, it was clear that there was much anticipation about the Chinese transition taking place in Beijing. This past Thursday, as the Chinese Communist party Congress drew to a close, the nation was introduced to Xi Jinping, who had been anointed the head of the Chinese Communist Party. He was also named the chairman of the Central Military Commission. Mr. Xi will take over from Hu Jintao as president in March. This transition of power is described by the Chinese Communist party as socialist democracy. Mr. Xi actually will be known as zhuxi or chairman of the country. (FT 11/17/12) Most of this year we have heard about the Chinese economy softening and trying to avoid a recessionary crash. It appears that they have managed through a soft landing and that growth, once again, could return to 8% in 2013 from 7.5% in 2012, although still below the 9%+ that they have experienced for most of the past decade. The IMF made this forecast in early October. (Reuters 10/8/12)
I flew to Australia over the weekend to spend several days in Melbourne, where Plan for Life (PFL), Strategic Insights Australian Division, is headquartered and met with our clients and employees. Simon Solomon, founder of PFL, and his son Rael Solomon continue to expand our business. The economic climate there is closely tied to Chinas need for Australias rich natural resources. The introduction of our web-based Simfund Australia Dash has been well received and they have added a significant number of new clients and upgraded many of their long-term clients.
The Asia/Pacific region will continue to be the fastest-growing region of the world in 2013. During our annual aiCIO Summit in Sydney on Thursday, I heard several participants refer to the U.S. and Europe as having insolvent economies. I did eventually point out that this was an overstatement and that the U.S. and U.K. would continue to recover from the Crisis, but that the path back to full employment, driven by strong growth, would take longer than most had originally anticipated. Our ability to operate globally should allow us, once again, to realize double-digit organic growth, although closer to 10% than the 16%-17% we experienced earlier.
I arrived back in the Bay Area on Friday morning. Mary Claire and I are looking forward to spending this week in Blackhawk and returning to New York City next Saturday.
Happy Thanksgiving 2012!