The Princess Leia conference

David Roche delivers wrist-slitting message at CLSA''s first virtual conference.

CLSA's latest conference adds a new twist to the genre this year by implementing technology first envisaged by George Lucas in the late 1970s.

The hologram technology, which CLSA is using is remarkably reminiscent of the scene in Star Wars in which R2-D2 projects a hologram of Princess Leia.

FinanceAsia went along to watch a presentation by David Roche of Independent Strategy, which was broadcast simultaneously by hologram to Singapore and Hong Kong audiences.

Roche - in his first known appearance as a hologram - began by telling the audience that he didn't like the US dollar, Asian equities or Asian currencies. He predicted the dollar would continue to fall to around 1.25 against the euro.

He then began a bleak assessment of the US and the cost of its foreign policy. "The reconstruction of toppled regimes is four to five times more expensive than the wars," he commented, predicting a US conflict with North Korea was next.

Defence spending, he noted, is wasteful and unproductive and using a chart he showed how throughout US history whenever defence spending rises, productivity falls.

He projected a 5.5% US budget deficit by 2006 - "which is very expensive considering Americans don't save" - and a 6.75% current account deficit. He said the US current account deficit would then constitute 8% of the rest of the world's annual savings.

The US consumer was happily spending beyond their means. "US households don't see any clouds on the horizon. Either they're wrong, or I'm wrong," he said, indicating that he believed the former.

The problem with the housing boom, he noted, is that the segment of US society with the lowest savings is also the one that holds 65% of its assets in property. These are the same group who are refinancing their mortages to fund their present consumption. Roche reckons the end of the housing bubble will kill this segment's ability to consume.

He then spoke of 'New deflation', a concept he said arrived with the advent of hyper-efficient production platforms in places like China (for manufacturing) and India (for services).

The deflation pressures are now spreading rapidly to the US services sector. "US workers in the service sector have been overpaid because they did not compete on a worldwide basis in the same way that US manufacturers had to. Now a new paradigm of competition in the services sector has begun."

That new paradigm had one inescapable conclusion. Labour costs in the US service sector will have to go down, he said, if it wants to compete. Again, that trend will dent disposable income of a large group of consumers.

Not surprisingly, he was not keen on US equities. Roche felt that the US equity market remained 50% overvalued on the basis of its price-to-dividend ratio and historical averages.

What did he think was worth buying? Gold, energy and commodities, he said, with the latter particularly driven by China and security concerns in the Middle East.

If Roche appeared somewhat negative on the US, the only country to receive even more criticism was Japan. He noted that the Japanese market had "all the excitement of watching a corpse," and added: "All that happens in Japan is Koizumi's hair gets longer."

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