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Chernovetskiy interviewed by Zerkalo Nedeli

“Global threats and today’s investment opportunities. Exclusive interview with Leonid Chernovetskiy”

First of all, tell us few words about your new venture, the investment company.

The establishment of Chernovetskyi Investment Group was announced a few months ago, and we have already received over a hundred inquiries from investment seekers in various fields all over the world, including Ukraine, Russia, the USA, Great Britain, Israel.

Through participation in international investment events we have been able to form contacts with more than 40 start-up teams. We constantly monitor their work, but I can tell even now that some of them have great prospects. We will certainly cooperate with them.

We are actively developing internal procedures. We formalise our communication with investment seekers. We are hiring more people and engage outside consultants. We are up to our ears in work!

Does this mean that Chernovetskyi Investment Group is monitoring all potentially interesting markets?

It means much more than that. The world keeps shifting to globalisation. As a result, economies, markets and various areas of human activity become increasingly dependent on each other. This allows a company to transfer its risks to markets where it doesn’t operate directly.

Do you see any global risks that could influence the global economy?

The global financial crisis which experts have been discussing for the last few years is considered a key investment risk. Of course the financial crisis has a global reach, but crises like this one come and go. Meanwhile, a new threat is fast approaching us – demographic crisis.

Do you think that the current economic situation in the developed countries could potentially destabilise the international economy in the future?

Absolutely. There is already a lot of evidence supporting this forecast. The demographic situation in the countries which are considered to be the leaders of the global economy is deteriorating steadily. The population is ageing due to higher life expectancy and lower birth rate. I strongly believe that this demographic shift will have a profound impact on the economic and financial stability of these countries, as the ageing of the population dramatically increases retirement and healthcare costs. This will put great pressure on the state budget.

How do you think the demographic crisis will unfold in the world’s major economic regions?

The ratio of working and retired population in the U.S. is 3 to 1 today and it’s changing. Experts predict that in 10 years, the ratio will be 2 to 1. Given the amount of social and medical benefits in the United States, spending will grow creating more pressure on public finances.

China’s birth control policy will sooner or later lead to a situation where the only child in the family will have to support (through pension payments) his or her two elderly parents. Given China’s limited social security, people will be forced to significantly reduce spending to save money for retirement. This will hinder the growth of domestic consumption.

In Europe, the impact of demographic factors on the economy may be even stronger than in the USA. Raising the retirement age, cutting pensions and healthcare benefits and increasing taxes will only aggravate the crisis and lead to massive social protests of people spoiled by high social standards.

Japan can become a case in point of how demographic trends may undermine one of the world’s strongest economies. The speed at which Japan’s population is ageing is the highest in the world. This can lead to uncontrolled release of retirement savings and cause inflation.

Is there a way to stop this negative trend?

There are no easy solutions or solutions that everybody would like. For too long, the developed countries have been ignoring the approaching threat to their stability.

To fight the demographic crisis, governments in the developed world would have to find a way to do two things at the same time. On the one hand, they will have to stimulate birth rate by keeping social standards on the high level and promoting family values. On the other hand, they will have to find ways to finance retirement payments and at the same time lower their amount.

Let’s talk about current issues. What do you think about the steps that the EU and the USA have been making to mitigate the impact of the global financial crisis?

The economic crisis in Europe will deepen at a high speed, but so far governments of the EU countries haven’t made any decisive steps. Most of the EU governments (perhaps except for Germany) are dominated by socialists, who believe that the crisis should be stopped by higher taxes, which I think can make things even worse.

The government of the USA is in the transitional period, as little time has passed since the elections. Obviously, during the election period politicians do not behave in a reasonable or consistent way.

What kind of advice can you give to investors?

I believe that today, conservative investment strategy with the focus on corporate bonds and high-yield US treasuries is a way to go.

For those investors, who want to invest in less risky positions in emerging markets, my advice is to focus on stable yield corporate bonds.

For stock market investors, I would suggest emerging markets that maintain their level of investment appeal against the general trend of increased investment in developing countries.

For Forex investors, I recommend Canadian dollars and Swiss francs.

Today’s world is unstable, but that does not mean that investment opportunities no longer exist. As before, they are all around. Yes, investments today are riskier than they used to be, but that doesn’t mean that investors should put all their money on savings accounts and wait for better days to come. Investing can be profitable even when everything seems to be going downhill. The important thing is not to be afraid to explore new directions, as well as to make reasonable forecasts of your financial situation and reliability of the markets and instruments in which you are willing to believe.

Leonid Chernovetskiy


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