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Goldman’s O’Neill Tells Investors to Brave Black Swan Concern

Goldman Sachs Asset Management Chairman Jim O'Neill
Jim O'Neill, chairman of Goldman Sachs Asset Management. Photographer: Chris Ratcliffe/Bloomberg

May 13 (Bloomberg) -- Jim O’Neill, chairman of Goldman Sachs Asset Management, said investors should shed their pessimism and stop hoarding cash amid prospects for a global stock rally that could start in China.

The view that “the West is in trouble” is wrong when nations including Germany, Sweden, Australia and Canada are performing strongly, O’Neill said in an interview with Bloomberg Television in Hong Kong, recorded yesterday and broadcast today. Investors should “stop worrying so much,” said O’Neill, known for coining the BRIC acronym for Brazil, Russia, India and China.

Global investors have tempered their optimism about the U.S. and world economies and plan to put more of their money in cash and less in commodities over the next six months, a quarterly survey of Bloomberg subscribers showed yesterday. The poll, conducted May 9-10, also found that investors’ enthusiasm for stocks is cooling.

O’Neill, 54, said his strongest hunch is that China’s inflation may be close to easing, meaning the Chinese stock market may “go crazy” in the second half of the year. The central bank yesterday raised banks’ reserve requirements by half a percentage point to lock up cash that threatens to fuel gains in consumer prices.

The benchmark Shanghai Composite Index rose 1 percent today, the biggest gain in a month.

‘Every Little Problem’

In the aftermath of the 2008 financial crisis, investors are overly concerned at the possibility of so-called black swan events, said O’Neill, using a term sometimes used to describe unlikely occurrences with severe consequences.

“Every little problem that crops up somewhere in the world is not going to create another black swan,” he said, adding that “there’s far too much conservatism,” in terms of investors holding cash.

O’Neill reaffirmed his view that Russian stocks are cheap, on the same day the nation’s Micex Index slid to a five-month low on falling commodity prices. He also said that a global stock rally “could start in China.”

His positive comments on the outlook for China came as two people with knowledge of the matter said Goldman Sachs plans to set up a yuan-denominated private equity fund in the nation. Chief Executive Officer Lloyd C. Blankfein attended a ceremony for Goldman Sachs in Beijing yesterday, the people said, declining to be identified before an announcement.

To contact the reporters on this story: Robyn Meredith in Hong Kong at rmeredith8@bloomberg.net; or Sophie Leung in Hong Kong at sleung59@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst in Hong Kong at ppanckhurst@bloomberg.net

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