International investment advisers warned yesterday against putting money into American capital markets during the next decade unless the U.S. government effects radical changes in the economy such as increasing savings rates and decreasing government spending.
Robert J. Boyd, the British representative in San Francisco of the London firm GT Capitol Management, told a gathering of mutual fund managers that prospects for profits in the 1980s aren't good based on past performance.
Over the last decade an international investor's experience in U.S. markets was below that of all Free Word countries except Spain and Italy, Boyd said. In the past five years, return on investment has been worse here than in every country except Austria, Denmark, Sweden, Italy and Spain, he added.
Moreover, the purchasing power of the U.S. dollar his dropped so much that $1 invested in 1960 was worth only 58 cents in 1979, today that same dollar invested in 1960 in Japan would be worth $2.69; in Hong Kong $4.88; in Germany, 97 cents; and in Britain, 72 cents, according to Boyd.
Boyd claimed that performance is predictable, based solely on economic growth rates. The superior performance of Oriental markets wasn't, in his opinion, due to "crafty tricks" nor to "magnanimity" on the part of the West toward the East nor to cheap labor.
The principal reason boils down to this equation, he said: Investment results are high where government consumption is low; they are low where government consumption is high.
As evidence, Boyd said that during the 1970s Britain had the slowest economy because it had the lowest share of private fixed capital formation in its GNP. Japan, on the contraty, devoted the largest share of its GNP to capital information, while Hong Kong had the lowest tax rate, he added.
Also, during the past decade, the U.S. government consumed three times the share of national income that the Japanese government did, and the American people had half the increase in income of the Japanese, Boyd said.
Dr. Ulrich Moser, senior manager for investment policy at the Dresdner Bank in Frankfurt, criticized the American markets for having too many "unproductive" investment vehicles.Japan, he noted, has neither futures, commodities nor options markets, so new investment capital moves directly to the equity and bond markets.