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Right on the Money: Farvahar Partners’ Omeed Malik on 2019 in Trade and the Capital Markets

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Omeed Malik is the Founder and CEO of Farvahar Partners, a boutique investment bank providing capital raising assistance, M&A advisory services in addition to holding positions in several dozen unicorn companies.

Prior to founding Farvahar Partners, Malik graduated with a Juris Doctor from Emory University Law School before gaining cross-industry experience as spokesman for New Jersey congressman Donald Payne, Jr., corporate attorney at Weil, Gotshal & Manges, Senior VP at MF Global, and Managing Director of hedge fund advisory services at Bank of America.

He maintains an independent asset advisory practice, Omeed Malik Advisors, is a term member of the Council on Foreign Relations, and is an avid fan of the arts, having appeared in a cameo role on Showtime’s Billions. You can find him on Twitter @realomeedmalik.

2019 was a truly historic year for the American markets. With major indices hitting record highs, the Bearish pessimism of recession soothsayers appears to have lost out to the surging Bullishness of a market bolstered by the continued influx of capital into key sectors like Healthcare and Tech.

Photo by Floriane Vita on Unsplash

Omeed Malik, Founder and CEO of merchant bank Farvahar Partners, sat down with Maria Bartilomo to break down 2019 in the markets and factors that could affect their current historic run:

Omeed Malik notes continued low rates as a central factor, prompting companies to issue elevated levels of debt before using the resulting capital to buy back their own stocks, inflating share prices and driving more investors to pile into the equity market.

However, Malik sees little negatives in the current situation given all-time low unemployment and positive signals we continue to see across fundamental economic indicators.

Above and beyond macro indicators, Omeed Malik points out that 2019 also gave us reason to have faith in the private markets. With the need for many asset managers to produce an IRR above 5-6%, 2019 was defined by a “frothy” market; the year saw the rise and fall of numerous heavily-hyped companies from valuations in hindsight shown to be decidedly excessive, with WeWork being the perfect example.

Omeed Malik points out that in the case of WeWork, the capital markets worked as they are intended, shielding retail investors from an astounding equity loss that only highlighted the importance of due diligence in securing disclosures about corporate governance and business financials.

“The private market is where these things should be shaken out,” Omeed Malik asserts, “and if someone takes a risk on a company and doesn’t do their due diligence, then they should lose their money. On a higher level, the WeWork produced a shift in emphasis to what Omeed Malik calls “the path to profitability.” This nascent profit urgency was just not there in the private market before.

Omeed Malik also notes ongoing U.S.-China trade negotiations and the reformed USCMCA deal as critical to the future trajectory of the economy. Although he has “a lot of empathy for Trump’s position with China,” Omeed Malik asks the simple question: “How any battles can we take on at once?”

Malik emphasizes the importance of ratifying the USMCA into law at a time when continued uncertainty surrounds the ultimate outcome of U.S.-China negotiations and Brexit in Europe. The deal would help American markets by aiding farmers in a hard-hit agricultural sector and add leverage against China in what has become a true war of economic attrition.

With overwhelming approval from both legislative houses and president Trump having confirmed his intention to ratify the USMCA, Omeed Malik asserts that a successful agreement combined with a properly structured bi-lateral US-UK post-Brexit deal will put the U.S. in a stable position without picking a direct battle with China.

Omeed Malik also placed ongoing geopolitical factors in the context of domestic politics: “A lot of interesting things can happen here, but in the end the real risk of instability could be something related to the election,” he argues.

Although many are looking for signs tying Michael Boomberg’s November entry into the Democratic race to wider effects on the markets, Malik doesn’t see it as such a game-changer. Bloomberg simply won’t play well to the segment of American society where we see a virulent strain of populism, specifically in the Midwest and South.

“The ‘Nanny State’ stuff he did with Manhattan just won’t play out to that electorate,” Omeed Malik asserts. Omeed Malik concludes with the simple fact that although it’s impossible to predict where any potential market-shaker might come from, regardless of geopolitical risks, the U.S. remains probably the best market to invest in at the current time.

 
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