Posts Tagged The Global Recovery

Europe will calm down. China will achieve a “soft landing” from their breakneck growth rate. The trauma of 2008 will not define the coming expansion. Energy, metals, materials, iron ore, food will all become more dear and faster than you expect. We are in a growing world and as Mark Mobius said recently, “a double dip recession is not in the cards.”

It ´s like watching someone try to kick start a car and then it stalls. Then, they try again. Every time it seems like the car cuts off, its a “risk off” day. Every time the car starts and stays running, its a “risk on” day. The debate about what governments should is nicely stated by the Institute of New Economic Thinking ” Cut now to inspire private growth or keep public investment to avoid stagnation?” Last weeks wall of worry was a worrying turnround in US factory activity which sparked a wave of selling at the end of the week, pushed further by a surprising move to downgrade the eurozone’s growth outlook. Interestingly, this is just after Germany´s star GDP numbers. Then, there is US jobs. Nobody knows if the new world economic order means the Americans don´t have to do all the consuming any more. We tell clients to keep focused on the big picture. The daily whip saw is tiring but the global economy muddles on. I found it telling that the mergers and acq. activity this week put the Materials sector front and center.

Worries are what drive the investment community debate even in rising markets. Financial journalism is “risk on”/”risk off” language. Negative possibilities quite literally drive markets and vice versa. When markets are under pressure like now, we have to keep focused on the basics. Global markets could easily see another 20% correction on all these worries. Remember, the fundamentals are solid. Asia is experiencing strong Output and so is Brazil.  The West is recovering as consumer consumption returns and corporate earnings stabilize. Even Europe will recover after the media circus leaves Greece. The merry go round of global production and consumption will not stop over worries, but those worries will rock markets. Our clients are in the biggest companies in the most conservative sectors: Financials, Materials, and Energy.  We will all survive and prosper through the volatility but I understand that doesn’t make it easy.

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This is just out from Barclays bank research. We have revised upwards our 2010 growth projections in the US and China from 3.5% and 9.6% to 3.8% and 10.1%, respectively. Data released this week reinforce our view that concerns about a double dip in the US are unwarranted and are, by now, tail risk.  We believe the biggest risk to our strong global recovery scenario is inflation but we fail to see global inflationary pressures yet. It is only in China (and, to a lesser extent, India and Brazil) where overheating risk is obvious, and even there, inflation appears to be under control.

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This headline jumped out at me this morning, “Asian Stockmarkets Fall Amid Recovery Fears.” World stock markets extended their losses Wednesday as Japan’s much weaker-than-expected economic growth and rising debt loads around the world added to concerns the global recovery was faltering. Asian markets fell 1 percent or more and European shares were lower as global stocks headed for a second day of losses. The dollar, up strongly the last couple days, slumped against major currencies like the yen and the euro, while oil prices rose. Investors in Asia were rattled after Japan reported its economy, the world’s second biggest, grew far less than originally expected in the third quarter, at an annualized 1.3 percent instead of 4.8 percent, as cautious companies slashed spending. The big cut to the growth figure came after a torrent of negative news about governments and companies that reinforced fears the world economy’s turnaround wasn’t sustainable.

TRANSLATION: The fundamentals beneath this government spending fueled market recovery are still weak and the debt is real. Remember, CR Capital clients are making a long term assesment that growth over the next years will be in the cornerstone sectors of the world´s biggest and fastest growing economies, namely China, Brazil and India. We are investing in fundamentals not market swings. Market dips are an opportunity in our world view to buy, build bigger positions and lower the average price per share.

There are genuine reasons to expect a significant market correction and to expect the global recovery to be uneven and awkwad. Keep focused on years, not months. Our objective is true “Capital Appreciation” or to grow your savings.

Let´s Just Hope It Doesn´t Come To This

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Offshore Banking

This is good news because the IMF tends be conservative in there assessments. Remember, it is a good thing the world economy that Asia leads the recovery. World Growth is like an prop airplane that should have several engines to take off and land not just one massive Prop which was the US economy for decades. Now, let’s just watch the consumer markets in Asia and other emerging regions such as Latin America mature as millions are brought into the growing middle class.
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Private Banking

This headline allows us to read between the lines. It ‘s appropriate for us to be cautious about assuming that this has all just been another bump in the road and that things will get back to normal soon. Credit is tighter for good in the USA, as capital requirements increase and both borrowers and lenders are more hesistant. There is also a permanent drop in demand. This is a double whammy and is part of the equation of the “new normal” we constantly talk about. Growth in the USA will be slower. Think of rich economies in a new light because the good old days !”, so that things don’t get worse than they already are. And, “Growth won’t be same though” in order to moderate expectations. The important point is that growth in rich countries and especially the USA won’t be the same.
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Wealth Management

We posted earlier that the Governor of the Bank of England almost implied yesterday that there is a threat that this recession’s recovery could be brief (like Japan has experienced all these years) as the global economy (and especially developed countries) dip back into recession. Will this happen or not happen is the “double dip” recession debate and it’s confusing. There are a lot of mixed signals which is why we prepare our clients for everything and focus on the long run.  It’s also why we like liquidity to buy on dips.
Having said that. Buffet doesn’t think there will be a “double dip”, but we still advise caution.
Warren Buffett tells CNBC that while the economy “hasn’t gotten worse” but also hasn’t “gotten much better” over the past three months, he doesn’t expect a ‘double-dip’ recession and sees significant improvement in residential real estate.

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International Investment Advisors