It's not as bad as we think

The global economy is not as gloomy as many people think, according to a fund manager who says the numbers don't always reflect the situation on the ground.

Monday, October 8th 2012, 6:00AM 3 Comments

by Niko Kloeten

Forsyth Barr head of funds management Kevin Stirrat, who will be speaking at the Meet the Managers forum later this month, said there are two distinct views about the current state of the world's economy.

The first view is that "the end is nigh" and that the world is on the verge of another depression, he said.

"The second view is that the problems are solvable, the world's still growing and still generating things and we just need to get through these issues."

Stirrat is in the second camp, having recently returned from a fact-finding trip overseas including the USA where he says the situation is more positive than the headlines or the economic figures suggest.

He said part of the reason could be the "cash economy" in the US, with some activity not being picked up due to the large number of transactions that are done in cash.

Stirrat said the US has a lot of things going for it, including the oil and natural gas boom which has lowered energy costs, increasing competitiveness and leading a number of companies into "homesourcing" jobs that had previously been sent overseas.

With US households still deleveraging the construction sector isn't in such great shape, a big reason why unemployment is still high although dropping.

But Stirrat said the "flexibility" of the US economy and the "entrepreneurial" nature of its people would help its recovery.

"One of the advantages they have is the most flexible labour market in the world; it's easy to hire people and easy to fire people."

Stirrat also said the Euro zone wouldn't break up due to the "geo-political risks" of allowing it to do so, although he said one or two smaller countries may drop out.

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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Comments from our readers

On 8 October 2012 at 11:47 am Cynic said:

Head of funds management of a stock broker is hardly going to be saying it's all doom and gloom, and people should get out of the markets now, is he?

On 8 October 2012 at 2:38 pm Independent Observer said:

It's worth noting that some stockbrokers operate independent funds management entities from their core stock broking businesses. The views and opinions that originate from these funds management entities are within the bounds of their obvious fiduciary responsibility.

It amuses me how many financial services participants place a heavy emphasis upon media statements or economic reports, instead of visiting various jurisdictions (or if they’re unable to, listening to those who have) to gain a firsthand impression of how the world is traveling.

On 8 October 2012 at 4:24 pm brent sheather said:

First rule in the finance industry is that all news is good news...according to andrew smithers.eg a recession = low interest rates = good for shares,boom = gdp growth= good for shares.simple really.lol.

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