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Is the US Still the Best Place to Invest?
08/31/2012 3:08 pm EST
Despite the global economic slowdown, Harris Private Bank's Jack Ablin explains why he thinks that the US is still the "best house" in a bad neighborhood.
What's going on in the macro picture that could affect investors? We're talking about that today with our guest, Jack Ablin. Jack, what are you seeing out there? A lot of people did use the old phrase about the US: "The best house in a bad neighborhood." What do you think?
I'd go along with that, Kate. I think that for as lousy as it seems our economy is and job growth is, we're actually very well positioned relative to our developed-market trading partners.
Take, for example, just labor costs. The fact is that over the last decade or so, wage costs relative to productivity and currency have far outstripped the United States in Europe and in the Far East, and that leaves actually the US as the place to do manufacturing. You know, it's remarkable to me that Airbus (EADSF), a company that's embodied the European government system, has actually chosen to build their planes in Alabama.
Right. Now, with all the talk about what's going on in Europe, the predictions. There just seems to be a different prediction every day, depending who you listen to, but how soon do you think we might really start to see some effects over here in this country?
Well, we're already starting to feel some effects, both positive and negative. As I said, there's been a lot of shifting of jobs away from Europe to the United States. Airbus is one, but VW and some other manufactures-Honda (HM) from Japan, and others. We are starting to feel that, obviously, with the negative effects in some earnings.
So, Philip Morris (PM), McDonalds (MCD), and a lot of the global players that rely on households to consume are starting to not only feel the pinch in near term earnings, but have actually projected some tamped down expectations, too.
Now, how about a predicted slowdown in China? How will we see the effect of that?
Well, I think, you know, everyone's been calling for the China slowdown, and it is slowing as they've tried to shift away from their reliance in infrastructure and more to a reliance on households. What we're seeing is, though, that experiment isn't working as well and as quickly as they'd like, so now the government is actually starting to rebuild infrastructure again, perhaps creating some bubbles.
So, I don't expect that China will necessarily slow their overall economic growth, but the mix of that growth is a little bit disturbing to me.
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