A Report From The Front Lines…
As former US Secretary of State Madeleine Albright once said, “To understand Europe, you have to be a genius – or French.” Well, I took the challenge head on and spent two weeks traveling about Europe. While the trip was supposed to be a vacation, I spent a good deal of time unearthing the “European” economic view.
My stories could fill a book. Today I want to focus on what I think is the most interesting thing I learned. So let me get to the point.
Within a day or two of landing in Europe, I discovered a huge contradiction. It was hard to miss. It hit me over the head every time I turned on the news or opened a newspaper. If you were there, you’d have seen it too.
What am I talking about?
I call it the “worry factor” as presented by the media. What’s the worry factor? It’s simply the news item of the day intended to make readers worry.
I have a perfect example. Before leaving the U.S, the news was full of concern over the European economic recovery.
Concerns over Greece, government debt default, and European Central Bank stability were highlighted. Add in hated austerity measures, a falling Euro, and a call for breaking up the European Union, and you now have a number of worry factors.
Any one of these is a headline story for the day. The U.S. media can’t escape the worry over Europe.
You can imagine my shock when I learned the big news in Europe. Across the pond, they’re worried about the economic recovery in the United States! Everyone in Europe, from the news media to businessmen of all types, is focused on the U.S. economy.
They’re concerned about the U.S. recovery and potential for a double dip recession. Poor economic news on home sales, consumer confidence, and the US Dollar added fuel to the worry fire.
It became clear to me, depending on which side of the big pond you were standing, your worries were entirely different.
Deep down inside I guess I knew that would be the case. But actually, living and experiencing the news media first hand drove home the point. While every economy has its own problems… everyone’s focused on (and worrying about) the other guy’s problems.
It’s like watching a fire start at your neighbor’s home… and not realizing your own home is already burning!
Given the focus on the other guy’s problems, I started to wonder if it’s a good thing or a bad one…
Many investors believe the U.S. is in dire straits.
For them a double-dip recession is certain, and the US economy is about to crumble. They point to the Dow and say, “Short, Short, Short!”
Other investors are saying Europe looks bleak.
They’re calling for the eventual demise of the Euro. They’re saying the European Union is unstable and economic growth isn’t possible. They believe the Euro will become worthless.
I have a slightly different view that’s probably less popular. (You know me, I don’t pull punches.)
I believe both groups are really, really wrong.
Look, the problems in both economies are real. However, these problems are not going to cause a global depression… and while many believe another recession is possible, I just don’t see in the cards.
While all of the economic issues in Europe and the United states are big, they’re being dealt with. They are identified and known. And for every problem, fixes (good or not) are being proposed.
I liken it to being hit by a bus. The danger is the bus you don’t see. If you see the bus barreling down the road, you can easily step to the side. It’s the same with these economic issues.
Think about it.
Our worry factor has already been identified… and new ones aren’t cropping up. The economy has gone from horrible to just bad and that’s progress!
So what’s it mean for our investing dollars?
First, don’t worry about the recession… but be cognizant of where you’re investing. Focus on areas ripe for recovery and look at the bigger trends.
Here’s what I see…
China is going to be a big driver of the global economy. (Can anyone disagree with this?) That means emerging markets are the place to be.
The European Union, while having its own struggles, is a far cry from breaking up… and that’s positive for the EuroZone Euro. And don’t forget commodities which are setting up for a nice rebound.
Best of all, some surprising industries like energy, travel & tourism, and banking are poised for big growth.
So while the news media, on both continents, is busy worrying about yesterday’s problems… I’m seeing opportunities for tomorrow. Next week I’ll talk in more detail about current trends and I’ll give you a few solid investment ideas.
Category: Foreign Markets
