NFB FINANCIAL UPDATE Volume50 June 2010
FROM THE CEO’s DESK
A
much confronted with debt repayment into the next decade and the UK settling into a shared
become the preferred currency for global trade. It was common cause that the US dollar was going to pot. Thankfully, we
parliament, where do we go in terms of investment? Given that worldwide earnings are depressed we could see a positive trend, which in
chose not to react to this implied pressure, and just a few weeks later the precarious nature of Greek and other geographies (not only the so-called PIGS) debt certainly became a focus. This problem will not go away simply because the euro-zone closes ranks and bails Greece out. It is one thing to provide a bail out, it is quite something else to expect these traditionally less fiscally disciplined folk, firstly, to change their ways and, secondly, to buckle down to extremely prescriptive and rather unappealing measures introduced to reverse the negative trends in their economies, which precipitated these conditions in the first place. One of the more worrisome outcomes of the current economic malaise is the re-appearance of nationalistic trends where, already in Europe, talk is heard of a second tier currency for the dislocated economies. Imagine euro 1 and euro 2! Nationalistic tendencies go way beyond currencies and include trade pacts being
turn might return confidence to markets and the next thing that happens is asset prices adjust upwards. My concern is that this has already happened, with questionable “earnings increases” having been reported. Companies have not earned more, they have simply spent less (retrenching, less marketing, no IT replacement, cutting packages and frills) and this has translated into better bottom line numbers. The problem, if I am correct, is the knock-on effect of this when they need to grow. They then have to scramble around hiring people, buying plant, technology and advertising, to get back into the game! This is not all bad, because their lethargy in building people, stock, capacity and ad spend will benefit others when they waken to the resurgent economy and demand, propelling share prices of those companies upward. I guess the trick is then to identify the beneficiaries, invest in them and wait. We are doing just that and, most importantly,
unilaterally amended to support politically attractive protectionist policies. To the shellshocked residents and voters in Greece for
as previously noted, we are also looking into the developing giants in the East and other geographies to add to performance.
example, and the other Club Med states, the idea of a “let's go it alone” escapist approach is probably appealing. The idea of taking the
Interest rates look set to remain lower for longer and until inflation raises its inevitable and ugly head governments will be urging their central banks to
medicine is unappealing and is easily blamed on others. Closing ranks can be expected as a proposed strategy from right wing politicians and
hold off on increasing the cost of money. The upshot of this article is that sticking to the basics is appropriate. Our asset management team is
will be accepted by people eager to resume “life as usual”. The hung parliament in Westminster is a further
actively adjusting portfolios, finessing exposure to equity, property and the other asset classes. The only real issue is that whilst we as a house have
concern. Already pummeled by the economic woes of the last few years, and with its status as a financial centre placing it amongst the worst hit
erred on the conservative during the economic meltdown, we have had little reward, as the cash into which we retreated is paying almost nothing!
economic zones in the recent meltdown, London is reeling. But, watch this space. The currency, independent of the euro, and capable of both
To the World Cup, that is now upon us. Remember, none of us in 1995 vaguely thought that a bunch of South Africans could get to the
strengthening and weakening allows Britain to roll with the blows. It will come back and the NFB team is watching it closely, intent on catching the lows
semi-finals never mind win the darn thing. GO Bafana Bafana, GO!
that sterling trawls. The Brits are a resourceful bunch and we believe they will come back fighting. So, with Europe a basket case, the US very
Mike Estment, CFP® CEO, NFB Financial Services Group
few months ago we were continually being asked when the euro was to
IN THIS ISSUE From The Ceo’s Desk Europe's Debt – How the Mighty Have Fallen Opportunities Abroad: Suppressing the Feelings of Contempt
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financial services group