Experts see upside to down economy
Denver Business Journal - by Bob Mook
The chief investment officer of UMB Financial Corp’s Asset Management division said Thursday that positive side effects will emerge from an economic slowdown that he characterized as a “recession.”
William Greiner, chief investment officer for UMB Asset Management, said some economists have stopped short of declaring a recession because the country hasn’t experienced a decline in gross domestic product (GDP) growth for two consecutive quarters.
But with financial institutions and manufacturers turning to the government for assistance and unemployment levels rapidly rising, Greiner said it’s clear the United States is immersed in a “macro recession” founded on debt.
“We as a society are basically condemned because as a nation, we’ve lived above our means for a number of years,” Greiner said.
He spoke at a breakfast forum to about 100 business people at the Brown Palace Hotel in Denver.
He predicted that unemployment will rise to 8 percent nationally in the next four quarters. But he also expressed confidence that the country will emerge from the crisis.
Although the short-term outlook is “glum,” Greiner added the downturn could set the economy on a different course that will benefit Americans in the long term.
“The economy is way too tethered to consumption, so we’re looking at a major shift,” he said. “The growth is being passed to someone beside the consumer, and that someone is the government.”
Greiner said historically, the government has had a bigger portion of the “growth portfolio” than it has in recent years.
As a result, the government will become the real drivers of economic growth in the next four to five years — investing up to $1.85 trillion into the economy in the next 12 months.
Greiner said consumers — particularly those approaching retirement age — will invest more money into savings. The downturn also will result in less inflation pressure in the next 12 to 18 months, he said.
He said the stock market has fared better under Democratic-controlled administrations, but that inflation has been worse.
Greiner urged the audience to look closely at investment-grade corporate bonds.
He identified “winners” in the economy as alternative energy (a highly touted sector in Colorado), construction companies (which are expected to benefit from a government push to improve infrastructure), and hospitals and health care supply companies (which will do well as the aging population utilizes the health care system).
Losers include “dirty” energy such as coal and oil, defense manufacturers and pharmaceutical and tobacco companies (which he said will be under “direct attack” from the incoming administration and the Democratic-controlled Congress).
The forum also featured remarks from Dennis Triplett, president of health care services for UMB Bank.
Triplett said that despite talk of comprehensive health care reform, he believes that only “incremental” changes will come from the new administration.
“There’s a strong feeling in Washington that we should ‘go for broke’ in health care, but personally, I think we’re already broke,” Triplett said.
He said to expect expansion of the federal program that provides insurance coverage for children as well as a greater investment in health care information technology, which President-elect Barack Obama said would help the system operate more efficiently.
“Obama talked about it a lot,” Triplett said. “Quite frankly, I think he oversold it.”
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