George and I have been in London this week meeting fund managers.
A highlight was George’s first exposure to Chris Taylor who runs the Neptune Japan Fund.
Chris is a big brain but he is also to political correctness what George is to sartorial elegance.
Chris has views and these are expressed with Anglo Saxon forthrightness but he is insightful and does not hedge (well he does hedge the Yen exposure in his fund and yes this last bit was just an excuse to use that joke).
His view of the world economy is that there are powerful forces working in its favour which in terms of cause and effect make the Greek problem but a “gnats fart” in the hurricane of the overall situation (this is how he would express it!)
He argues that the increasing demand created by the developments of the East (not just China and India) will act as the locomotive to pull the world’s economy along, Europe and its insipid consumption will act only as a minor break.
To illustrate his point (and please see the enclosures with this blog which illustrate his thesis with hard figures).
The UK is on the same latitude as Canada. Canada is much colder in winter than the UK, why is this?
The answer is that an Oceanic current called the Gulf Stream runs across the Atlantic from Florida and its effect is to keep the UK weather significantly warmer than it would otherwise be.
The Gulf Stream is not easily observed (coconuts washing up on UK beaches are a sign) but it is that difference that makes the difference. Without it we would freeze but it’s there and it’s doing its work, we just don’t see it.
The analogy is comparable to the consumption / development stream that is flowing from West to East.
It explains in part the phenomena that has confounded many predictions of falling corporate profits over the last two years, the Western Multi Nationals which have tapped in to Eastern Markets are enjoying strong growth (as an example Unilever’s growth is 12% in the East and 4% in the West, roughly 50% of the business by turnover is now in the East which gives them a net 8% growth) and this will continue.
The final point of this blog is to challenge the pervading current perception that a Greek exit is a Lehman style event and which could imperil the world (as the Lehman event actually really did).
The point here is that there exists a huge difference, no-one really saw Lehman coming, no-one really knew what it meant (i.e. the level of contagion) and everyone was in a state of shock.
With Greece everyone has seen this coming, there has been at least 2 years to prepare and it will not be a shock (many will actually be relieved) when it happens.
As one commentator wryly remarked recently, the really bad news for Germany is that IT CAN afford it.
The markets will be volatile, and if Greece leaves they will react negatively but initial reactions are often wrong as evidenced by all the past bubbles and fads where the belief was that everything was smelling of roses, and in fact it was far more like the stuff put on roses to make them grow; so the reverse can also be true.
Attachments:
Significant revenue growth potential
Diversified worldwide revenue growth
Conservative assumptions little downside
NOTE: This is written in a personal capacity and reflects the view of the author. It does not necessarily reflect the view of LWM Consultants. The post has been checked and approved to ensure that it is both accurate and not misleading. However, this is a blog and the reader should accept that by its very nature many of the points are subjective and opinions of the author. This is not a recommendation to buy any product or service including any share or fund mentioned. Individuals wishing to buy any product or service as a result of this blog must seek advice or carry out their own research before making any decision, the author will not be held liable for decisions made as a result of this blog (particularly where no advice has been sought). Investors should also note that past performance is not a guide to future performance and investments can fall as well as rise.