Stuck in a Turnaround

Remember this scene in Austin Powers when the world’s wittiest spy couldn’t manage to get his cart turned around without getting stuck?

It seems today’s world leaders and central bankers are having the same problem. Despite their best efforts, the global economy is caught between recession and recovery, and it’s not clear which direction will prevail.

Pessimists can point to last week’s poor employment report, continued weakness in housing—in the U.S., China and elsewhere—and a slowdown in global manufacturing as indications things will get worse before they get better.

Optimists take heart in the International Monetary Fund’s (IMF) new forecast that the global economy will grow 4.6 percent this year and 4.3 percent in 2011. The 2010 forecast reflects stronger-than-expected growth in Asia. China is expected to lead the way with 10.5 percent growth this year and 9.6 percent next. The other BRIC nations (India, Russia and Brazil) are also expected see growth between 4 percent to 9 percent.

What about the EU’s debt problems spreading to the rest of the world? The IMF played down the idea of contagion—“contagion to other regions is assumed to be limited and the disruption in capital flows to emerging and developing economies to be temporary.”
But it says high public debt levels, unemployment and constrained bank lending amplify any downside risks.

Sovereign debt and slow growth isn’t a big issue in emerging nations. For that and other reasons, we think the BRIC nations and other key markets like Turkey, Indonesia and even Chile and Colombia (Latin America’s best-performing market year-to-date) will continue to provide good opportunities for active managers.

About Frank Holmes 264 Articles

Affiliation: U.S. Global Investors

Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc., which manages a diversified family of mutual funds and hedge funds specializing in natural resources, emerging markets and infrastructure.

The company’s funds have earned more than two dozen Lipper Fund Awards and certificates since 2000. The Global Resources Fund (PSPFX) was Lipper’s top-performing global natural resources fund in 2010. In 2009, the World Precious Minerals Fund (UNWPX) was Lipper’s top-performing gold fund, the second time in four years for that achievement. In addition, both funds received 2007 and 2008 Lipper Fund Awards as the best overall funds in their respective categories.

Mr. Holmes was 2006 mining fund manager of the year for Mining Journal, a leading publication for the global resources industry, and he is co-author of “The Goldwatcher: Demystifying Gold Investing.”

He is also an advisor to the International Crisis Group, which works to resolve global conflict, and the William J. Clinton Foundation on sustainable development in nations with resource-based economies.

Mr. Holmes is a much-sought-after conference speaker and a regular commentator on financial television. He has been profiled by Fortune, Barron’s, The Financial Times and other publications.

Visit: U.S. Global Investors

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