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World Economies

September 29, 2011 – 5:58 pm

Managing money is not only an exercise of understanding the economics of individual companies and the growth and health of sectors but also being able to competently judge the strength or weakness of the economy. In recent years that knowledge is no longer enough.

Today, you need to understand the interconnectedness of the world economy and its effect on international banks and the banks ties to sovereign debt. You have to understand the importance of the Euro that, as a single currency, has partially tied countries together each of which has very different views on economic stability and the government’s role in their individual economy. Also, the influence of China on the world stage and its emergence as a dominant world economy with their particular brand of a free economic economy is not only complex but because it is a communist country with their obsessiveness with keeping things secret makes the transparency of what is happening inside China very difficult to ferret. Add to that their lack of institutions that report on the broader economy, and to say nothing of massive corruption that in many cases is institutionalized.

This is why managing money is so very difficult. It is no longer just about the health and growth of individual companies that moves markets. Today, it is also about world economies. Then again it has always been about economies, just not all of them at the same time. Earnings are and have always been the key. This world interdependence is not only a problem to understand but it also can be a stabilizing force as well. China’s growth, though reduced to 9 to 9.5%, is very good for the rest of the world. It may well drag Europe out of its doldrums once they firmly address their debt issues.

It will never be easy, but it certainly interesting.

Good Trading
Steve Peasley

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