"Kee" Points with Jim Kee, Ph.D.

The overall economic landscape is probably best described as modest growth in the U.S., accommodative monetary policy globally, faster Chinese growth going forward, and diminishing “tail risks” or risks to the global financial system coming from Europe (Bank Credit Analyst). Proprietary research shops seem near unanimous in their view that the U.S. will avoid a full fiscal cliff effect, predicting instead either temporary extensions, compromises on taxes and spending by Democrats and Republicans, or some combination thereof. Business investment spending is definitely going nowhere until we get some clarity on these issues, but like other cyclical drivers (such as autos and housing), it is already at a low level and so its ability to pull economic growth down further is limited. There is some optimism regarding a small capital spending boom or “catch-up” phase (BCA) once clarity is forthcoming. I would agree that we should see an incremental increase in capital spending next year, but nothing that would merit the use of the word “boom!”


I mentioned “proprietary research” and I think a brief digression on information generation might be helpful to Kee Points readers. Most economic and investment information comes to non- professionals in the form of news media, which clearly has to generate headlines whether they have any meaning or not. Most people know this – it’s nothing new – but they don’t have access to more objective, proprietary views and research. Much of that research comes from large Wall Street firms, who provide research to institutional investors in exchange for their securities trading business, from which they earn commissions. Institutional investors vote on each firm’s research, and whichever firm provides the best research – ostensibly the most objective and unbiased, i.e. “useful” – gets the most trades allocated to them. The system isn’t perfect, but it does promote competition among research providers to produce good, detailed analyses. That’s different from the conventional media (including business and investing shows) serving a mass audience. They are much more in the attention-getting business than the good, detailed analysis business. I think that’s why the views of professional investors are often different from and usually less extreme than those of the "average person."