Monday, July 7, 2008

Boston Globe Interview with Ken Heebner

Hat tip to Daniel Wahl for the heads up about this Boston Globe interview with Ken Heebner, "Portfolio manager casts an optimistic eye on economy". It's worth noting that the positives Heebner sees in the U.S. economy are those sectors benefiting from the weak dollar or the secular bull market in commodities. Says Heebner,

People are overlooking the fact that we're having a huge boom in the farm economy. Also, the energy area is very positive. And I further expect the weak dollar to energize our exports and manufacturing industries. Our natural competitive strengths, our innovation and creativity, remain unique skills in the global economy. We're going to start to export cars, we'll start to export steel.

This is in contrast to some self-described contrarians who have been buying beaten-down American stocks in sectors that are more dependent on the U.S. consumer.

It's unfortunate that, perhaps because this was such as short interview, the reporter wasn't able to ask more follow-up questions. For example, it would have been interesting to read Heebner's response to some additional follow questions about his prediction that inflation could hit 10% in three years. Heebner does say in this interview that he expects high inflation to lead to multiple compression, and that the way to offset this is by investing in companies with enough growth in earnings to offset this multiple compression. I would have been interested to read more of Heebner's thoughts on the consequences of a return to double-digit inflation, and the consequences of the Fed's response to it.

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