U.S. Trust Speaker Series
Robert T. McGee
ABOUT ROBERT T. McGEE
Robert T. McGee
Managing Director and Chief Economist
Tim McGee is Chief Economist at U.S. Trust. He is responsible for the economic
forecast and other economic research with a focus on investment strategy. In addition,
he serves on the Finance and Investment Strategy Committees.
Prior to joining U.S. Trust, Mr. McGee was a strategist and economist with UFJ and
Tokai Banks. He is well known in Japan for his regular market column in the Nikkei
Financial Daily. Over the years, he has been recognized by Bloomberg news, Business
Week and USA Today for outstanding forecast accuracy, including most recently being
ranked by The Wall Street Journal as the number one forecaster for 2006. He has
appeared on CNBC, Reuters, and Bloomberg TV and has often been quoted in various
publications like the Wall Street Journal and New York Times.
Mr. McGee began his career in the academic world teaching at Florida State University
and New York University. He also spent three years at the New York Federal Reserve
Bank and one year as a fellow at the Netherlands Institute for Advanced Studies. He
has published numerous articles in academic journals.
Tim received his B.S. from the Georgia Institute of Technology and his M.A. and Ph.D.
degrees from the University of Wisconsin. Some of his memberships include the
American Economic Association, the National Association of Business Economics, The
Forecasters Club of New York and the Money Marketeers. He has served as Chairman
of the American Banker Association’s Economic Advisory Committee and president of
the Forecasters’ Club of New York. He is also a member of the New York City Economic
Advisory Panel.
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U.S. Trust Speaker Series
Robert T. McGee
TOPICS AND ABSTRACTS
As Chief Economist of U.S. Trust, Robert McGee, known as Tim, manages the
Economics and Strategy Research Department, which is responsible for analyzing and
forecasting economic and financial trends. Tim brings to this distinctive position an
astute, contextual view of the global economic environment, and at the same time, the
ability to translate those trends into meaningful investment strategies and ideas for
clients.
For example, in speaking about globalization, he is able to address how trade and labor
flows among emerging industrial countries like China and India, and post-industrial
service economies such as the U.S., can be beneficial to both sides and create robust
investment opportunities.
Another distinguishing characteristic is that Tim focuses on what is different amidst the
fast-paced assault of global economic data. This perspective informs U.S. Trust
analysts in identifying and anticipating opportune investment strategies for clients. “Most
investment strategists work against historical averages. The most fruitful way to make
money is to understand what is new this time,” he concludes.
For example, Tim can address these three interrelated themes separately or together:
“The Reflationary Economy”
With oil and gold prices rising and the re-emergence of Japan as an economic force, is
2006 different from 1976? Tim can outline the hallmarks of “reflation” – such as
outperforming commodities and real asset investments – against the backdrop of
cooperation among the U.S. Federal Reserve and foreign central banks in not
dampening economic growth. He explains how the participation of emerging industrial
countries in the global economy has enabled this extended growth without inflation.
“The world is awash in liquidity, creating an optimum environment for tangible assets,
natural resources and real estate. We think that this will persist,” he says. He points out
that rising gold prices are liquidity driven, not inflation driven, and that Japan’s emerging
strength is finally based upon structural underpinnings rather than cyclical forces.
Because rates are low, this suggests a low-return environment for financial assets. That
said,
Tim sees investment opportunities in “old economy” companies such as industrials,
energy, materials and utilities as well as equities in emerging industrial companies.
“What’s New About Old Economy Companies”
Opportunities abound in companies such as Caterpillar that have been undervalued
because the market believes that their perceived cyclical peaks have passed. Tim
disagrees with that consensus, “What’s different for these companies is that we are in an
extended global expansion. Instead of correcting, they just keep reporting stronger
earnings. So we have the unusual situation in which energy, metals, construction and
heavy machinery companies are reporting better earnings but haven’t yet attained the
valuations to go with those earnings.”
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U.S. Trust Speaker Series
Robert T. McGee
The last two business expansions have been the longest in U.S. history. Rather than
assuming that the expansion cycle will be of historically-average duration, Tim says, it’s
important to look at why the recent cycles have been longer. Some reasons: U.S.
companies have been able to outsource cyclical jobs; there are 50% more two-income
families, and real-time inventory control means that the inventory cycle is much quicker
and companies can avoid a crippling build-up of inventories. Also, inflation expectations
are low and stable, keeping long-term interest rates more stable.
“Globalization: The Win-Win Environment”
The emergence of major countries like China and India as new industrial forces has
created consumer demand that fuels post-industrial, service economies such as ours.
At the same time, the availability of relatively low-cost labor enables U.S. and other
western companies to maintain profitability through outsourcing and off-shoring.
“The growth rate the world can experience without the effect of inflation has risen. This is
because underdeveloped economies are able to grow at a faster pace due to their
increased participation in the global economy and the effect of more prudent policies that
they didn’t have in the past,” he says.
The demand for consumer goods among countries with younger, increasingly affluent
populations will only increase, he says.
Additional investment topics. The following are just a few of the investment themes that
result from these trends:
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Global distribution network. Tremendous cross-border movement of goods and
services requires a more globalized distribution network, creating an urgency to
upgrade railroads, ports, trucking and transportation systems.
Energy and utility industries. This infrastructure is changing; the high price for energy
has brought back discussion of nuclear and alternative energy sources.
Health care and related technology. These products and services are taking a
growing share of wallet in developed countries and regions where the populations
are aging, such as the U.S., Japan and Western Europe, and will play a greater role
in emerging economies like China as their people age.
Environmental issues. The environment is being strained by rapid growth, especially
in places like China, and this will have to be confronted.
Defense and aerospace. These areas will be enhanced to deal with jihadists and
increased global travel.
Investment banking for M&A and asset management, insurance and risk
management as an unprecedented number of older people require financial services.
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