If you want to be successful, it’s not enough to think about business in your neighborhood or even in the Local Business owners and entrepreneurs have to think globally, says George M. Feiger, CEO of San Francisco wealth management firm Contango Capital Advisors.
“While all of us have very local interests, what happens to these local interests can be very powerfully affected by what happens elsewhere in the Eurozone or in China,” Feiger explains.
In an exclusive interview, Feiger outlined issues that small- and medium-size businesses must consider in order to compete in this increasingly interconnected and competitive world. This past January, Feiger, 63, was one of the expert panelists presenting at the Vectra Bank Colorado 20th Economic Forecast Breakfast. Both Contango and Vectra are part of the Zions Bancorporation family of companies.
Here are five key trends that Feiger tells us will drive entrepreneurial success in the U.S.:
Europe’s economic troubles could still hurt us. Feiger says that while some people think the recession here and elsewhere is likely to end by 2014, there is evidence that it could last longer. “Of all of the major economies — if you look at the Eurozone, Japan, the UK — our economy is the only one where aggregate output today is higher in total than it was before the crisis began in 2007.” Not only could further stagnation or decline make it difficult to do business with European companies and markets, but it also might turn into a big drag on U.S. financial markets, Feiger warns.
Despite what you might hear and think, this could be a good time to borrow money. “We have the best-capitalized banking system in the world,” Feiger contends. “The [Federal Reserve] is increasing liquidity in the system, but that’s not actually creating an explosion of monetary growth, it’s just creating in effect, more reserves, because the banking system is capable of lending much more than it actually lends because there isn’t enough demand.”
The U.S. has energy to burn. Feiger views fracking – the ability to extract natural gas, gas liquids and even oil from shale – as holding great promise to buttress our economy. “We have huge amounts of these resources, and we also have developed the technology that enables these resource to be tapped. We are at the very beginning of this era of producing this energy, and I think everyone should understand how important this is. Natural gas is one-quarter the price here that it is in Europe, and one-fifth the price that it is in China. So, if you’re producing anything that’s energy intensive, you’re going to do it in the United States,” Feiger says.
Technology is driving our economy and changing how we work. The salaries of people with bachelor’s degrees have held steady. Only people with graduate degrees are seeing salary increases. “Our economy is at the forefront of this globally because we invent most of this technology,” Feiger notes. “You’re seeing a massive displacement not only of unskilled labor, but also of skilled labor. Even doctors [are being displaced] by smart machines, and this has huge implications for the future.”
Inflation is coming, and it’s not all bad because it will help us reduce our enormous national debt. But there will be losers. Feiger explains that by borrowing money, the federal government will create inflation and pay off its debts with less-potent dollars. Because insurance and pension funds invest in Treasury bonds, pensions and annuities also will face reductions in value. “What we’re going to get is a transfer from savers to borrowers,” Feiger says, adding whether that’s bad or good depends on who you are. “If you are in your 50s or 60s or 70s, [inflation] is unambiguously bad,” he says. “If you’re in your 20s or 30s or 40s, probably you’ll benefit from it.”
Listen to an extended audio interview with Feiger, who was a recent guest on Monday Morning Radio, co-hosted by Cranberry Newswire co-founder Dean Rotbart.
George M. Feiger, an investment expert, is CEO of Contango Capital Advisors, Inc., and executive vice president of Contango’s parent, Zions Bancorporation. Feiger holds a PhD in Economics from Harvard University and was an associate professor of Finance at Stanford University’s Graduate School of Business. He has held multiple senior positions in the financial services sector.