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UMB's Chief Investment Officer, Bill Greiner, appears on Mike Shanin's KMBZ 980AM radio program.
December 07, 2006
| Date: | December 3, 2006 |
| Time: | 09:00 AM - 10:00 AM |
| Station: | KMBZ 980 AM |
| Location: | Network |
| Program: | Mike Shanin Show |
Click here to watch a video from the show.
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Mike Shanin: As we continue with Kansas City's morning news Sunday edition on news radio 980 KMBZ. I'm Mike Shanin. Kansas City-based financial analyst appears often on network TV programs dispensing his views about the economy and the fact that he keeps getting invited back means he is usually right. Bill Greiner is the Chief Financial Officer of UMB Financial Corporation's Asset Management Division. Greiner was named Business Week's Fearless Forecaster - the 2005 Stock Market Strategist of the Year for accurately forecasting where US markets would be at the end of last year. At the end of this year, he joins us to talk about the holiday season's financial outlook and much more. Bill, good morning and thanks for joining me.
Bill Greiner: My pleasure Mike. It's great to be here.
Mike Shanin: How do your predictions for 2006 look as we near the end of the year? Is your fearless forecast likely to be on target again this year?
Bill Greiner: Well, I think we were a little light this year. We thought the market would close about 2% lower than where it is right now. That isn't to say that the market couldn't correct 2 or 3% between now and the end of the year. It very well could. So I think we are within shouting distance of where we thought the market was going to be this time last year.
Mike Shanin: When you are on television nationally from Kansas City, are you usually on CNBC?
Bill Greiner: Actually on Bloomberg News.
Mike Shanin: Oh really?
Bill Greiner: Yep.
Mike Shanin: How did you get involved with that? Did they just find out that you existed and that your forecast had been pretty accurate and gave you a call and said 'Come on'?
Bill Greiner: Well, between myself and Jim Moffett who runs our International Equity Effort at UMB, we've been involved with the New York Press and that kind of thing now for the last 4 or 5 years off and on with Barron's and the Wall Street Journal and those types of publications. We just built those kinds of relationships over the last few years.
Mike Shanin: What kinds of things, Bill, do you consider when you forecast what's going to happen in an economy as dramatically large as the one we have in the United States?
Bill Greiner: It's a multi-factor issue. I think, as you'd well imagine, I think the real key though is the consumer. Consumer represents 70% thereabouts of the total economic power in the United States. As the consumer goes, normally speaking, so goes the economy. In our view, the consumer is slowing - there's no surprise with that - we think that the overall economic power therefore is slowing. And we think the crux of the issue is that everybody out there - all you listeners are aware - has to do with the U.S. residential real estate market.
Mike Shanin: Yeah. Is that still going to be a serious concern into the early part of next year and perhaps beyond?
Bill Greiner: We think it will. We think it is going to continue to be a drag on overall economic power and our outlook for next year is for U.S. GDP growth to come in between 2 and 2.5%. We think things are weakening down pretty hard right now. The ISNI Survey, which I think a lot of your listeners probably are aware of, came in on Friday below 50 which basically says the industrial side of the equation, along with the consumer, is actually contracting right now. So the industrial side of the economy had been growing pretty steadily for the previous 4 years, and now that is starting to contract. So our view that the economy is in the middle of a growth/contraction is still, I think, very valid. And I think the bottom line of this is that we expect the Fed, next year, to start reducing interest rates.
Mike Shanin: I took a look at your holiday spending forecast and you seem pretty upbeat about what's going to happen during the holiday season.
Bill Greiner: Well, I think people in general are pretty buoyant. Some of the data we've seen over the last week or so wouldn't really say that's the case. Although I think we have to remember that there is a very quick seasonality to Christmas sales. Typically speaking, the week or two after Thanksgiving tend to be relatively punk and things tend to ramp pretty quickly from that spot throughout the end Christmas. Also I think more and more people are giving gift cards now and retailers don't post those sales until they are cashed in - usually in January. So I think there is that kind of a shift going on also within the retailing side.
Mike Shanin: That is kind of weird, every Christmas here over the past several years we will get one report on the outcome of holiday sales, if you will, and it will say 'but not including how much was spent on gift cards.'
Bill Greiner: Right.
Mike Shanin: And that turns out to be a huge amount, typically. Why can't they report that with the other data around the end of December?
Bill Greiner: I think that really depends - it comes down to trying to keep their books straight from an IRS standpoint. When people come in to cash those in basically, inventory then leaves the shelves and they offset the revenue from the cost of goods sold at the stage. They'd have a mismatch on their accounting books if they count it in one quarter versus another quarter I think.
Mike Shanin: They've got the money but they can't count it.
Bill Greiner: Yeah, exactly.
Mike Shanin: Is what you forecast nationwide typically applicable to the situation in the metro Kansas City area?
Bill Greiner: In general, yeah. I think that Kansas City is a pretty good microcosm in many ways of the United States in total. We're not really as volatile as far as growth rates nor contractions typically as the coasts, for example. We don't see the big highs and the big lows as you see in many of the major cities and so we are kind of, if you will, a good microcosm overall of U.S. economic activity.
Mike Shanin: Let's go back to the holiday shopping here for just a second, I meant to ask you, what items are going to be hot this holiday season?
Bill Greiner: Well, what we've seen so far is that electronics are becoming a hotter and hotter item as time goes on. I think toys are doing relatively well. But in addition to that I think we are seeing as far as a sector of the retail area that is doing surprisingly well this year is the major line department stores - you know, the Macy's and the Federated Department stores organizations. Those types of places are actually seeing a nice uptake this year in relation to what we have seen in the previous 4 or 5 years in those kinds of store formats.
Mike Shannon: Okay, let's turn again now to the local economy. How has 2006 been in the Kansas City metro - been a pretty good year or a not so good year?
Bill Greiner: A pretty good year. I think in general unemployment is low in Kansas City. I think that most people, not everybody obviously, but most people that want a job have a job. I think inflation and rising prices in general have been capped. I think it's been a relatively decent economy here in Kansas City and on a nationwide basis for the last 12 months. Things are slowing here in Kansas City and abroad - not abroad, but within the nation. Witnessing for example, housing values I think have stopped going up in general in Kansas City. And in certain areas of the city - the higher-end areas - I think actually we have seen some contraction in pricing. So, in general though, I think it's been a pretty good year in 2006.
Mike Shanin: 2007 going to be a decent year for Kansas City and the nation from the economic standpoint?
Bill Greiner: Yeah, I think it is going to be okay. I think it is not going to be as strong as 2006, and certainly not as strong as we saw in 2005. Our overall economic outlook for 2007 basically is saying clear skies but clouds forming on the horizon.
Mike Shanin: Well Bill, it's great pleasure talking to you. Thanks very much for your time, and I hope you will have a delightful holiday season as well and come back and join us again.
Bill Greiner: You too Mike, I enjoyed it.
Mike Shanin: Thank you, sir. That is Bill Greiner, the Chief Financial Officer of UMB Financial Corporation's Asset Management Division. I'd like to see his business card.
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