Caterpillar chief Oberhelman says global economy more uncertain than ever

As well as John Paulson’s troubles at his hedge funds, the wider hedge fund industry is also struggling to outperform their benchmark indices and gain a handle on where the market is heading in the remainder of 2012. For example, the U.S. focused RBC Capital Markets Hedge 250 index was up 2.7% this year to the end of July, with equity long/short funds up 2.5%, versus a 4.9% return for the FTSE 100 and a 12.7% gain for the S&P 500 year to date. That’s some underperformance for supposedly absolute return funds.

Doug Oberhelman, CEO, Caterpillar

A story in the FT this morning seemed to confirm that the investor community is not alone in not easily being able to predict the course of economic events this year. Doug Oberhelman, Chief Executive of Caterpillar, the world’s largest mining equipment supplier said that he considers the global economic outlook is more uncertain than at the start of the crisis in late 2008 and that it was harder to predict what would happen to the global economy over the coming year than at any time in his 37-year career.

In the FT interview Oberhelman said, “I don’t think the situation is as grave as it was in 2008, but the uncertainty, the storm clouds are around things that none of us know about – like what will happen with the political situation in Europe,” , “Virtually no segment today in the US is signalling any recession,”. “It’s also not signalling a boom. China has bottomed and I think everybody agrees – the question is whether it’ll snap back or be flat, but it won’t disintegrate. Brazil has bottomed.”

With the US market up by a healthy margin this year, it’s difficult to consider putting too much extra on the table. The July US non-farm payrolls seems to indicate that the US economy may be slowing down but, the economy is far from collapsing giving little hope that further quantitative easing is around the corner. The big question is what Europe will do to kick start growth? Pressure is growing on France’s new President Francois Hollande to deliver on his election promise to engineer some growth in the anaemic French economy. For now, the Hedgies, like ordinary investors, are struggling to place their bets in the right place at the right time!

Contrarian Investor UK