ING chief market strategist: Abundance of cheap natural gas will be a boon to U.S., Michigan in particular

Posted on February 13, 2013

The chief market strategist for New York City-based ING U.S. Investment Management delivered good news Tuesday morning as the keynote speaker at the annual economic outlook breakfast of the Detroit chapter of the Association for Corporate Growth.

Douglas Cote, a frequent analyst on cable TV news and business shows, said the prognosis for both Michigan and the U.S. was favorable because of what he referred to as tectonic shifts in the global economy.

“Tectonic shifts are big and explosive,” he said. “These are catalysts for growth, and they will mean a lot for Michigan.”

Cote said the shifts are:

  • – Growing overseas markets that have a demand for U.S. products. While others talk about the BRIC countries — Brazil, Russia, India and China — markets such as Venezuela, Peru, Indonesia, Oman, Turkey and Vietnam will be key trading partners, he said.
  • – A focus on big data that track consumers and “turn information technology from being a cost-cutting tool to being a revenue-producing tool. Big data is the next wave of venture capital and will go across every sector,” he said. “It will be enormous.”
  • – A manufacturing renaissance in the U.S. and Michigan, which is tied to another tectonic shift.
  • – Cheap natural gas in the U.S., with Michigan a major source in the coming years. “The biggest advantage the U.S. has in manufacturing is cheap natural gas,” said Cote, who noted that manufacturing, fertilizer and chemical companies now based overseas already are either opening U.S. operations or planning to because of the cheap cost of energy here.

“We’re about to be energy-independent in less than a decade, and five years ago, we didn’t even know what ‘fracking’ was,” he said. “We are the Saudi Arabia of natural gas, and Michigan is ideally situated to benefit. And these are jobs that can’t get outsourced. They’re here.”

Cote said exports of natural gas could lead to a U.S. surplus in two to three years, for the first time since 1975. “That will solve a lot of revenue problems for the U.S., and it will solve a lot of employment problems,” he said.

“Eventually, cars will be running on natural gas, too, and that gives you a feedstock that costs you $3 instead of the feedstock of oil that costs $90.”

Cote said the economy would do even better if risk-averse investors and corporations with $7.5 trillion of capital on balance sheets start putting their money to work.

“The credit crisis, as bad as it was, is so three years ago. Come on, get over it,” he said. “Institutional investors have a death grip on cash, and they have a death grip on gold.

“The crisis is truly over. Those who can look beyond fear to opportunity are those who will thrive and prosper.”

In addition to the tectonic shifts, other reasons for optimism exist, including retail sales hitting an all-time high in the U.S. in 2012 and a big turnaround in the housing industry — thanks, he said, to Federal ReserveChairman Ben Bernanke’s rightfully favoring expansive monetary policy.

“Housing starts, new-home sales and existing-home sales are all going up, and they will continue to go up,” he said. “Housing prices going up is an enormous catalyst for getting this economy supercharged.”

Another reason for optimism is the continued growth in gross domestic product, which Cote said has rebounded from the economic downturn and is now at pre-recession highs.

Cote sees a few clouds on what is otherwise a rosy economic panorama. Greece doesn’t concern him too much — “Greece is about the size of Iowa, and that was causing everyone to bail out of markets? Crazy,” he said.

But Europe as a whole is troublesome. The continent is a large market in a recession, and that could affect other regions if it continues to slide, he said.

Cote also said rising U.S. debt continues to worry him but shouldn’t derail the recovery.

The breakfast was held in conjunction with the Detroit chapter of the Risk Management Association at theGlen Oaks Country Club in Farmington Hills.

Tom Henderson, Crain’s Detroit Business.