Friday Thoughts

Last fall I attended a symposium for financial advisors hosted by one of the money managers that I use. It was a great event and I left with so many ideas about how I can be better at what I do. After that event, I vowed to make every effort to attend at least one conference a year from now on. Little did realize that conferences like that were going to be a rarity in 2020.

One of my wish list conferences is the Strategic Investment Conference hosted each year by Mauldin Economics. It is a power packed conference of well connected, highly respected and experienced speakers. However, it’s usually cost prohibitive to attend. This year is a different story, though. Due to the virus, they are having the conference virtually. 

I’ve been able to login and watch presentations and panel discussions that really make you think. The presentations have a different feel then I expected. They’re really focusing on what the world will look like P.C. (Post Corona). 

It’s only a few days into the virtual conference that will be going into next week, but I thought I’d share a couple of takeaways. 

One of the first is a frame of reference of this period and the recession that many expect to come. Even though this is an unprecedented time, it can be helpful to find a similar time to give us an indication of what the recovery may look like. Many people have been comparing this to the Flu of 1918. I haven’t liked that comparison, because this is a very different world than 1918. Back then, electricity was the exception, not the norm. So running water was a luxury and regular hygiene wasn’t very good. Our healthcare system is so much better prepared.

One of the speakers made the comparison to the recession of 1947. At the end of WW II, we had numerous GI’s coming back from war with no jobs. Plants who had been geared for production of tanks, airplanes, and weaponry were shut down and their employees were unemployed. Also, similar to today, the country was massively in debt to pay for the war. 

While that period is similar to today, I would argue that there are a number of differences too. In 1947, the American people were generally happy, as we had just won the war to end all wars. Today, we are a divided citizenry. Then, companies were in pretty good financial shape, as they had benefited from war spending. Today, there is a record amount of corporate debt on the books as corporations have been taking advantage of low interest rates by issuing bonds to fund operations and buy back stock. 

It’s still a helpful comparison and may be the best example we have to go by. I’ll be looking into that period over the next few weeks to see what I can take away. 

Another takeaway from the conference so far - no one really knows what this is going to look like going forward, but there are a lot of very strong opinions out there. That’s probably not a shock to anyone who has been on social media or watched cable news lately. But, the level of disagreement among these speakers has caught me by surprise.

During a panel discussion about the Federal Reserve response to the shut down and the potential for inflation or deflation things got heated. Several panelists felt that we will see prices go lower as demand for goods and services is down. One felt that prices would go up do to the massive amount of money dumped into the economy to combat the looming economic dislocation. And one felt that the prices would be lower for the next few months but for a different reason, he sees a depression coming with a large number of companies failing and unemployment staying high. Things got so intense, I was glad it was a virtual conference so no one could ask to take things outside. 

Watching these highly educated, very experienced, and obviously brilliant men have this debate, I realized that none of them really know what’s going to happen. We’ve never seen anything like this in our lifetime. 

So what do we do, knowing no one has any idea what the world will look like in the next few months or years into the future? The first suggestion is to be mindful of your own financial situation. Carefully monitor your monthly budget. Try to avoid debt. And, be sure to keep an emergency fund of 3-6 months of expenses. It is not your responsibility to spur economic growth. Like they say before each airplane fight, “be sure your mask is secured before helping someone else”.

Secondly, maintain your plan for your longer term investments, like your retirement accounts. But, be aware of the risk profile of those investments. Not all investments react the same in different environments. It can help lower anxiety to have an idea of what to expect your investments to do in a given environment. If you would like to have an assessment of your portfolio’s risk profile, let me know. I can run a report and e-mail it to you, to maintain social distance. 

A quick note about that - While I’m still largely working from home, I am going to the office every day for a little while. I’m willing to meet with anyone at the office, if you call in advance and set an appointment. I’m not doing open office time, as I’m trying to share time “teaching” the kids with Nancy Lee, as she also has a business to run and needs work time, too. We only have one more week of “school” and we have lined up a summer nanny, so we should be back in the office full time after Memorial Day. I’m expecting to have summer hours of 8-5 Monday - Thursday and by appointment on Fridays.

One last note about the summer. I’m considering hiring a summer intern. With all of this work from home, I think I could use some help getting files caught up and getting reorganized. If you know of any rising college Juniors or Seniors who are home for the summer and would like to get some business experience (and make a little money), please let me know.

Have a great weekend and stay safe,

Jonathan Zimpleman