Big and little pictures are entwined in economics
By a timing coincidence, I recently attended two absorbing conferences in New York and Florida which left me invigorated – and blessed by the opportunities and wisdom that was shared.The Financial Times conference titled “View from The Top – The Future of Finance” in New York had a number of luminary speakers and provided a focused macroeconomic perspective in an intimate setting.The second gathering was the Top Advisors Conference hosted by Barron’s Magazine. This Barron’s invitation-only event brings together some of the best and brightest in our profession.It doesn’t matter if you handle hundreds of millions or billions in client assets – the fundamentals, issues and concerns are correlated. I am energized by the validation of how we communicate and have performed represents best practices for those we serve.Two major lessons from the Barron’s gathering were connected to the volatility and complexity of the evolving economic environment.First, our clients need us and our good counsel more than ever and there are enormous opportunities to assist them. Our role is similar to that of a financial doctor – to help achieve the best financial health we can.Second, to get to that financial health, we have an obligation to educate our patients about the stresses, strains and opportunities in the new paradigm. For example, the entire generation known as the “sandwich generation” is financially squeezed by older parents and younger children needing help.Power shiftGenerational rifts emerging on the family level mirror those we see in the daily headlines about the financial tensions between rich and poor, the public and private sectors, and developing and developed countries.Yet geopolitical, local and personal tensions also lead to opportunities – especially in faster-developing markets such as India, Brazil and Africa.This is why it’s critical to embrace a macroeconomic perspective.The Financial Times conference included some of the most sharp and esteemed observers of global finance – Larry Summers, Robert Rubin, George Soros, Joseph Stiglitz and Mohamed El-Erian.One top macroeconomic theme that is significant is that we are at a tipping point where a shift in the power structure from developed to developing countries is quickening. How the “hand off” from developed to developing world is navigated is likely to matter greatly to investors for the next two or three generations, and is especially important to understand now.We may have forgotten the Asian financial crisis of 1998, but foreign bankers and regulators have not.It is telling that Chinese banks have embraced the spirit of our Glass-Steagall Act of 1934, which separated investment and commercial banking operations.As Martin Wolf, the FT’s economics editor remarked, “The Chinese are happy to have adopted Glass-Steagall and even happier they did not repeal it” (as we did in 1998). We will hopefully learn from our mistakes.I continue to be deeply impressed by Mr. El-Erian’s knowledge and perspective on global economics and their impact on what we face day to day.He didn’t sugarcoat his evaluations of the “New Normal,” which means that investors and advisors will need to be patient. There may be lower-than-average historical returns, slower growth and a decreasing role of the U.S. economy – all entwined in complex regulations.It’s not often that one gets to enjoy hearing one of the world’s most successful investors recite the lyrics to the 1960s Beatle’s song “Help!”, while reflecting that it is no surprise why we are, where we are.Mr. El-Erian was reminded that he’s been entrusted with enormous responsibilities for our mutual clients, to which he responded, “No pressure, Tom.”Tom Sedoric, managing director-investments of the Sedoric Group of Wells Fargo Advisors in Portsmouth, can be reached at 800-422-1030 firstname.lastname@example.org.