Learning from People Who Know

One of the great things about my job is that I get to travel around the country and listen to very smart people who know things most of us don’t about our economy, the financial markets and the politics that influence them. In this article, I will share a sampling of the information I got from my most recent trips to Florida.

First, I went to Fort Lauderdale for my quarterly meeting with a peer group of about 15 advisors. The purpose of our group, known as the National Independent Financial Advisor Panel (NIFAP), is to share information about our local economies, our businesses, investments, and what’s on our clients’ minds. We work out the agenda weeks in advance, but the best information usually comes unexpectedly. I always get information that helps BWFA improve our services to clients.

My takeaways from this NIFAP meeting were mostly about using technology to improve productivity and management of our firm. Also, I will look into using Thinkbigworksmall.com, a client-communications tool. Plus, I picked up investment ideas about using options and private real estate investments.

Next, I went to Orlando for a conference sponsored by the National Association of Personal Financial Advisors. (I enjoyed two detours—a really nice dinner with some clients, and getting “beamed-up” to the retirement seminar BWFA held at the Applied Physics Lab.)

At the conference, I had the privilege of hearing John Mauldin and David Gergen speak candidly about our economy and the political environment. Unlike most presentations where speakers offer upbeat comments so they will be invited back, Mauldin and Gergen painted pictures of a difficult economic environment and path to recovery.

Here are some of their specific, frank observations:

  • Commercial real estate—The current situation in the $1.4-trillion commercial real estate market is much more severe than prior boom-and-bust cycles. Its full impact has not yet been felt on the economy.
  • Unemployment—We’re told that unemployment is about 10%, but the real number might be closer to 17.5%. If you measure “underemployment” (those people who are working part time because they can’t find full-time employment), the number is close to 33%, perhaps the highest number since the 1930’s.
  • Consumer spending—Consumers have hit their debt limit. Faced with inadequate retirement savings, consumer spending is not likely to return to historic levels for an extended time to drive our economy forward.
  • Tax receipts—For each of the last four quarters, tax receipts have fallen. Receipts were off by 11% in the last quarter, at a time when government spending is at a record high.
  • Government spending—Both speakers agreed that we are not going to spend (read: stimulate) our way out of the current economic slump, as we have before. Prosperity will require real innovation that leads to long-run new job creation. Gergen suggested that biotech or “green” technology might offer opportunities of the magnitude that are needed.
  • President Obama—Gergen had a lot of interesting things to say about the president, and he was complimentary about Obama’s ability to grasp and analyze important policy matters. He expressed concern, however, over whether the president has the “steel” to make the large spending cuts in military and entitlement programs in order to keep high taxes from impeding economic growth. Discretionary spending would have to be cut by 70% in order to leave military and entitlements untouched—and that’s not going to happen.
  • Looking ahead—The federal budget is due out in February. It will help define (or not) how our economy moves from spending to investment. The budget will also influence how we invest for our clients.


At the conclusion, Gergen offered the following observation: Before entering World War II, Roosevelt asked how many planes our nation was building; the answer was 5,000 to 6,000 per year. He then asked how many we could build, and the experts answered 25,000 at flat-out production. Roosevelt then established a national goal of 50,000 planes per year. At the end of the war, our nation was turning out 75,000 planes per year.

Ultimately, the inherent power in our nation—our freedom, our respect for others, and our innovative spirit—will enable us to solve this “crisis,” as it has all others.