Notes on the Economy in 2010

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Filed under: Canright Inspirations

Notes on the Economy in 2010

Here are quotes and assessments on the economy in 2010 from panelists at tonight’s Massachusetts Institute of Technology Enterprise Forum Chicago program on the Economic Outlook for 2010. Tim Curley, a financial advisor at UBS Financial Services, moderated in front of a sell-out crowd.

Bryce Bulman, Senior Vice President, PIMCO/Allianz Investment Management
“PIMCO coined an expression called ‘the new normal.’ We’re not setting to a previous mean but going into new territory. We’re not going back to 2005 or 2006.”

“There are risks. The Fed is looking to exit from the mortgage market. It put a trillion dollars in buying mortgages. What happens when the Fed doesn’t buy mortgages like they have been? It could result in better values for patient bond investors.”

Adolfo Laurenti, Senior Economist, Mesirow Financial
“We are probably going to see big (GDP growth) numbers. Why, then, are we feeling so bad?

“The numbers for growth look good on paper. Most of those growth numbers will be quarter by quarter and build off temporary factors. In the first half of the year, the stimulus package. Massive inventory rebuilding for one or two quarters.

“Very little will contribute to a sense of momentum ahead. Temporary factors will not create momentum to create jobs and thus income.”

Mark Keeley, Keeley Investment Management
“My whole thesis is patience. People get impatient especially in their investment. . . . If you’re not moving money around, you’re not doing what you’re supposed to. Sometimes the best thing is to do nothing.

“If you remember one thing from tonight, it’s the point on retirement,” Mark said, in response to a comment about the job prospects of Generation Y and the retirement prospects of the Baby Boomers.

“Retirement income and inflation are related to purchasing power. This is the key point. When you stop working, you have to make money on your money. Your number is purchasing power and in an inflationary cycle it will be scary. That’s the real wild card. When we print all this money, there are repercussions.”

Angela Librizzi, Regional Director, Goldman Sachs Asset Management
The Goldman Sachs forecast is not optimistic and fraught with dangers but also hidden opportunities. “We need 100,000 new jobs to stay flat and 250,000 to decrease unemployment by 1%. We have a ways to go.

“Now that the economy is more normalized, we will see a dispersion of high quality and low quality. You’re always better off in quality. Owning good businesses is where you will win in 2010.”

That’s because the fundamentals of human capital and creativity in the United States remain sound. As Mark Keeley put it:

“We’re the greatest innovators in the history of the world. The Chinese are the greatest imitators in the history of the world. The Indians are poor, smart and hungry, and that’s what we learned to be, but they learned bureaucracy from the English.”