Dear Partners and Friends –
Crow Holdings Capital – Investment Partners hosted our inaugural Economic Forum on September 17 at the Old Parkland Campus in Dallas, Texas. The event is part of our ongoing effort to bring experts to Old Parkland to educate and create discussion among our partners.
Below are highlights from the discussion between Crow Holdings Capital – Investment Partners’ Principal, Mike Silverman, and Dino Kos of CLS Bank International, as well as summary thoughts from our keynote speaker, Pulitzer Prize winning Washington Post columnist George Will.
At Crow Holdings Capital – Investment Partners, our objective is to continue to ensure that we introduce vibrant, lively and informed perspectives to our investment process. We look forward to future events that advance this objective, and welcome your feedback.
Please let us know if you have questions about the Inaugural Forum or suggestions for upcoming speakers or topics. If you have not already done so, please also visit our updated website at www.CrowHoldingsCapital-IP.com.
Mike Silverman and Kirk Rimer
Co-heads, Crow Holdings Capital – Investment Partners
Highlights: Capital Markets Discussion with Dino Kos
Mike Silverman and Dino Kos discussed the state of current capital markets, the evolving role of Central Banks, and the economic recovery to-date. Dino spent over 20 years serving the Federal Reserve Bank of New York in several capacities before joining CLS International in 2013.
- State of the Economic Recovery: The recovery in the United States has been notably weak by historical standards. Coming out of the recession in 1983 we saw 7% to 9% growth, but in this cycle, we have yet to see a similar slingshot growth effect after the trough of June 2009. Economic cycles have gotten longer, and after five years of weak (~2%) growth, it seems likely this weaker growth will continue through this economic cycle.
- Relative to Other Developed Economies, the U.S. Recovery is a Winner: The Italian economy has had virtually no growth in two decades, and Japan has slowed to low single digit gains in recent years. Among emerging economies, China is stabilizing, but Brazil and Russia are in or near recession. Mr. Kos believes that China is the most interesting economy to watch in the near term. There is concern that in the next few years China’s growth will slow which would directly impact the global economy and asset valuations.
- The Role of the Central Banks: Recent statements have indicated the Fed may soon be raising the Federal Funds Rate, but have not committed to a timetable. Most troubling is the absence of substantial inflation at this point. The velocity of money has declined which is unusual given central bank stimulus efforts around the world. Currently, a lack of “imminent danger” of inflation has contributed to some of the Fed’s indecisiveness around rate changes.
- Impacts of Steeply Rising Asset Valuations: Net worth and asset prices have increased steeply as of late, begging the question of sustainability of these prices given lackluster growth. According to Mr. Kos, at some point, interest rates will increase, which will in turn adjust valuations back down, representing the inverse of the early 1980s when stocks traded very low due to high interest rates.
Highlights: George Will Keynote Remarks
The keynote speaker, George Will, discussed economics through the lens of what’s happening in Washington, and what history can teach us about our country’s future. The following is a general summary of observations shared by Mr. Will:
- Philosophical Shifts in Government Spending: Will reviewed how US government spending policy has shifted from when government borrowing was used to support growth and future-oriented projects, early in the 20th century, to our current practice of borrowing money from the future to pay for current spending. Both healthcare and retirement spending are the major causes of this change.
- Historical Anecdotes Provide Helpful Benchmarks: Will provided interesting anecdotes such as how the net worth of the Rockefeller’s in the early 1900s could have extinguished the national debt, but how the net worth of today’s richest American family, the Gates, would only pay two months of interest payments on our national debt. Further, he pointed out that in 1935 retirement lasted two years and now the average retirement length is 20 years. Mr. Will suggested that this can be easily remedied by indexing retirement age to life expectancy.
- A Free Society is an Aspirational Society: Will discussed that the natural state in a free society will always have income inequalities and that encouraging market driven entrepreneurial efforts is a key to more equality. He suggested that a pattern of government driven initiatives are less likely to be successful. The founders of our country wanted a government safe from tyranny and abuse. He explained that a government can be benevolent without being a benefactor.
Note: The information above is a summary of items and issues discussed at CHC-IP’s Economic Forum on September 17, 2014. The current economic, competitive and market information is provided for general informational purposes only. This information is not intended to be predictive of future results and past performance is not necessarily indicative of future performance. This material is not intended to constitute, and may not be relied upon for, legal, tax, or accounting advice or investment recommendations, and this material does not constitute an offer, solicitation or recommendation to sell or an offer to buy any securities, investment products or investment advisory services