In the last 30 days, I had the privilege to attend some good conferences. Here are some of my notes/thoughts from those events.Generous Giving Conference- Austin, TX 10/22-10/24
Generous Giving is an organization that exists to promote joyful giving among Christians. There were many inspirational stories of believers who were challenged to be radically generous and obedient to God's calling with the resources that God had entrusted to them. Here are some of my thoughts from this conference:
Stanley Tam- 94 year old businessman from Ohio.
He signed a legal contract early in his life that God was the owner of his business- US Plastics. God has chosen to prosper this business. Stanley took a moderate income from the business as a salary and turned over the vast majority of profits to fund the works of Christian ministry. The business has given over $120 million to works of Christ.
My key takeaway here was that when God spoke to Stanley, Stanley obeyed. His driving passion is evangelism and everything in his life is oriented towards this end.
There are some terrific videos on his life/testimony that are worth the investment of time to watch here.
Chip Ingram-pastor of a church in California. Link to his media ministry.
He gave two excellent talks. One on being surrendered to God. The other on the genius of generosity. On being surrendered to God, he walked through three case studies about people who had a specific knowledge/expertise. Each of these three had stumbled upon a treasure that was worth infinitely more than the asking price. One involved rare coins. The second was an original Picasso painting. And the third was Jesus' parable of hidden treasure.
In each case study, the person who discovered the hidden treasure was required to sell everything they had to acquire the treasure. In each case, the reward was far greater than the cost.
Chip used the life of Stanley Tam as an example of what should be the normal Christian experience. We are offered a choice to trade stuff that doesn't last/satisfy for treasures that last forever. This is not weird or fanatical as society views it. It is just smart. It is rational.
Chip's talk on the genius of generosity highlighted the generosity staircase using the Christmas story as an example. It is easiest to be generous with money (Magi). It is harder to be generous with our time (Shepherds). Even harder to be generous with our reputation (Joseph). Harder still to be generous with our future (Mary). Next our life (Jesus). And finally our most precious possession (God- The Father).
Ingram emphasized that as the cost went up in each of these areas on the generosity staircase, the rewards and intimacy went up as well.
Allianz Investors Conference- Newport Beach, California 11/11-11/13
I was excited about attending this conference because I have invested money for clients with PIMCO (manages close to $1 trillion for investors the majority of which is in bonds) for many years and some of their top minds were presenters- including Paul McCulley, Bill Gross and Rob Arnott.
Here are some short notes that I jotted down from the presentations of those three speakers.
Paul McCulley- Managing Director/Portfolio Manager
Paul spoke on the New Normal. Some bullet points:
- A Depression is off the table. The economy was in cardiac arrest last year but government programs kept the patient alive. The patient was sick from double bubbles (property and leverage). Too much debt on too much property declining in value too fast.
- Government injected socialism in our economy and it worked in the short-term. Just as there are no atheists in foxholes... there are no capitalists in financial meltdowns.
- McCulley expressed his fondness for the economic theories of Hyman Minsky who promoted a financial instability hypothesis. Human nature has a tendency to go off the rails every 40 years or so.
- Minsky believed there were three types of financial borrowers in the marketplace. First, the hedge buyer (traditional fixed rate mortgages- 20% down; fixed rate; ability to pay back loan). Second, the speculative buyer (little money down; interest only loan; ability to pay interest but not principal). Third, the ponzi buyer (no money down; betting heavily that values go up or will default on loan).
- The crisis was a result of too many speculative and ponzi buyers/lenders before the meltdown. 20 million Americans have negative equity in their homes currently. McCulley compared it to an underage drinking party with Moody's and S&P handing out fake ids (these two agencies were giving "safe" ratings to loan paper that was extremely risky).
- The housing and auto industries are shrinking. These sectors were fueled by home equity loans in the past. US consumers still have the will to be hedonistic but not the wallet or access to credit.
- McCulley saw three main issues in the economy: 1. Wealth effect is a headwind not a tailwind currently. 2. Unemployment rate will be slow to come down. 3. Lack of demand going forward as the household sector spends extended time in the Betty Ford clinic for balance sheet rehabilitation.
- McCulley predicts the next 10 years will bring returns in these neighborhoods for investors: bonds (3-6% annual); US stocks (6-8% annual); emerging market stocks (8-11%).
He didn't give a presentation, but he did speak to a group of advisors for about 30 minutes on the PIMCO trading floor at the end of trading. A couple of brief notes on his comments:
- The FED is going to keep interest rates near zero until the economy shows sustained growth above 4% for GDP for at least 18 months. This is likely to fuel prices that are artificially high in many markets- stocks, real estate, bonds, commodities. But this is by design as policy makers desire to reflate the economy.
- Priorities should be: job creation, job creation, job creation. Some large incentive programs to become the leaders in clean energy, education and health care for the world.
- Global imbalances are still large. We have income that equals 56% of GDP. Our consumption is 72% of GDP. The difference is made up by government borrowing. This needs to come into balance.
- Bonds have outperformed stocks from 1968-2009. When you have heard that stocks are always the best long-term asset to own, it usually comes from a post 1980- pre 2000 mindset.
- The discount (cheapness) of value stocks relative to growth stocks is near the largest in history- exceeded by the end of the tech bubble in late 1999-early 2000.
- Deflation is the issue for the next 12-18 months. Government programs like the homebuyer incentive program actually work to keep CPI low because they remove renters from the marketplace which is a key component of how the CPI (Consumer Price Index) is calculated.
- Large inflation is coming to our economy. Total debt is 5 times GDP and this historically has never ended smooth.
- Three options on our national debt issues: 1. Pay down the debt slowly over 20 years. This is politically unpopular because it involves sacrifices, less entitlements, etc... Those are the things that politicians don't give up easily. 2. Quit paying our debt- we owe Japanese, Chinese and other countries a good portion of our debt. We could just default. This is not a good solution because it leads to wars- military and trade. 3. Use the printing press to allow inflation to run. If we have $70 trillion total debt, we can allow it to be only $35 trillion if inflation doubles over the next 10 years.
- Arnott is betting that #3 is our path- the most painless way out of the mess. He was asked what areas of fixed income would perform the best and he responded favorably to Treasury Inflation Protection bonds and floating income bonds because they do a good job of passing through inflation.
For God's Glory,
Ashley Hodge
