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Mr. Reitmeister Goes to Washington

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Yesterday I was in Washington DC attending the White House’s First Personal Finance Online Summit. The purpose was for the administration to parade out their lineup of economic All Stars to the investment websites that don’t normally have direct access. In fact, they left nothing to chance by hauling out President Obama for a surprise visit. More on that later.

You see, traditional press conferences are attended by the usual cast of objective (and tame) news sources like CNN, Fox, ABC, CBS, NBC, Associated Press, etc. However, the Obama White House is wising up to the fact that investment websites like Zacks, Morningstar, Investors.com, Motley Fool, Marketwatch, Forbes etc, have tremendous outreach to the investing public. And our subjective views and recommendations have great influence on over 50 million investors…many of whom are small business owners who help create much needed jobs for the US economy.

So this event was a first step towards increasing the access that companies like Zacks has to the leading economic and financial policy makers in Washington. And yes, the same is true in reverse as they want our help to get their message out to you.

Granted, we have freedom of speech in this country and we fully exercise it here at Zacks. Meaning that we do not have any intention of just echoing everything the administration says without further analysis. You can count on us to always provide you our truthful opinion of what is going on and how to profit from it in the future. With that said, let’s dig into the substance of the day’s event.

Insights from the Summit

My first insight is that DC is a hot place. Really hot. Standing on the sun hot. If I had truly comprehended that beforehand, then I would not have decided it was a good idea to walk 1.5 miles to the White House…with a fully loaded backpack and rolling suitcase…in a navy wool suit.

The locals understand these conditions. The men wear light suits…some are straight out of the Colonel Sanders collection. I will know better for the next time.

Now let’s get into the real meat of the matter. Instead of dumbing down the article by only sharing 3 or 4 of the main highlights, I have decided to share with you my full set of notes. Yes, people are supposed to have short attention spans on the web leading to the creation of shorter articles. And yes, many of my peers just shared their insights via Twitter (a 140 character post doesn’t really get the full flavor of the event, if you know what I mean). Simply, I think that there is no such thing as an article that is too long…only articles that are too boring.

So below are my full notes from the 4-hour event. As you will see, I am not an overly prodigious note taker. And don’t care to get every single thing written down. I just focus on the main points and amusing moments that stand out. (Anything you see in parenthesis means that I added it after the fact to enhance clarity for you, the reader). Lastly, if you want to skip ahead to the section where President Obama made a surprise appearance then scroll down 4 speakers from the top. Enjoy!

Austan Goolsbee, Chief Economist for the President’s Economic Recovery Advisory Board

  • Official Economic Forecast made in Feb 2011 said that they expected average of 9.3% unemployment and 146,000 monthly jobs added in 2011. And thus he made note that they are ahead of pace from predictions. Problem is that some of the previous month #s were so good that expectations got raised too high.
  • Do not expect “slow growth,” they expect better than that (meaning 3%+).
  • Drag in first quarter is considered transitory; spike in oil prices and Japanese supply chain issues. (Most other leading economists and market strategists agree with this assessment…but not all.)
  • One of their goals was to shift away from consumer and construction boom and boost cycles that beset the US in the past. They want the economy led by activity that is more broad-based and sustainable such as exports and fixed business investment. Goolsbee points out some of the gains that have been seen on this front. (True, but a lot of the export-driven growth is from printing too much money, which lowered the value of the dollar which made our exported goods cheaper by comparison…it also created inflation in other goods and services we buy. Maybe not the best trade-off for the average consumer).
  • They do have a sense of crisis, but not sense of panic. That allows them to make clear-headed decisions of what is best for the economy. Not just now, but for years to come. (They do perceive that others are panicking over the recent soft data points. And that is probably why they are rounding up the online investment community, to help quell some of that panic).
  • Government's responsibility is to stop of a free fall, but not to keep up growth. And so there is a transition now perhaps to allow the economy to handle things on their own. (Read: Don’t expect much more in the way of stimulus if #s are simply soft. We will only act if a downright recession and the financial markets seize up like they did in 2008).
  • Incredibly bright and funny guy who restrains himself (barely) from chopping off people’s heads for asking dumb questions.
  • His departure from the Administration was supposed to be in the fall. Unfortunately it was leaked early and thus he had to announce sooner…which was Tuesday morning.
  • When asked about “brinksmanship over the debt ceiling,” he said it’s foolish to wait til the last second. Don’t want anyone to lower rating or think we won’t pay back our debts. He believes things will be resolved on that before the last hour, which would be dangerous.
Aneesh Chopra, US Chief Technology Officer
  • Startup America Partnership - Tech's role in securing our economic growth and prosperity
  • Emphasis on healthcare, education, energy. Why? Because they are big parts of the economy that, as of yet, have not shown much productivity gains on their own. (I think the issue is that they are all inelastic goods. For those of you who haven’t been to econ class in awhile, that means that people will keep buying this stuff pretty much regardless of how much the price goes up. And so that generally leads to inefficiency in the industry…and yes, that makes it ripe for some massive improvements).
  • Promote market conditions to help start ups “eco-system." Example: Make it easier to get patents that allow start ups to get to market faster…and not burn through all their cash waiting for government approval.
  • This guy has an infectious personality. He is so energized by what he is saying that it is hard not to get excited right along with him.
  • Mentoring is big part of it. “Master Entrepreneurs” who mentor new entrepreneurs to help their businesses flourish. The benefit is that these small companies will help deliver new jobs.
  • Health focus
    • Transform Care Delivery System
    • Health IT enables value driven healthcare
  • Education- A learning system that works
    • Change from “seat time” in schools to “mastery”
  • Energy- unleash a clean energy revolution
  • Data.gov is great source of free data to entrepreneurs.
Heather Zichal, Deputy Asst to the President for Energy and Climate Change
  • China has overtaken the US in terms of consumption of energy.
  • Reduce net oil imports by 1/3rd by 2025. How? 3 pronged approach.
    • Expand domestic oil and gas production
    • Smarter consumption
    • Alternative energies
  • Had to stop in the middle of her presentation for President Obama’s appearance (description of that below.) Feel bad for her. He’s a hard act to follow.
  • Advanced batteries big part of the initiatives.
  • I asked about “How much does the Administration believe in the free market to help solve our energy dependence issues?” (Meaning that higher prices should be a natural trigger for innovators to create solutions). The answer was “kind of” but then switched conversation back to what they are focusing on which are not market driven.
 
PRESIDENT OBAMA WALKS IN THE ROOM
  • Everyone in the room lit up like a Christmas tree given that it was unexpected. And no matter your political stripes, when the President of the US appears in front of you…it’s DAMN impressive. One guy was even giggling like a little school girl. Truly gushing and laughing way too loud as if Justin Bieber sat in his lap. Truly embarrassed for that guy.
  • He stressed that the goal of this event is to increase clarity of administration’s policies to the public. And reaching out to our industry (investment and personal finance websites) is part of that.
  • Someone asked if the Administration will release oil from the strategic reserve in an attempt to lower gas prices. I shook my head so violently that the President turned in my direction. He said that they are not interested to do that now, but left his options open. He did emphasize that the reserve is there for real disasters like supply disruptions so the country can keep running. And would prefer not to use it just to alleviate a potentially temporary spike in gas prices. (I breathed a sigh of relief on that one.)
  • He noted that the best way to tackle the rise in energy prices is by focusing on lowering demand. Two best ways are creating alternative energy and promoting wiser energy consumption.
  • One of the questions posed to him was; What one piece of advice do you have for the average investor out there? He said “save more, spend less.” Emphasized not to redo the mistakes of the past. Everyone needs to stay within their means. And yes he agreed that the government should do that too.
  • He shook everyone's hand and I said to him "I’m a fellow Chicagoan," to which he replied, "Say hi to everyone back home for me."


(The devilishly handsome bald guy on the President's right is yours truly ;-)

Elizabeth Warren, Consumer Financial Protection Bureau
  • http://www.consumerfinance.gov/ - launched early 2011
  • From the website: The central mission of the Consumer Financial Protection Bureau (CFPB) is to make markets for consumer financial products and services work for Americans—whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products.
  • Level the playing field and increase transparency to help individual consumers who do not have as big of a voice as the big business that is trying to fool them.
  • Best quote of the day: "The financial crisis of 2008 was built 1 bad mortgage at a time."

Gene Sperling, Director of National Economic Council

  • A little late because of budget meetings with VP Biden "there are many, many budget meetings these days" he joked.
  • Part of bi-partisan deficit negotiations. There is "purpose and seriousness" on both sides. And people are focused on the policies and not political posturing (...at least in the closed door sessions before they get in front of the cameras.)
  • Both sides are serious about deficit reduction and "living within our means". He is confident that one way or the other they will make a serious down payment to lower the debt.
  • 2nd best quote of the day" When you lighten the load of a plane, you do not throw out the engine." Meaning it's important that they foster growth while making spending cuts.
  • They do want to take on entitlements, but don't want to destroy the compact that was made for people who depend on it or will be depending on it shortly.
  • He has very strong disagreements with substance of GOP/Ryan's deficit reduction plan. Yet there is a mutual respect amongst "budget wonks" like himself and Ryan.
  • Joked about going to bed at night with all kinds of budget analysis, but gladly he is married to a TV writer who brings art and culture into his life to balance things out.
  • One possible drag on the economy is peoples' worry that the 2 political parties will not come to agreement on deficit reduction and how that would hamper the economy. (And that brings us back to the top of his remarks. Both sides are aware of the problem. Both sides want to solve it. But to be honest it doesn't sound like there is much common ground on specific policies that they want to remedy in the same way. Most likely they will make compromises. As in "I will support your budget cut if you support mine". Hopefully when you add up all the tits for tats we can take a serious bite out of this deficit).

Wrap Up

It was a great honor to meet with these officials first hand in a small intimate atmosphere. I believe that they are all people of great intelligence and conviction.

If that is true, then why does it seem that the government is so ineffective? That brings me back to something I learned a long time ago from the father of quality management, Dr. W. Edwards Deming. He said "the problem is never the people...it is the process." That certainly applies to our political system. It's a poor process whereby the 2 main parties spend too much time bludgeoning the other to gain the upper hand in the next election. And not enough time is taken to think about what is right for the people they are serving. When we solve that, then we can make real headway on the big issues that affect us all.

 


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