Category Archives: Hot Topic Commentary

Musings from My Laundry Room

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By Susanna Gibbons, CFA
Managing Director, Carlson Funds Enterprise
Carlson School of Management, University of Minnesota

Finishing my 15th week of WFH (Work From Home), I feel an urge to reach beyond the bounds of my new home office, just to see if anyone is still out there. Friday afternoon in the laundry room is a uniquely great setting for thinking about the world in a relatively unbound way. I am not exactly unplugged, but I am somewhat insulated from the chattering of the Street, so I thought I might start chattering a bit myself.

Like many of you, I have been amazed at the resurgence of equities since March (past few days notwithstanding). The market is placing a significantly higher probability on a V-shaped recovery than I am, so I have been trying to unpack the data here and there, since I don’t really want to be right. And the retail sales number from June 16 is the perfect place to start, since it was a surprisingly strong number – up an eye-catching 17.7% compared to expectations of +8.4%.  Yes, I am aware that if you are down 14.7% and then up 17.7% you are right back where you started. The number was still a really positive sign and clearly leaned in favor of a solid v-shaped recovery.

I am also aware that Autos were by far the largest part of that number, followed by Furniture. I know we don’t go out buying cars every day, or furniture, and that it was heavily promotional, but it was still a positive sign. Americans have not forgotten how to spend money! The V-shaped recovery might be within our grasp.

There is also one little tiny category that was not only up strongly in percentage terms, but actually exceeded spending from 2019: Sporting Goods, Hobby, Book, and Music Stores. This category of retail spending sounds like a boomer throwback category if there ever was one….I mean, music stores? It’s one of the few categories of retail sales that has seen virtually no growth since 2008. And yet there it was, popping up out of nowhere. Naturally, I had to talk to someone younger to figure this one out. Was everyone really buying CDs from newly re-opened record stores?

Nope. According to my sources, people-younger-than-I have realized that going to a gym for a group fitness class might not be fun for a long time. In what I am labeling the Peloton Effect, it seems they have swapped their gym memberships for Pelotons, NordicTracks, Mirrors, Bowflexes, bikes, and in what surely is an act of sheer desperation, golf clubs. I asked my source, who was recently furloughed, how it made any sense at all to purchase a $2,000 piece of equipment at this time. Apparently, this particular household had been spending $250 a month on yoga memberships, $150 a month on studio cycling, and another $50 on an ordinary gym. Those have all been canceled, and they are now left with $70 a month to finance the Peloton for the next two-plus years, and $30 a month to join their online classes –zoom-for-bikes. (They also had to get a new couch to make room for the bike, so maybe that helps explain the furniture sales numbers.) Significant monthly savings.

The important point here is that large numbers of people are shifting their behavior in dramatic ways. They are swapping monthly studio payments (bad news for commercial real estate owners) in favor of equipment ownership. To me, that minimizes to some degree the bounce we saw in retail sales. Shoppers are back, but their behavior has changed, and it would be a mistake to extrapolate sales growth right now because we are caught in the middle of this seismic shift. We are seeing this shift in other ways, too. Nobody needs nice pants anymore, we only need one nice jacket, we don’t go to the dry cleaners, we don’t get our hair cut. We do need a new router or laptop. Retail businesses may be re-opening, but many of us are re-thinking how we engage with the world, and how we allocate our resources. There is some up-front capital cost to the shift, but that short-term pop might be the front end of a long-term down-shift in overall spending.

Or not. The reason my laundry room looks so nice right now is because I could finally renovate after getting rid of the 25-year-old Heavy Bag that was part of our mid-90’s boxing-for-fitness routine. It’s been on the floor for most of its existence. I’m not going to get sucked down that hole again. Plus, it’s 12 weeks right now to get a Peloton.

2020 Annual Dinner Recap

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Written by: Tharaniitharan Panchalingam, Junior studying Finance and MIS at the Carlson School of Management and Fixed Income Analyst at the Carlson Funds Enterprise

The 2020 CFA Society Minnesota Annual Dinner featured Rick Rieder at BlackRock, with questions moderated by Society volunteer Susanna Gibbons, CFA, Carlson School of Management. Rick Rieder is BlackRock’s Chief Investment Officer of Global Fixed Income, Head of the Global Allocation Investment Team in the Multi-Asset Strategies Group, a member of BlackRock’s Global Operating Committee and Chairman of the firm-wide BlackRock Investment Council. In addition to this, he is a member of the Borrowing Committee for the U.S. Treasury and is currently a member of the Federal Reserve Bank of New York’s Investment Advisory Committee on Financial Markets.

The presentation got off to a humorous start with Rick sharing how his multiple flight delays in New York had him running around the Downtown Minneapolis looking for our venue! After he gathered his breath, he went into what his day was like. In the morning, he presented to the New York Fed on his outlook of the global economy and the policies that ought to be implemented. After this Rick mentioned how he was on a call with Elon Musk to give his thoughts on Tesla’s expected share sale to raise capital. Rick concluded by saying that Elon Musk is probably the smartest person of our generation.

We then went into conversations about Fixed Income; Rick believes that debt is far too cheap and that we are in an environment where spreads are unbelievably tight but, there is still a massive demand for US based fixed income assets, which further puts pressure on the US and global economy. He also stressed that due to the nature of the market, Fixed Income managers must not “stretch in 2020” and that hitting five percent would be an accomplishment.

He also touched on technology and how companies that have significant investments in R&D are creating this “incredible growth paradigm,” while those that don’t invest aren’t experiencing much growth, if any.

This led to one question that caught my attention. Susanna asked Rick, “what do you think of Negative Interest Rates and what are commercial banks’ alternative?” Rick immediately responded with “I think that negative interest rates are the dumbest invention of all time.” He went into why and stressed that it breaks down the traditional investment paradigm and that in Europe, because of the way businesses operate, growth will be extremely hard to come by. Rick said that Europe needs to create “exogenous growth” by investing in innovation. Europe’s innovation is stifling and as a result, don’t benefit from the dramatic growth that it has the potential for. He also said that Japan is in the same predicament and that there may be a time in the future where Japan will default on significant portions of its debt.

We ended the night talking about equities being very cheap relative to credit and that we will see a turn or two in equity multiples over the next few quarters.

All in all, this was a tremendous night. Rick has such a wealth of knowledge and his ability to weave a coherent picture with the data he analyses is incredible. We had great food, great company and a very insightful hour-long conversation! We hope to have Rick back soon!

A Letter from Our President

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The eve of a New Year is a great time to spend with family and reflect. It is also that time of year when my wife asks about my 2020 resolutions. But, instead of making a list of future broken promises, I would rather reflect on the year gone by. When it comes to CFA Society Minnesota, I often reflect on the same question: what is the value of CFAMN to me?

If you don’t know me, you may picture the CFA Society President as a very buttoned-up, 100% professional Kool-Aid drinker who is completely sold on everything we do related to CFAMN. If you do know me, you probably laughed at that image, and instead know that I am a fellow, engaged Society member just like each of you, who has happened to get more and more involved with the organization over the years. So even as president, I need to be able to answer that CFAMN is and continues to be valuable to me (of course, if I find the answer is less-than-ideal, I am in a particularly good position to help do something about it). 

There are three main things that I get out of my membership. 

  1. Education – I had no accounting classes when I sat for the CFA exams. It was in large part CFAMN prep programs that got me through the exams. Since that time, I have attended many events and learned a ton. This year alone I improved my personal organizational habits (Managing Me event) and got a jump start on my goal to learn programming (Python event). However, education is not just the education from any single event, but also what I have learned from the people I have met since I attended my first CFAMN social at Lyon’s Pub more than ten years ago. 
  2. Volunteering/Board Service – I have greatly enjoyed the time that I have spent as a volunteer for the Society and have found that the value I get from CFAMN has grown exponentially as I have become more involved. Whether it was helping set up at an Annual Dinner, developing the mentorship program, or helping to set the strategy for the organization, I love doing my small part to help advance our mission and get the opportunity to work with so many others who are doing the same thing. 
  3. Flexibility to shape the organization as a member – Volunteers do a tremendous amount to shape the society into an organization to which we can be proud to belong; Society members have the ability to have significant influence well. Members often introduce us to interesting speakers and are active in providing thoughts about what is or is not beneficial to them. Without that valuable feedback, volunteers could not be nearly as responsive or effective in shaping the organization into a truly meaningful society.  

However, the true value of CFAMN membership for me, and many others, is often less tangible – relationships. Not networking. Real relationship-building and CFAMN provides a forum for this to occur. The Society is comprised of a wide range of people, but we are connected in a way that many groups are not. Where else can you interact with a group of people that really get you in a way that most friends or neighbors cannot?
There is something that unites us, as a group of people that have faced the same challenges in preparing for and taking the exams and ultimately earning our CFA Charter designations. I imagine it is much the same way that a group of actuaries would feel, if actuaries had feelings. Kidding. I know an actuary and he is awesome. CFAMN acts as the clearinghouse, not for transactions, but for discussions – a place where relationships can begin. 

In the future I’d like to share more about how others have benefited from the people they have met through CFAMN. For today, I’ll share a story from a friend. 

“I met a person 4 years ago at a CFAMN event. Afterward, I sent them a short note and asked them a somewhat inconsequential question. They responded with a two-page email going into great detail to answer my question… Not only was I touched by the amount of care the person took to be helpful, I still have that e-mail, I still reference it. This person has had a material impact on my life because of one small thing they did.” Regarding the value of his membership he continued, “This may not do anything for most people, but I’m sure for most involved members, they have their own version of this story.”

If you have a story like this, or anything else that you would like to share about your experience as a society member, please let us know. Also, I will reiterate the call out from my last letter – please reach out if you are interested in meeting with me, or if you prefer, introduce yourself at an event. As an introvert, I am not always the best at going out of my way to meet new folks, but I would really like to meet you. Please feel free to say hello. Or maybe meeting new people should be my 2020 resolution?

All the best to you and Happy New Year!

Chris May, CFA
President, CFA Society Minnesota

University of Wisconsin-Eau Claire Financial Management Association in Minneapolis

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The University of Wisconsin-Eau Claire Financial Management Association traveled to Minneapolis to visit U.S. Bank, Wells Fargo, UBS and Target on Friday, November 15. CFA Society Minnesota worked with Wells Fargo and U.S. Bank to put together an outstanding day filled with real-life experiences. We had an incredible time and look forward to this event every year. Special thank you to both of these organizations for hosting our group and for teaching us about the different career paths in the finance industry.

Wells Fargo

Wells Fargo broke the ice with a heated game of financial family feud between two groups of Eau Claire students. The family feud was geared toward topics in wealth management. After playing financial family feud, there was a panel discussion with Kashi Yoshikawa, CFA, Kevin Ario, CFA, and Tasha Alexander. Joshua Witherspoon led the panel discussion and the students were able to ask any questions they would like. The finance leaders touched on client relationships, client retention, industry certifications, specialized services, D.I.S.C. personality model, and team building. They also explained their career paths and the different roles in the industry of wealth management. Special thank you to Joshua Witherspoon, Brittany Jacks & Ploy Pattinson for organizing this visit.

Speakers:

Kevin Ario, CFA: National Investment Management and Implementation Director
Kashi Yoshikawa, CFA: Regional Investment Manager
Tasha Alexander: Senior Private Banker

U.S. Bank

U.S. Bank hosted our group in a large training room. We first heard from an HR representative, Cindy Kuehl, who went over an organization overview of the company. We also heard from six other finance employees:

Aimee Brantseg: Private Wealth Advisor
Lisa Erickson, CFA: Senior Vice President and Head, Traditional Investments Group
Preeti Higgins: Private Banker
Leisl Kistow, CFIRS: Head of Wealth Management Trust Advisory Center & SVP
Kate Lyons, CFA, CAIA: Vice President, Senior Portfolio Manager
Leslie Penrith: Vice President, Marketing
Leela Rao: Vice President, Director of Strategic Initiatives

They discussed each of their positions, what a typical day looks like for them and the challenges they face within their roles followed by a Q&A session. This was a very beneficial presentation and provided insight into the industry of wealth management. It was great to hear from all the professionals and to learn more about the different finance positions in their organization. Special thank you to Lisa Erickson and Kate Lyons for putting this visit together for us.

November Executive Director Message – What’s Your Opinion?

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If you read last week’s newsletter, you know that CFA Institute has been working with Societies over the past year to develop a career-focused competency framework designed to guide members in acquiring necessary skills throughout their careers. The new framework generated quite a bit of buzz when was released last month at regional Society Leadership Conferences.

The Institute is actively seeking input about the new competency framework from you and your fellow industry professionals. To shed more light on what this all means, we interviewed Josh Howard, CFA, who served as CFAMN’s President in 2015-2017 and who was elected earlier this year to serve as the President’s Council Representative for our 12 Midwestern CFA Societies. Josh also is a member of the CPD (Continuing Professional Development) Design Council, the joint Society-Institute working group helping to create the new framework.

Mark Salter, CAE, ABC
Executive Director

Q. There was a lot of excitement in the room when CFA Institute unveiled the new competency framework for professional learning at last month’s Society Leadership Conference. Why the excitement? Why is this important?

Josh: The competency framework was designed to provide direction to members seeking to maintain competence in a current role or transition to a new role, and to provide an organizing framework for the Institute and Societies to offer relevant content to members. It includes soft skills, technical skills and ethics, which are mapped to specific job roles. The competency framework is the first step in developing a robust professional learning experience, and it will guide the development of the professional learning platform and content.

Many Society leaders were excited about the competency framework after the unveiling because they recognized it can help Societies organize their educational events and better track topic areas they are missing or could emphasize more. It will be useful in mentoring programs, job seeker seminars and event planning, and hopefully will add to member retention at the Society level.

The competency framework has been released to all members, and the CFA Institute is looking for feedback. To learn more about the competency framework and to provide feedback, please visit this link.

Q. Some people believe that CPD (aka Professional Learning) should never be mandatory – that it should be left up to the individual practitioner. What are the pros and cons of this position?

Josh: The main retort I hear to making professional learning mandatory is that members already do it, and a concern that the requirements and content won’t align with the education we need to stay relevant, which will turn a professional learning program into a time-wasting, box-checking exercise.

The argument for a mandatory professional learning program is that having it will demonstrate to clients, prospects, employers and regulators that CFA charterholders are part of a professional body that has ongoing learning requirements throughout their career. Having a requirement to engage in professional learning throughout a career will align CFA charterholders with most other professional designations and will help our global members meet their regulatory learning requirements. I have even heard stories from other countries that the lack of a mandatory professional learning program means CFA charterholders in those countries are not exempt from certain regulatory requirements, whereas members of other professional organizations with mandatory professional learning are granted an exemption.

Q. Why did you volunteer to work on the CPD (Continuing Professional Development) Design Council? What did you hope to contribute or accomplish?

Josh: I volunteered because I care about adult learning. I have a Master’s degree in Education and throughout my career I have been interested in how adults learn. I wanted to help ensure that the professional learning product from the CFA Institute was designed with adult learners in mind, offering relevant content where, when and how an adult learner wanted to access it. I am just completing my first year on the design council and have had a great experience working with other Society leaders and Institute employees who care passionately about designing a great professional learning experience that adds member value, regardless of when and if it becomes mandatory.