Tag Archives: CFA Charterholder

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.

Event Recap: “What’s next for Commodities”

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By Joseph G. Ogega, a student in Financial Mathematics at the University of Minnesota and CFA level I candidate.

On February 15 CFA Society Minnesota hosted a presentation by Robert P. Ryan, SVP of Commodity & Energy Strategy at BCA Research. Bob comes with more than 30 years of experience in options market and trading. Prior to joining BCA as an ME in 2014, he worked at New York Mercentile Exchange, as a Senior Economist and Director of Options Research, Commodity markets.

Bob discussed how some macroeconomic factors and policies in key global economies impact supply-demand dynamics in commodities’ market. According to him, OPEC producing countries led by Russia and Saudi Arabia will most certainly maintain their production levels for the remainder of the year. “The demand for crude oil and other refined products is expected to spring up or at least be steady in 2018 through 2019, as a result of significant growth rates registered in approx. 75% of countries monitored by the IMF,” he said.

Global supply of crude oil is expected to increase on average by 1.98mm b/d leading to 99.64mm b/d in 2018, hence U.S. shale-oil production rising by 1.15mm b/d leading global growth. Coincidentally, global demand is also expected to increase by 2mm b/d in 2019 from 100mm b/d in 2018.

“In 2019, global crude and liquids supply will average 102.22mm b/d (+2.58mm b/d), led again by surging U.S. shale-oil production (+1.39mm b/d). “ (view graph here, slide 4)

 

He also believes that the recent move by the Fed to raise interest rates will boost crude oil prices as a result of appreciation of the USD. (view graph here, slide 9) This effect will be felt more in the second half of 2018.

The rapid decline in Copper prices -between 2011 and 2017- is believed to be due to China registering slower growth over the same period. However, with a strengthened USD, Bob believes that the market will be able offset the supply shortfalls.

China, have since implemented monetary and environmental policy reforms aimed at encouraging importation of high-grade ores over low-grade ores. Though this has caused a depression on steel prices, China remains the biggest global consumer of iron ores. Australia and Brazil have also adopted similar domestic policies.

As a parting shot, Bob strongly believes that the Energy markets is going to boom in the foreseeable future (five to 10 years from now).

Ryan, R (2018). Commodity Revival At Risk [slides 4,9]. Retrieved from BCA Research.

Changing Perceptions Interview with Mariann Montagne, CFA – Portfolio Manager

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Tell me a little about yourself

I earned my bachelor’s degree in finance from the University of Detroit then immediately began studies to become a CFA Charterholder. I am a portfolio manager at Gradient Investments, an investment firm with $2bn AUM and about 15 portfolios.

What sparked your interest in the investment industry and CFA Program?

I set out to do a book report on John D. Rockefeller in 8th grade. For research, I called Merrill Lynch and talked to a broker. I was fascinated with the amount of information this broker had at his fingertips. Throughout high school and college, I read the newspaper cover to cover and talked with my dad about investments. He also has a degree in finance from the University of Detroit, though he was not an active investor.

How/where did you land your first role?

After my second year in college, I went door to door to brokerage firms, banks, savings and loans and insurance brokerages for about a week. At the end of the week, I had two offers and went with a regional brokerage firm.

Did you have a mentor or champion who was instrumental in your career?

The interesting thing about mentors is that I am still looking for mentors —men and women, old and young people— people with good insights, experience and inputs. But no, I did not have just one.

What professional opportunities and challenges have you experienced?

A few challenges would be keeping up with day-to-day changes in the investment arena, and taking time off to be with my kids for several years. Because I am very eager to learn every day, I find that opportunities may show themselves from new inputs. A big opportunity I had was to come back to work for the same bosses twice in my career.

What is the biggest risk you’ve taken in your career?

The biggest risk I’ve taken was choosing to stay in the Midwest. I have friends who are in New York and can just go down the street for new opportunities. But I really value the honesty and integrity of the Midwest.

What got you here; how have you been successful in investment management?

Along with eagerness to learn, I was naturally an extrovert in an introvert role. I asked questions others are afraid to ask, I take good notes, I ask good questions and compile good data, noting the cadence of performance vs. expectations has been helpful in my career.

18% of CFA Institute’s members are female, and 14% of CFA Society Minnesota members are female. Do you have any thoughts on why more women aren’t pursuing a career in investment management?

I have wondered about this for a long time. I was the fifth woman president at the CFA Society Detroit in 2004. The first woman president was in 1983. I keep looking at the progress. It took 20 years to have the fifth woman president; why 20 years? I don’t understand. I think that maybe we need to address the girls when they’re still in middle school and not wait for the discussion in college. We need to get them interested in the idea of compounding and being patient, long-term investors. I think we just need to start earlier. There’s some unconscious bias by everyone to think that this is a man’s type of profession but look at Muriel Siebert – the first woman to own a seat in the New York Stock Exchange and opened her first firm in 1967. Money is agnostic, it doesn’t care what you look like. Why not just gather the skill set and use some determination? There are a lot of attractive aspects about this business.

Research has proven that the returns of diverse investment management teams outperform those of non-diverse teams. Have you seen this in your experiences?

I think so because most women are more patient and less trigger happy. I know sometimes its client driven and they want to see a change in sells and buys, but women are more cautious about changing from an old horse to fresher horse. Having that level of patience pays off in the long run.

Do you have any advice for young professionals interested in a career similar to yours?

My advice is to be more extroverted than others and resilient, keep that childlike eagerness to learn and always maintain your integrity. Find the place where you respect the people around you – but if you don’t, move on.

As a longtime CFA Charterholder, how have you seen the CFA Program and industry evolve?

When I first started, it was a rarity to hear people say they are studying for the CFA exam. Now, it’s more common. The pass rate is still low, but more people are attempting it. I am blown away by the numbers that are added to the rolls each year.

 

Student Interviewer

Yeng Lee is a first-generation student at Gustavus Adolphus College in Saint Peter. She was born and raised in Saint Paul and was first introduced to economics in her senior year of high school, which really intrigued her. Yeng is studying Financial Economics and English with a writing emphasis. After she graduates, she plans to take the CFA Exam and build on her experience to become a financial analyst. Yeng’s lifetime goal is to be a philanthropist.