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Tag Archives: CFA Society MN

A Letter from Our Society President

23rd February, 2016 · Joshua M. Howard, CFA · Leave a comment
Joshua M. Howard, CFA

CFA Society Minnesota’s Immediate Past President, Kim Brustuen, and I hosted a call last week for all Midwestern U.S. Society leaders to discuss best practices in building and running an effective Board. This is something our society has been focused on for a few years now, and we have made tremendous strides in moving from an operational board to a strategic board. During the call we shared our growing pains, struggles and accomplishments with over 20 other regional Society leaders and Institute employees.

One of the reasons we have such a respected Board is our ability to source volunteers. We have a large board (currently 24 members) and over 100 active volunteers that serve on our committees and help with individual events. This allows us to be innovative and try new things while still maintaining our popular events and programs. One of our main points on the call to Society leaders was that it is never too early to start planning for the next round of new volunteers. Although we currently have an abundance of energetic, thoughtful people on our Board and our committees, we must continually replenish our volunteer base. Every year we have 3-5 Board spots open up as long-time volunteers roll off the board, and committees frequently have volunteers who join or leave throughout the year.

When we prepare for Board transition we look for new Board members and committee volunteers from a variety of industries – some even outside of finance, such as people with experience in human resources, accounting or law. We look for a diversity of ages, experience and viewpoints. We strive to represent the interests of the entire body of local members and of all occupations either directly or indirectly related to investment management. Many people do not realize that you do not have to be a charterholder to be on our Board or to volunteer with one of our committees. Event and committee volunteers technically do not even need to be local society members, though most choose to join once they start volunteering.

Our Nominating Committee for the upcoming fiscal year will begin their work in May, but it is not too early to put out the call for new volunteers. If you have an interest in joining our Board, assisting with a single event, or helping one of our committees please let me know and I will get you in touch with our staff or a committee chair.  If you want to learn more about volunteering in general please send Kris Kautzman or me an email and we can discuss the current opportunities. I guarantee we have a spot for any level of time commitment. If you know of someone who might be a good fit we also accept referrals.

To all our past, current and future volunteers, thank you so much for your contributions to the CFA Society of Minnesota.

Joshua M. Howard, CFA
President, CFA Society Minnesota

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Posted in Hot Topic Commentary, Local Charterholders, Society President Letters | Tags: CFA, CFA Society MN, Joshua M. Howard, Letter from Our President, President's Letter |

Distinguished Speaker Series Featuring Bob Doll, CFA, CPA – Event Recap

16th February, 2016 · CFAMNEB · Leave a comment

By Harvey R Peck, CFA

On Thursday, February 11, 2016, CFA MN hosted a presentation by Bob Doll, Senior Portfolio Manager and Chief Equity Strategist at Nuveen Asset Management. After a light dinner at the Minneapolis Club, Mr. Doll shared his highly respected views and perspectives on the global equities markets. You may recognize Bob Doll as a regular on CNBC, Bloomberg TV and Fox Business News with Doll being quoted in other business publications.

Vicious negative feedback loop
Doll opined the equity markets are in a “terrible funk”, a vicious negative feedback loop. As global growth estimates decline, oil prices drop, earnings estimates are revised down, stock prices fall, there is forced selling, credit standards tighten, then global growth estimates decline, and the cycle repeats itself.

How do we extract ourselves from this funk? Oil needs to stop going down. The U.S. dollar needs to stop appreciating. Problem: Oil and commodities are in a multi-year bottoming process.

Can the U.S. economy avoid importing these global deflationary trends?
Doll noted the U.S. economy is doing better than most other developed economies. It is primarily a domestic consumer economy. Doll is forecasting U.S. real growth at mid 2% and nominal GDP growth at 3-4%.

The U.S. consumer economy is doing relatively well as supported by strong new housing starts, firm home resale prices and record auto sales.The Federal Reserve’s inflation targets are within reach. Rising U.S. domestic inflation expectations is supported by two factors: (1) a tightening labor market showing upward labor price pressures and (2) housing rents and home prices increasing.

Bull market in bonds over
The bottom in yields likely occurred back in July 2012. By 2016 year-end, Nuveen forecasts U.S. Treasury yields to be higher. Doll expects high yield credit spreads to be narrower and yields to be lower by year end. Nuveen contends high yield spreads are currently overreacting to the declining creditworthiness in energy and materials. However, these factors should not affect other non-industrial areas of the economy such as medical, information processing technology and media. Currently the high yield markets have corrected too much and the correction was too fast.

Political Issues
The U.S. federal deficit improvement trend is over. Rising entitlement costs over the coming years will cause the deficits to expand. The growing deficit is not yet problematic. Investors are encouraged to wait until the government’s ability to service debt is rising faster than GDP before implementing defensive strategies.

The U.S. needs bipartisan congressional action to address the problem of corporate income taxes on foreign based earnings. The current tax law is fostering large capital outflows from the U.S. economy. This is a very important issue for the long-term viability of the U.S. economy.

Recommendations
Nuveen recommends overweighting allocations to equities, underweighting bonds and fixed-income and holding an overweight in cash reserves. They expect above average volatility. Most investors will be frustrated by the current environment of higher volatility and low returns.

We thank Bob Doll and Nuveen Asset Management for sharing their thoughts and recommendations. You can follow Bob Doll’s commentaries and other Nuveen Asset Management research publications at www.nuveen.com/home. Thanks again to Nuveen Asset Management for their support of CFA MN.

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Posted in Hot Topic Commentary, Local Charterholders | Tags: Bob Doll, CFA, CFA Events, CFA Society MN, CPA, Distinguished Speaker Series, Nuveen Asset Management |

2016 Annual Economic Dinner Featuring Michael Pettis – Event Recap

1st February, 2016 · CFAMNEB · Leave a comment

By Mark Carlton, CFA 

Last Thursday night we were pleased to welcome Michael Pettis, Professor of Finance at Guanghua School of Management at Beijing University, to speak at our Annual Economic Dinner.  He is perhaps the most sought-out speaker anywhere on the economic changes and challenges China currently faces.

First, addressing the gyrations in the Chinese stock markets over the past two years (first soaring more than 150% and then giving back all of that and more) he informed the crowd that the Chinese stock market is not a predictor of future profits.  Instead, it is a call option on the credibility of the Chinese government.  While foreigners may be blamed internally for market instability, he said, they actually account for just 2% of trading volume.

He then went on to describe the difficult transition China is currently undergoing.  He gave us a modern history of China in four stages, starting with the liberalizing reforms of Deng Xiaoping in the 1980s.  During that stage the government removed impediments to private market transactions.  Stage two was marked by an infrastructure investment program and was very successful. Because that sector had been long neglected, return on capital was very high at a time when the real interest rate on borrowing was extremely low.  As time passed, however, this fortunate set of circumstances changed.  The current stage, three, began several years ago as the value of new projects no longer covers the rising cost of capital.  In every other instance when this situation has occurred (Japan in the 1980s and Brazil more recently were cited), the country has ended up with a debt crisis as borrowing continues past the point at which it makes economic sense; internal politics make that transition too difficult.

The key point he made was that growth in China needs to decline rapidly to avoid making the debt situation worse.  At the same time, they need to promote domestic consumption so as not to have a depression.  Mr. Pettis stressed that the Chinese leadership understands the issue and that the reason for the government’s anti-corruption campaign.  The elites oppose reform (as they tend do everywhere, he stressed) so the government has had to centralize power so that it can implement the necessary reforms.  He emphasized that this type of transition has never been successfully executed in a command economy and is rarely successful in a free market economy.  He was optimistic that the Chinese leadership has done the right things needed to give themselves a chance of success, but their job was a tough one.

He predicted that Chinese growth will slow to 3% or less over the next decade.  That will allow debt to grow slower than GDP (it is currently growing more than twice as fast as GDP).  This will be a problem for global growth as the world already faces insufficient demand.  He believes that the global economy can still grow in a sub-3% Chinese GDP world, much as it grew in the 1990s with Japan growing at just 0.5% per year.  Pettis thinks hard commodity countries are going to continue to struggle as a result, but soft commodity countries can prosper.  He believes the ultimate impact of the Chinese economic transition can be mildly positive on balance, but that the benefits will be unevenly distributed.

Finally, he addressed the question of what makes a rich country rich.  He argued that rich countries have domestic institutions (i.e. private property rights, the rule of law, etc.) that enable citizens to be maximally productive.  By that measure, China is a long way away from being a rich country.

The audience was appreciative.  It was a great night marked by a very informative speech.

 

The event was also featured in the StarTribune. Click here to read the interview with Michael Pettis by the Star-Tribune’s Evan Ramstad, team leader for business coverage

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Posted in Hot Topic Commentary, Local Charterholders | Tags: Annual Dinner, CFA Society MN, China, Chinese Economy, Economic Dinner, Michael Pettis, Pettis |

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