InvestmentInsights
BY CAROL SCHLEIF
Structurally Sound
A timeless approach for the 21st century
Is anybody else as fed up as I am with hearing about how bad things are? Let’s get on with it already and start focusing on what we can do to survive—and thrive—in the new reality.
Periods of meltdown and renewal are not at all unusual for
the United States. Read John Steele Gordon’s book An Empire
of Wealth for numerous examples of American ingenuity and
stick-to-it-ness pulling us back from the brink of financial meltdown. This is the time when we need to pull ourselves up by the
proverbial bootstraps, dust ourselves off, and figure out how we
are going to push forward. At the risk of stating what should be
painfully obvious, here are my thoughts on some of the things
we can try to get “unstuck” and help us move forward:
• Retool. It’s time to stop pining for what we’ve lost and start
embracing the fact that the ground rules have changed. In financial services, for example, while mortgage underwriting is down,
workout specialists and credit counselors are in demand. Given
the current run rate of just over 500,000 new homes per year, we
are probably not going back to developing 2 million new homes
per year any time soon—if ever. This means there are loads of
folks in the construction business and in ancillary businesses from
appliance and carpet manufacturers to mortgage and insurance
underwriters who need to seriously consider retraining for other
careers. All sorts of industries (auto, apparel, railroad, etc.) have
had to recreate themselves over the decades as progress marched
on. Ask all the middle managers displaced in the late 1980s and
early 1990s as the conglomerates of the 1970s were unwound.
The initial period was heart-rending, but the long-term result
yielded new, vital industries creating careers unimagined just a
few years before.
I’ve heard that welders and over-the-road truckers are in
short supply. Maybe it’s time to rethink the old prescription
that a college education (and the ensuing debt) is the way to
long-term financial security. Perhaps tech and trade schools
are an increasingly attractive alternative, especially with many
of the basic trades so underrepresented in new graduate ranks.
• Live within our means. Whether by choice or by the
will of creditors, many of us are already doing this in our own
households, the nonprofits we assist, and the businesses we own.
Companies are doing it too, as Corporate America remains cash
rich and operationally lean in aggregate. Now we need to demand that our politicians put us on a course to balance budgets
at the local, state, and federal levels before investors (a.k.a. the
creditors of the municipal markets) force the issue.
• Get used to asset class returns in the low to middle sin-
gle digits. The incessant search for higher yields and returns is
leading, yet again, to the creation of synthetics and doc-lite loans
while putting extra risk in the market. Aging Boomers are reduc-
ing their exposure to the stock market in an attempt to reduce
volatility in their portfolios as they near and enter retirement.
If we could collectively stop pushing the envelope in search of
the double-digit returns of the late 1990s, and rest comfortably
knowing that single-digit returns can compound nicely too (es-
pecially if there is less volatility involved in generating them),
perhaps there would be fewer sleep aids needed.
Carol M. Schleif, CFA, is a partner and investment principal of Lowry Hill, a Wells Fargo business.
Lowry Hill is a private asset management firm that
provides proprietary investment management and
financial services to families, individuals, and foundations with wealth greater than $10 million. The firm manages approximately $4.7 billion in assets for nearly 300 families and 56
foundations from offices in Minneapolis, Naples, Fla., and Scottsdale,
Ariz. Schleif (formerly Clark) welcomes questions and comments at
cschleif@lowryhill.com.
