A CBO Report To Crow About!

While everyone was screaming and drawing battle lines over the latest CBO report on the Affordable Care Act, I was reading another CBO report—“Budget and Economic Outlook:   2014 to 2014.” You can find the report here http://www.cbo.gov/publication/45010 . It’s quite uplifting.

Since the Financial Crisis of 2008, growth in our economy has been tepid, coming in below 3% each year. In our office, we carefully follow the release of each piece of economic data. We noted the slow improvements in our economy since 2010 and saw a pick up in activity in 2013. It seemed that we were back on track. Our view is that this would continue into 2014. After the auspicious beginning in markets this year, our projections seemed too optimistic. Nice to know the CBO agrees with us!

According to the report, GDP growth is expected to be 3.1% for years 2014, 2015, 2016, AND 2017. While still not setting the world on fire, 3.1% is a healthy rate. Four years of this pace will be good for business!

Buried in the report is a comment about the improvement in state and local budgets. They are healing from the huge losses of the past few years and are finding themselves with more cash than expected. The result is that these state and local governments should begin spending again. More spending here means more economic growth.

And maybe some of their spending will involve hiring more people. THAT will be a welcome change, since 2/3 (TWO-THIRDS, you read that right!) of the job loss over the last five years has come from the government sector. The CBO projects the unemployment rate will stay above 6% until 2016. A turnaround in this trend will help with our stubborn unemployment situation.

And guess what else?

The federal deficit continues to shrink!! Much of that is due to improvements in tax revenue with an improving economy. The CBO expects a further reduction of $514 billion in 2014 and $478 billion in 2015. In 2016, they expect us to start losing ground again since we refuse to address the real problems in our budgetary process. In fact, with the exception of Social Security, healthcare programs, and net interest, all other government programs are seeing declining expenditures.

And inflation? Meh.

Don’t expect anything beyond 2.0% for the next few years.

I was all smiles until I got to the part covering 2018 and beyond. They are projecting a return to the snail’s pace for our economy at that point. I’ll be like Scarlet O’Hara and worry about that tomorrow! For now, I’m looking at the glass half full.

With all this positive news, why didn’t THIS report make the headlines?!?

The Education Puzzle

Mississippi has gone from next to last to LAST! Simply put, we can't get any worse.

Our education system is a mess. 90% of our students attend public schools from kindergarten through 12th grade. Across the state, the variation in quality is huge.

My daughter attended public school for all her pre-college years in Clinton, a top-rated program. She received an excellent education and was well-prepared for college classes. But Clinton is a town with above-average median household incomes and a supportive group of citizens.

Travel across the Jackson area and you'll find more of the same. In the towns of  Brandon and Madison, incomes and property values are higher than average. Support for the public systems is strong. Both have excellent schools, as well.

Head out into the county of Madison, and you'll find a different story. Drive a few miles down the road from Clinton to Raymond, and you'll see the variation. Take a drive into the Delta, and you'll find systems that aren't making the grade.

I understand that just throwing money at a school system is not the answer. More money does not, necessarily, mean better performing students. But I also know that our current funding system misses the point.

Schools in parts of our state with low-performing students that come from difficult family backgrounds need MORE time, attention, and, yes, money than those in nice, suburban Clinton or Brandon. But the structure of school funding in the state means that those with more just get even more, while those with less make do.

The issue of education funding continues to be clouded by our history. Desegregation led to a dual system of public and private schools in many places. In those systems where white families and white students remained, public schools succeeded. In areas where white flight led to largely African American students, public schools tended to falter. Those schools got the short shrift.

The change that came about due to Brown versus Board of Education has not been reversed here. In fact, it has become worse with black flight from blighted school systems. More and more African American families of means are moving to districts with good public schools. Who could blame anyone, black or white, from trying to provide their children with a good education?

But we're still left with a bunch of schools that are simply not cutting it. The students who need the most help are the ones stuck in poor-performing districts, and the result is a large number of our citizens without the education to help themselves or the economy of this state. What is there to do?

First, we must recognize the problems and their roots. Poor-performing districts should be handled aggressively by the State Board of Education. They should receive additional funding to address their added problems. While I'm not a fan of charter schools, some models may work better for these areas. We should consider using technology to deliver better instruction to these areas than can be efficiently delivered in the traditional setting. I wouldn't even oppose a type of boarding school for some students who lack support at home.

I think it's time for us to throw everything at the wall and see what sticks. Our poor educational system is leaving us on the bottom economically. It is resulting in two Mississippis-- one with hope and opportunity and one that is stuck and hopeless. When faced with this condition, what have we to got to lose? We can't get any worse. We're LAST!

Giving Us All A Bad Name!

I love a good story. And I love to see that story come to life on the big screen. But this time, I'm passing!

The Wolf of Wall Street has all the elements of a good, juicy story-- sex, lies, greed, and a major scam. It's the true story of Jordan Belfort, a Wall Street broker, who stole millions from his customers. Ryder read the book and declared Belfort to be "the worst person in the world." That was enough for me!

Never mind that Belfort left his customers holding the bag. He spent 22 months in prison, then bounced back by writing the book and selling the movie rights for a blockbuster directed by Martin Scorcese and starring Leonardo di Caprio. As part of his court settlement, he is required to make restitution to his former clients.

Belfort, true to form, is fudging on this agreement and finding a way to keep his ill-gotten gains. He is now on the speaker circuit and has another book coming out. What a colossal a**! Instead of profiting off his misdeeds, he should be put in stocks in the town square and left in the cold. His kind makes everyone in my business look bad-- and I don't appreciate it!

On December 26, 2013, a letter appeared in The LA Times http://blogs.laweekly.com/informer/2013/12/wolf_of_wall_street_prousalis.php which was written by the daughter of one of Belfort's cohorts in crime. In it, she reminds us of the excesses of Wall Street and the very real damage that gets left in the wake of such greed. Her advice? Don't put another dime in Belfort's pocket by reading his book, going to this movie, or hiring him as a speaker. He and his ilk are scum and should never be rewarded for bad behavior.

Suffice it to say, I'm not going to this movie.

I had the chance to hear John Bogle speak at a conference this year. Bogle is the founder of The Vanguard Group and has spent his professional life beating the drum for lower fees for investors. He was his usual, admonishing those in our business who produce nothing yet extract abnormal profits from their customers. Bogle is highly successful, but he got there by putting his clients first. This is the model I follow.

At New Perspectives, we may never have Belfort's wealth, but we will always keep our integrity. The trust placed in us by our clients is sacred, and we place our clients' interests above our own. So, don't put us in the same category as Jordan Belfort, or Bernie Madoff, or the dozens of other "financial professionals" who find themselves in the headlines. We plan to keep our heads down, do our jobs, take care of our clients, and stay out of the news!

And so it begins

There are a couple of things going on here. First, a changing of the guard: Janet Yellen is set to succeed Ben Bernanke as chair of the Federal Reserve.  Next, an improving economy: employment numbers have been surprisingly good as of late, pushing unemployment down to 7% recently. Lastly, lots of unease and lack of clarity: investors have been skittishly anticipating the end of the monetary stimulus provided by the Federal Reserve.

All of these things came together yesterday in possibly the most exciting monetary policy story since quantitative easing started.

Quantitative easing (QE), round infinity, the latest of the Federal Reserve's monetary stimulus, consisted of $85 Billion of purchases of long term bonds and mortgages. This held long term interest rates down, ostensibly to encourage long term investment. A possibly unintended side effect was to assure anyone holding or buying bonds that their prices would keep going up for a little while. The investor uncertainty around QE has been the speculation over when and how it would end, or taper off.

More information came to market yesterday when the Fed announced that they would start to reduce purchases to $75 Billion a month next month. This is not a huge reduction, but the timing is a great relief for a few reasons. Firstly, this frees Janet Yellen of the pressure of continuing the full scale purchases. With so much institutional momentum behind QE, it is a relief that the brakes are already being applied, if only tapped lightly. Second, since the tapering of QE was supposed to be based on the health of the economy, this is a good omen - the Fed believes that the economic trends will support the withdrawal of stimulus. Lastly, investors now have an extra crumb of information when analysing investments. The question of when reductions would happen is off the table, we get to speculate on everything else now!

Flying Mississippi!

We flew to Philadelphia, Pennsylvania for Thanksgiving. Philly is the home of the cheesesteak sandwich, Independence Hall, and the Flyers. More importantly, it's the home of my daughter.

Flying from the Jackson International Airport is a chore. There are no through flights. The options for carriers and schedules are limited. Usually, we end up on Delta. Of course, that means we have to travel through Atlanta.

Jackson's airport is small. The agent at the counter may also be the one at the gate. I've wondered if they also have to load the luggage and fill up the plane with fuel. Mainly, it's a one man show.

On the way back home, we went back through Atlanta. The flight from Philly to Atlanta was a little late taking off. The pilot said something about maintenance issues. That caused my ears to perk up! Couldn't we just change planes? After some time spent on the runway, we ascended. My perked up ears heard a high-pitched sound. I started saying my prayers before I realized there was a dog on the plane!

The yapping and crying lasted most of the flight. Good grief! We couldn't wait to get on the flight to Jackson where we could have some peace and quiet. Then I started hearing something. No, it couldn't be! Across the aisle from me was a passenger with a cat under his seat! He sheepishly apologized for the meowing. And I thought flying with kids was bad!

We made it home, glad to be back in Mississippi. We love home, but we love to travel. Despite its difficulties, air travel is really the way to go, so I was quite disappointed to hear the news today.

Southwest Air will no longer service Jackson. Yet another one bites the dust. We are left with so few options to get OUT of Mississippi that it makes staying here and doing business here difficult.

Mississippi is a small state. We are not a wealthy state. I understand that airlines have to make business decisions based on profit potential, but we NEED more options. It's time for our state government to step in and offer subsidies to support air travel to the Capitol City.

Business packages are put together all the time to encourage development in our state. Why not do this for air travel? It's the link that connects us so that other business happens. Surely, such an expenditure could be easily justified.

We could even request the planes have a Magnolia on the side. Mississippi Air-- now THOSE are some friendly skies!