Conference Tidbits

Well, consider that a bullet dodged. You’ve likely heard by now that President Biden signed the “Fiscal Responsibility Act of 2023” into law this past weekend. Among other things the bill suspends limits on federal borrowing until January 2025. We can debate if not having a debt ceiling is fiscally responsible but it’s a big win for the markets and the broader economy at least in the short-term.

I was following these developments while at another conference last week. This time it was the Financial Planning Association’s “NorCal” conference at the Palace Hotel in San Francisco. Attendance was high at this in-person event and the educational content was outstanding, broad in topics, and appropriate for the times.

I still want to bring you some tidbits from the other conference I attended earlier in May, but the debt ceiling debate got in the way. Since that’s in the rearview mirror, over the next few weeks I’ll share takeaways from speaker sessions at both conferences.

Stephanie Kelton – You may recall from early in the pandemic that I wrote a post about The Deficit Myth, a book by Stephanie Kelton, a PhD economist at the forefront of a movement to reset how we think about government debt and deficits. Her book was published as the pandemic started raging and governments around the world were hastily preparing massive spending programs. At the time the book and its ideas seemed to offer cover for limitless government spending. But of course it’s always more complicated than that.

Back then I participated in a study group based on the book and comprised of financial planners. We met virtually with Kelton and others in the Modern Monetary Theory cohort and got a crash course in MMT. Fascinating and timely for sure.

The years since have come to be seen as a real-world test for MMT theories, so it was a great opportunity to hear directly from Dr. Kelton. Essentially, the idea is that the federal government issues its own currency and, because of this, has the power to do so indefinitely at any amount that can be absorbed by the economy. Too much too fast and we have inflation. Too little or with too many constraints and we have an unnecessary recession. CPI rising faster than it had in decades and peaking at over 9% a year ago illustrates the first point and, fortunately, with the debt ceiling deal we won’t have to worry about the second point for a while.

There’s a lot more to MMT and Kelton was quick to remind conference attendees that the theory wasn’t (and still isn’t) meant to be prescriptive. Instead, MMT is a different lens to look at our monetary policy and economy through, she said. For example, the federal government doesn’t need to manage it’s spending as if it were a household, but we continue to pretend it does and this limits our potential.

There’s more about all this in her book. I’m still willing to buy it for you if you’re interested, not as a political statement or anything like that. Instead, this is foundational information to have on hand when listening to and thinking about our debates around the complexities of government spending.

Liz Ann Sonders –

Liz Ann is Schwab’s Chief Investment Strategist and, say what you will about her employer, she’s the bomb! I always try to make time to read Liz Ann’s commentary, and I definitely make time to hear her speak live.

Liz Ann had some interesting thoughts to share during an hour+ conversation with a moderator that served as a breakfast keynote. She’s constructive on where we are in the economy and markets but mentioned, as we’ve discussed in other posts, how we may actually be in recession now although it may not be “called” until later. This could end up being a so-called soft-landing where the economy, on average, experiences a mild recession while some sectors get hit harder.

Liz Ann also talked about how stocks are up so far this year but a relative few are holding up the market. This outperformance is being driven by multiple forces but the upsurge of interest in AI is paramount. The players in this space are often referred to as “tech companies” while, technically speaking, the companies are found in sectors like Communication Services, Consumer Discretionary and, of course, Technology. She talked about how investors often buy the label when buying investment funds and sometimes chase tech and other aspects of the market without realizing they’re not getting the exposure they intended.

On AI specifically, Liz Ann offered the destabilizing force as an example of how change and volatility are likely to be heightened for a while, and the rate of change is faster than we’ve experienced in a long time. This is uncomfortable for most of us but much about AI should prove beneficial. She isn’t overly concerned about the technology’s threat to humanity and hyperbolic stuff like that, but she did mention being taken aback by a recent report from BCA Research suggesting there’s a 50/50 chance that AI wipes out all of humanity. Sobering talk over breakfast, for sure.

Here’s a link to a short CNBC interview with the BCA analyst: https://www.youtube.com/watch?v=9VOuCcEORsM

But the rise of ChatGPT, Bard, and Midjourney as a Terminator movie wasn’t Liz Ann’s main point. She was optimistic (correctly, as it turned out) about the debt ceiling debate, the economy, and markets even while expecting a mild recession and prolonged volatility. And she was optimistic about investing. Liz Ann has long been a proponent of keeping a level head during turbulent times and remembering how the process of investing is like running a marathon and not a sprint. That’s always good advice.

As I mentioned, barring major developments in the coming weeks I’ll plan to share more conference tidbits with you. Those include a couple interesting sessions about aging in America, our healthcare system, and the outlook for assisted living in our country.

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