Bisnow Conference 20091028
I attended a conference this morning: “Is K Street the New Wall Street?”, hosted by Bisnow.
The gist of the event was to qualitatively gauge Washington’s intrusive role in the economy. Given the topic and list of speakers, I had low expectations. I figured, since we were in Washington, there would be some chest-beating rants on how government is saving the day. To my delightful surprise, there was more focus on economic realities than I imagined, and I walked away mildly impressed. Here is my take on this morning’s speakers.
Jerry Jasinowski, former CEO of National Association of Manufacturers
The first speaker on the docket had me scribbling the following in my notes:
“Old guy telling me what I know”
And then a few moments later…
“Old guy telling me what he doesn’t know”
To be fair, Jasinowski had some good content, and it was well-organized. However, it lacked the amplification of driving home the main point. I kept hearing phrases alluding to “we’re now in recovery,” but the implication was unclear—are we in the clear or is there danger ahead? This was evidenced by the moderator’s first question, “Are we in a bubble?” Jasinowski’s answer was finally a clear, “Yes.”
Jasinowski hit on a few main points that echo my last major article, The Next Recession. Among them, there will be an uptick in 3Q GDP driven by zero interest rates, fiscal money, inventory reduction, cash for clunkers, and the housing tax credit incentive. Weak consumer spending and 10% unemployment will remain for some time (years) attributable to consumer deleveraging. A weak consumer also slows business investment. I feel like a broken record typing this, but the DC crowd just doesn’t get it.
Earl Devaney, Federal Stimulus Tsar
I am a zero fan of the $787 billion stimulus, so my expectations were about as high as the leather on my shoes. Yet, I learned a few things. The stimulus money is divided into three buckets of similar size: tax benefits, entitlements, and grants/loans/contracts. Only 6% of the grants/loans/contracts has been spent, and only 25% of the total funds has been spent (70% of the total should be spent by the end of 2010). So, to hear the media/politicos trumpet the stimulus’ success is misleading since most of the money will be spent next year… And no one has even mentioned the crowding out effect, which is the number of private jobs that are lost because of government jobs created. And even if the little 6% stimulus is working wonders, imagine Peter Pan, how wonderful will things be when Tinkerbell sprinkles the other 94%?? A stimulus recovery is a fairytale. Nevertheless, I thought Devaney gave a fair, unbiased presentation.
Michael Chertoff, former Secretary of Homeland Security
Chertoff had some interesting commentary. The one thing that struck me is that his biggest Homeland concern is a biological attack. The biological investment plays right now (in my mind) are H1N1 (Novartis), human genome (Illumina/Affymetrix/Sequenom), and maybe cancer (Abraxis). I don’t know how the everyday person can benefit from his insight, but it’s intriuging nonetheless.
Panel: Eric Trump (The Trump Organization), Bill Farmer (Lazard), Ed Mathias (Carlysle Group)
Trump focused his discussion on the difficulty to obtain financing, and those that hold cash can strike good deals. While I don’t totally agree with him, I won’t disagree—he knows commercial real estate much better than I do. After all, his parting shot was “stick to your core competencies.” I’ll abide and take a pass on the criticism.
Lazard hammered away that the smaller, nimbler, quicker firms that focus in cyber security and IT will be the most successful in that field. He also mentioned continued consolidation in aerospace and defense. Most of what he said didn’t apply to me, but given the government contractor presence in DC, they had to put a guy like that on the panel.
Mathias was the best! Dear DC, the markets don’t like the uncertainty you cause when you take over the banking industry, the auto industry, the energy sector, and soon to be healthcare. “We are going the wrong direction… not healthy for our economy… government action permeates everything we do.” Mathias alluded that inflation was a long-term problem (beyond 6-12 months) implying that the government would be unable to wean itself away from the easy money monetary and fiscal policies (and he is very likely correct). His parting advice was diversify investments, invest globally, and protect against inflation/higher taxes/higher interest rates. I agree.
