Volume 77 May, June, 2011

A Penny for My Thoughts...

By Ryder Taff

    When Nancy gave me the opportunity to go to Chicago for the 2011 Morningstar Investment Conference, I jumped at the opportunity. An investment conference and a train ride – how exciting! From the vast windows of the observation car, I watched an economy at work. The creeping pace of the train, sometimes jolting or slowing, was a reminder that it is not a smooth, quick ride.

    I have never had a satisfactory explanation for why I like train travel so much. Going to the University of Bristol in England gave me three years to indulge in the joy of train travel, both in Britain and Europe. I found my fifteen hours aboard the City of New Orleans very well spent, and much cheaper, than the alternative – a mere two and a half hour flight.

    My first trip to Chicago was a fantastic experience. From walking along Lake Michigan in a cool breeze to listening to the world’s greatest investors, I kept my eyes open and my wheels turning.

    Our economic recovery has not been a smooth, quick ride. Bad news, like the unruly passenger being removed late in the night, has unexpectedly stopped progress at times.

   The good news from the conference is that there was a positive consensus on the U.S. economy. The panelists pointed out that we still have all of the elements for strong growth.

    American consumers and businesses alike are saving more and improving their balance sheets. This sometimes painful deleveraging process is making our growth more sustainable going forward.

   Low rates on bonds and bank accounts have people looking elsewhere for growth and income. Even Bill Gross, possibly the world’s largest and best-known bond fund manager, suggested that people look to stocks for real income.

   It was noted that U.S. companies have great cash flows, quality assets and money in the bank that will keep them from default. With their finances in great shape, U.S. company bonds are very safe, and their dividend-paying equity is only more attractive.

   It is a slow journey we have ahead. Just like Amtrak’s City of New Orleans, there will be slow stretches and unexpected stops; faster moving trains may pass us, but our economy will keep rolling ahead.

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