FICP Keynoter Sees the Economy on the Right Track

Highlights
Finance professor and funnyman Peter Ricchiuti succeeds as a presenter with an unpredictable mix of wisdom and wackiness.

Economist or comedian? Tulane University Finance Professor Peter Ricchiute is indisputably both when he delivers a keynote address. Photo powered by redbutton.tv

The second full day of the 2010 Financial & Insurance Conference Planners Annual Conference at the Fontainebleau Miami Beach opened with an announcement: The 2013 annual conference will take place at the Sheraton Boston, November 17 to 20.

As it happened, that announcement was followed up by a Boston native—keynote presenter Peter Ricchiuti, now a finance professor at Tulane University's Freeman School of Business in New Orleans. In a talk that was two-thirds terrific economic content and one-third standup comedy, Ricchiuti delivered a welcome perspective to the 625 planners and hospitality partners in attendance. Remember during the dot-com boom when Alan Greenspan called investors irrationally exuberant? Well, Ricchiuti calls today’s investors “irrationally pessimistic.”

Stocks are underpriced and corporate earnings are “outrageously good,” he said, predicting that in 2011 we will have “the highest corporate earnings in the history of the country.” Far from being headed toward more gloom, he believes, we’re on our way toward an economic “sweet spot.” The stock market, which has risen 85 percent in the past 19 months, is a leading indicator, showing where the economy will be six to nine months out. Unemployment, on the other hand, is a lagging indicator. So while the unemployment rate is not yet improving, the stock market is well on its way, and news reports that focus on the former paint too dark a picture of the economic future.

The iconic curved shape of the Fontainebleau Miami Beach, host of the 2010 Financial & Insurance Conference Planners Annual Conference Photo powered by redbutton.tv

More of Ricchiuti’s “sweet spot” evidence: There’s never been a down year in the third year of a presidential term, and companies are holding more cash on their balance sheets than they have in a decade. They will need to put that money somewhere: into share buybacks, increased dividends, mergers and acquisitions, much-needed capital expenditures, or, yes, hiring workers. After companies spent the past two years laying off employees and asking those who remained to do more, productivity now has peaked and companies will have to start putting workers back on payrolls. It’s all good news for the economy.

Ricchiuti also looked to history to put the current recession into perspective. Since World War II there have been 11 recessions. “Recessions last 14 months on average,” he said. “But they always end, and the economy always rises to a higher plateau.” Worried about the national debt? Ricchiuti advised looking beyond the actual number and looking instead at the debt as a percentage of gross domestic product, and focusing on the way it’s trending. “We don’t need to eliminate the debt,” he said, “we just have to change the direction” and get it heading down instead of up. How? Policy changes such as increased taxes on those earning more than $500,000 and changes to entitlement programs such as raising the retirement age—things that are open for discussion now in a way they’ve never been—would have an affect.

And by the way, you know the conventional wisdom that having a Democrat in the White House is not good for the stock market? Ricchiuti offered these stats: the S&P 500 was up at the end of both of President Bill Clinton’s terms, down at the end of both of President George W. Bush’s terms, and is up 55 percent since President Obama took office.

One last thing: Have you been looking to gold as your safe investment? Ricchiuti sees that as the next bubble.

Read more from Ricchiuti at Burkenroad Reports, the Web site of his university course where students research and visit public companies. Ricchiuti's keynote address was sponsored by Loews Hotels & Resorts, represented at the conference by Michael Dominguez, vice president, global sales, and other sales representatives.

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