Right-brain Financial Analysis
Mark Teed Seeks Answers from Trends and Patterns
Mark Teed has file folders — lots of them — each dedicated to a trend he’s spotted in the news or through his own observations.
As senior vice president of Investments at Raymond James & Associates in Springfield, he uses those folders in his everyday work, trying to spot market trends in an effort to help clients build wealth.
That’s not unusual. But the sheer breadth of the file topics might be, ranging from straightforward stock news to societal shifts that might not immediately seem to impact financial markets. They serve as individual brushstrokes on the canvas of his financial outlook; each may not seem to portend much, but together they lend clarity to what can be a very confusing landscape.
He focuses on ‘anomalies,’ such as the question of why many retailers are still struggling in the wake of the Great Recession, yet restaurants are packed. His answer is that consumers are still holding back somewhat on purchases, but they’re prioritizing the social element of eating out.
“We think maybe restaurants represent the anti-technology world, where we can spend time with people in real life. It feels like the antidote to the smartphone world, a way to get away from technology.”
And that opens many, many other folders on the societal impact — and, by extension, the market impact — of the social-media age and the burgeoning attitudes and habits (some promising, some disturbing) of its denizens.
“I don’t like numbers. I like symbols, colors, patterns,” Teed said, admitting that he’s a right-brain thinker in the left-brain world of financial analysis. What his folders full of trends, anomalies, and inferences represents is no less than an attempt to understand and connect all the disparate rumblings of a world of rapid change, and what that means for the future.
“In my work, I’m just trying to find some clarity in the numbers, trying to help people get into a good retirement,” he said. “I’m concerned about the average person’s savings rate. I want to help people get to the point where they save and invest and accumulate and believe in America’s future, because, warts and all, it’s still the greatest place in the world.”
And it’s a nation in transition. The folders tell the story.
If you ask Teed for a quick market analysis — and, as a regular commentator on financial matters for CNBC and other media outlets, he’s asked often — he has an easily understood answer that sticks to the financial basics.
“At this point, the markets are calm. Four year ago, they were volatile and chaotic,” he said, crediting the change to Federal Reserve Chairman Ben Bernanke’s commitment to bringing interest rates close to zero in an effort to protect and ease the markets. But Teed says that’s only a short-term, artificial solution.
“There’s a certain amount of calmness, but behind the scenes, a lot of these models are based on constants, and they are becoming more fragile,” he explained. “Today is a sunny day, but we’re concerned about the clouds in the distance. We’re not sure how it will all play out because it’s such a new, uncharted territory. Hopefully [Bernanke] could start to raise rates a little bit, and the markets will respond positively, but we’re not sure.”
The result, he said, is that “we’re on guard like we’ve never been on guard before. Intuitively, the average person here in Springfield feels it in their gut; their head tells them it’s OK, but in their gut, things aren’t right, and we’re seeing signs of fear out there — not as much as four years ago, but just that gnawing fear.”
It’s not eased, he said, by a flood of new regulations pouring into the financial world. In a trend he calls “10,000 commandments,” he noted that the Dodd-Frank legislation designed to prevent the next financial crisis is only 30% complete and already encompasses some 9,000 pages.
“It’s gotten to the point where people don’t know how to behave,” Teed said. “Those in power are pushing through what I call extreme regulations, which are not meant to create a fair playing field; they’re meant to punish. Our response to the crash was that someone did something wrong, and we’ve spent three or four years figuring out who did something wrong and punishing them. And now there’s a hesitancy to do business because no one knows what the rules are.”
Meanwhile, millions of individuals, many approaching retirement, are still reeling from the crash. “Someone who was 55 years old in 2007 is now 61, and six years have gone by, and even though the market has reached new highs, they don’t feel like they’ve made any progress,” he said. “Baby Boomers always thought the future would be wonderful for them, and now reality is setting in; they’re worried they won’t have enough money. They know people are living longer, and they can’t retire yet. The future doesn’t look as bright as it did for their parents.”
Teed repeatedly came back to a problem he calls “psychological deleveraging.”
“We’re such an optimistic country. When I was growing up, the future looked so bright and wonderful,” he noted. “But in the last 10 years of market selloffs and layoffs and outsourcing, people, psychologically, have deleveraged what life is going to get them, and they’re starting to settle for less. There’s a feeling, as a nation or as an individual, that they’re not going to get there.
“It almost leads to anti-consumption,” he went on. “You see it first in the rich; instead of getting a trophy house, they’re getting a trophy rental. They’re not putting capital out there. They’re starting to hoard cash. It’s the first time I’ve ever seen that.”
These discussions — of markets and regulations and retirement fears — are far from uncommon in Teed’s field. But for him, they’re a jumping-off point to explore the broader social anxieties that underpin those financial uncertainties.
Take the hyperconnectivity of Americans today. Teed, at 55, says his generation tends to value privacy and are careful about with whom they share information. But the younger generations, who grew up in the computer age — and particularly Millennials, who are very comfortable abandoning their privacy on the web and social media — are a much different breed.
“They have an amazing cooperative instinct; they aren’t afraid to reveal themselves, and in many ways, they create peace through cooperation.”
Coincidentally — or perhaps not — violence levels are down nationwide, Teed noted. The national murder rate is the lowest since 1961, and New York City recorded 414 murders last year after averaging around 2,000 per year as recently as the 1990s. “The Internet and social media are the great equalizer; these kids are different than you and I — they’re cooperating; they just get along very well, and that’s good for the future of the stock market.”
At the same time, though, perhaps paradoxically, Americans are more politically polarized than ever, and the Internet tends to fuel that as well. “It’s modern tribalism. We’re forced to be a member of a tribe and have to define ourselves by that label,” he said. “I think it’s hurting us because everyone is so polarized, and polarization leads to paralysis; nothing gets done. It seems like the airwaves are full of people venting.”
What they’re looking for, Teed said, is authenticity, noting that audiences have responded enthusiastically to a string of films set in the 1920s, including Midnight in Paris, The Great Gatsby, and The Artist, the latter a silent film that won the Academy Award for Best Picture.
“That’s an extreme anomaly,” Teed said. “We’re seeing a tieback not to nostalgia, but to authenticity. People are searching for something authentic and real, and therefore the politicians, business leaders, and religious leaders who BS people are in trouble. People are looking for truth, and that ties into that cooperative instinct. People want people to tell them the truth.”
He said Apple’s stock soared for years under Steve Jobs’ leadership not only because people used and liked its products — which they certainly did — but because users saw Apple as an authentic company; there was a level of connection and trust. When Apple released a map application with serious flaws, that was big news, because it cut against that hard-earned reservoir of trust.
Cutting-edge technology collides with trust in other ways, too, such as the cyberwar that percolates beneath the surface of the business world every day.
“It’s a barbarians-at-the-gate mentality, but it’s a digital gate,” Teed said. “If you’re a Fortune 500 company in America, you’ve been hacked. You might not know you’ve been hacked, but everyone has been hacked by the Chinese.”
He said the U.S. government has been developing a 1 million-square-foot facility in Utah tasked with countering the threat, hoping to employ some 4,000 people with high-level hacking skills to fight back. “It’s total information awareness. We’ll have eyes and ears on every single thing happening in America. I think we’re at war, but it’s a cyberwar, and our cyberwarriors are hackers.”
That sort of unsettling prospect contributes to the perception of an authority void in America — or, at least, the collapse of the illusion that our leaders are in control.
“Hacker groups like Anonymous and LulzSec — they hack into companies, not to hurt them, but just to show them they aren’t the authority, but the power is in the hands of the hackers,” Teed said. “They’ll tap into the Department of Defense website and won’t do anything, just to show them they can do it. That’s an amazing anomaly.”
And it translates, in the consumer arena, with heightened fears of identity theft — just one more anxiety to deal with.
Easing Their Pain
And they’re dealing with their anxieties in new ways, such as the dramatic increase in the use of drugs like Adderall, and other forms of self-medication.
“People are on this cycle where they take sleeping pills to go to sleep at night, then take Red Bull to wake up in the morning, then take Xanax to calm down later on, and start the cycle all over again,” Teed noted. “That’s their response to how difficult daily life has been. That hasn’t gone away, and that worries me about the future, and the future of markets.”
He concedes that those difficulties are authentic, such as a real-estate market that has remained soft for longer than people expected, and graduates leaving college so laden with debt that they can’t afford a new house anyway.
“For the first time in my lifetime, education is being attacked at its core, which is the value proposition,” Teed said of the millions of college graduates emerging into a difficult job market and onerous student-loan burdens. “People are now questioning, ‘is a college degree worth it?’ With almost a trillion dollars in education loans out there, that could be the next subprime problem — defaults on student loans. And if people are not able to find jobs, it’s a problem for universities to try to find their value in this world.”
He cited a college in Florida advertising a $10,000 BA, placing the entire focus of its pitch on the low price. “That really attacks the core value proposition for education.”
Bernanke’s actions, Teed said, have pumped oxygen into the markets, and consumer confidence has been on the upswing. “I think that’s a real positive; that would give people hope. But in their gut, they’re just not feeling that great, so he needs to keep this going.”
Yet, Teed remains undiscouraged.
“Amazingly, most of these pressures are negative, but I’m incredibly optimistic about the future. It’s so bright,” he said. “We have many, many problems, but when 6 billion people are cooperating, great things can happen, and I’m very optimistic for this country in particular to solve our problems. This is still the greatest place to invest, to raise kids, to say, ‘I came from here.’”
That’s why he doesn’t hold with the crowd clinging to investments like gold as they await another crash. “People view gold as a hedge against disaster, and that’s almost unnatural because gold doesn’t pay dividends,” he said. “I understand it, but I don’t think gold is the best investment. People are going to be surprised how quickly we get back to normal in the next 10 years and people feel better.”
That trend, which he hopes is no anomaly, will be led, he believes, by an increasingly connected world that, at its heart, identifies problems and wants to solve them cooperatively, no matter our tribal differences.
“That’s very good for the future and very good for the stock market. The stock market is nothing more than a mirror image of how we feel. It’s a confidence game. When we’re feeling good, things go up, and when we’re feeling lousy and scared, they go down. It’s amazing how quickly they react,” Teed said.
The bottom line? “I think the markets will go on and set new highs,” he said. “We always underestimate how great we are at innovating.”
Joseph Bednar can be reached at firstname.lastname@example.org