The View From Here

Our analyses of topical issues relating to the economy and financial markets.

Getting to Know You

July 16, 2012

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To colleagues and clients of Northern Trust:

I’ve been a professional for 31 years now, and I’ve only had three jobs.  My children look at that data and reach the conclusion that my limited talents have limited demand for my services.  My wife attributes this outcome to an inertia that also delays the completion of key household chores.  Quite a support system I have at home…

I am excited to begin my fourth posting here at Northern Trust.  I am really looking forward to working with all of you.

When I started in banking, I developed an immediate reverence for Bob Dederick, Northern’s economist at the time.  I thought, “If I could reach that level of competence, I’d be doing awfully well.”  The reputation established by Bob and his predecessors has been ably maintained by Paul Kasriel.  It is an honor, and just a bit intimidating, to become a part of that lineage.

A bit of background may help all of you understand the perspective I’ll bring to the role.

Born on Chicago’s south side, I was educated at the University of Chicago.  Schooled by Nobel laureates and their disciples, I was required to sign a form upon my graduation stipulating that markets are perfectly efficient and that the money supply was the only economic variable that really mattered. 

Fortunately, both the school and I have become a bit more open to other angles of thought since then. While we’ll watch monetary policy closely, we’ll certainly try to account for broader influences on market and economic performance.

For almost 25 years, I served as Chief Economist and Head of Balance Sheet Management at LaSalle/ABN AMRO Bank.  It was a period of almost unprecedented achievement for the US economy; it was a treat to write about this era, and to discuss it with colleagues and clients.  The affiliation with ABN AMRO, which had offices in more than 60 countries, offered a great opportunity to develop a global perspective, and I had the good fortune to visit many of our international locations.

At LaSalle, we wove our economic work into the bank’s strategic and risk management processes.  Northern Trust shares LaSalle’s commitment to this principle, and I’m looking forward to joining in the discussions at key Northern Trust committees.

After LaSalle was purchased by the Bank of America in 2007, I went to work for the Federal Reserve.  At the time, the financial crisis was working through its opening movement; when it reached its crescendo in September of 2008, I was sent to the Fed in New York to assist.  For more than two months, the experience was frightening, exhilarating, exhausting, and exasperating, all at once.

From there, my attention turned to the stress tests which are now required of all large banks.  The tests are huge econometric endeavors, but they’ve been hailed for helping to restore confidence in the US banking system.

When I was a banker, I spent a lot of time wondering what the Fed was thinking.  So it was an almost illicit pleasure to participate for four years in central bank discussions of economic fundamentals and policy alternatives.  It will be hard to become a spectator again, but at least I’ll know a little bit more about what goes on behind the curtain this time.

I very much hope to apply the insights accumulated during this array of involvements to the benefit of Northern Trust and its clients.  I’ll also look forward to leveraging the network of colleagues I’ve met through a variety of professional organizations.

There are a few other things that you should know about me.

Firstly, I do like to interject a little levity into commentary.  Over the years, I’ve had to sit through a lot of dry, technical presentations; we will try to spare you that fate by keeping our analysis lively and interesting. 

My family will often feature in the lead-ins to my discussions, as economic actors and commentators on matters at hand.  I thank them in advance for their understanding.

Secondly, I try not to overwhelm clients with data.  Globally, we get hundreds of metrics every month; all suffer from varying degrees of measurement error.  While the financial media tends to dramatize each release, one number does not a trend make.  Overreacting can be costly.

We’ll try to put things into proper perspective, connecting the dots between economic reports and focusing your attention on the most important indicators.  More numbers do not always impart more information; it is our responsibility as analysts to turn raw material into intermediate insights.

Third, I always try to put the forecast in its proper perspective.  We will, of course, sustain our practice of updating our outlook regularly.  But one must be realistic about the accuracy of forecasts, and understand what can make them go wrong. 

The value in the forecasting exercise is often the journey, which helps to identify key sensitivities and points to alternative scenarios that deserve attention.  As well, the skill in using models sometimes is knowing when to turn them off.

Finally, the best feedback that I can receive is that I’ve helped someone understand things better.  If we can bolster your ability to diagnose the environment and work through it successfully, we’ll have accomplished an important aim. 

In this age of multiple communication channels, there are many ways for you to ask us questions, and we’ll look forward to responding.  And if you have insights that you think we should be aware of, please send them along.

We begin our association during some very interesting times.  I’m really anxious to begin thinking through the issues of the day with you.  And I hope we’ll have a long and productive partnership.

Best Regards, CRT

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.