Mississippians have weathered storms before

By Nancy L. Anderson, Ph.D., CFA

Published in the Mississippi Business Journal, May 9, 2010

A couple of weeks ago, I headed to the Coast for a book signing. I was scheduled to be at Bay Books in Bay St. Louis on Saturday morning. This is one of my favorite places in Mississippi, so the trip was no hardship. In addition, it gave me a reason to visit my parents in Gulfport.

I drove down Friday afternoon and headed straight to WLOX-TV. This local station is just a few blocks from my parents house, so it felt like old home week. I appeared on their 4 p.m community show. The ante room was full of happy, joking people — a magician, his sidekicks, a musician and me. I followed the magician. Never follow the magician.

It reminded me of the reason I love this part of Mississippi. The people here are fun and happy and resilient. They are more interested in living than in making a living. Nobody preened for the cameras. They were just all having a good time — no pretense here.

The next morning I took the long drive down the Beach Highway to Bay St. Louis. I’ve traveled this road several times since Hurricane Katrina, but this was the first time I felt hopeful. While the storm debris has been gone for a while, signs of activity have been scarce. On this morning, I noticed new buildings and new signs of life. As I passed Pass Christian, I saw numerous shrimp boats just off shore.

I crossed the new Back Bay bridge and marveled at its structure. People were using the pedestrian lane for walking, running and cycling. Off to my right were sailboats on a morning regatta. As I turned into Old Town, I saw new residences built in the old cottage style. Downtown was bustling on this glorious morning. Citizens were planting in the community garden. Children were biking to playgrounds and the big, town oak tree. There was a local flea market whose proceeds were going to the victims in Haiti.

As I met the proprietor of Bay Books, Kay Gough, I commented on what I had seen. With tears in her eyes, she said, “Yes, it’s been hard. We reopened  a year after Katrina.” I saw a resilience beyond measure. After spending the morning in her store talking to new Habitat owners about managing their money, I decided to spread some of my money around this wonderful, quaint town.

I spent the afternoon on “The Bay.” I had lunch on the porch of an old house now serving as a cafe. I wandered through the historic cemetery, noting the abundance of French names and New Orleans-style crypts. One storeowner proudly showed off the poster for the upcoming harbor. It was beautiful, and the best part was that they already had all the money for it.

Last week, I called my dad for the latest oil report. No, the oil hadn’t come ashore yet, but they were resigned to its arrival. Another blow for my beloved Coast? I thought about those shrimpers just now starting their season. And I thought about the new tourist attractions along the highway. And I thought about those wonderful, welcoming folks on “The Bay.” How would they cope with this new disaster?

Then I remembered the resilience of these people. The Coast has been particularly hard-hit by the recession. After all, it’s mostly about the tourists. When people don’t have money for groceries, they certainly don’t have money for fun and vacations. I wondered if this event could have a silver lining.

Don’t get me wrong. I’m in mourning over the effects on the beaches and the wildlife. I’m concerned about the long-term ramifications for fishing in the Gulf. And I wonder about the wisdom of drilling in pristine oceans, all the while driving around by myself in my oil-dependent car. These bigger issues will have to be addressed, but for the people on the Coast, fussing now is a bit like crying over spilt milk.

It’s coming, and somebody has to do something. While volunteers are lining up to clean beaches and assist in any way possible, BP is hiring like crazy. They’re contracting with local fishermen for the use of their boats and crews. They’re hiring people to participate in the clean-up on land. Laid-off casino workers are lining up for the chance to work again.

In the short run, this could offer a boost to the region. The same thing happened after Katrina. While I don’t relish the thought of dead turtles and black beaches, I know the resilience of this people. Volunteers will jump at the chance to save their shores. Unemployed workers will take this lifeline and know they are helping their community, as well as their families.

The effects of this oil spill will be with us for years to come, but the people of the Coast understand about long-term commitments. They’ve weathered many other storms and are still standing. But they’re not just standing. They’re laughing and living and hoping for better days. They know when a disaster looms offshore, there’s no use wringing your hands. You just need to go ahead and start planning for the clean-up… because it’s coming.

Nancy Lottridge Anderson, Ph.D., CFA, is president of New Perspectives Inc. in Ridgeland, (601) 991-3158.  She is also an assistant professor of finance at Mississippi College. Her e-mail address is nanderson@newper.com, and her web site is www.newper.com.

Globalization has come to Clinton

By Nancy Anderson, CFA

Published in the Mississippi Business Journal, March 2010

Globalization has come to Clinton , Mississippi . Nowhere is that more evident than on the campus of Mississippi College. The influx of foreign students into small town Clinton has been noticeable. It has transformed this small, Southern town into a cosmopolitan area. For our traditional students, it’s been a lesson in the changing world.

The American university system is still viewed with awe by the rest of the world. Students of every color, religion, and ethnicity flock to our schools for an education. As countries like China and India experience growth and improvements in their standards of living, more and more families are able to afford to send their children to us. College campuses across Mississippi are experiencing the same phenomenon.

The goal for some students is to develop a skill that will allow them to stay in the land of plenty. For some, the goal is to improve their English skills, because, even in their native countries, this is the key to success. And for others, the goal is to learn about an economic system that holds the promise of opportunity.

As a professor at Mississippi College, my challenge is to broaden our America-centric method of teaching finance to a classroom representing 5 or 6 different countries. How do I explain mortgage-backed securities to students from Nepal who have no concept of a mortgage? How do I explain the influence of our political system on monetary and fiscal policy to Chinese students who don’t understand why government directives aren’t immediately issued and followed lockstep? More importantly, how do I explain to our American students that the world has shifted beneath their feet?

The financial crisis of 2008 was an event that highlighted the globalization of our financial markets. In our classrooms, we spent a lot of time talking about the seeds of the crisis and the effects on financial markets, and we also talked about the global effects.

The Chinese students told of factories closing. The Indian students spoke of call centers shuttering. Students from countries with little to no developed financial systems spoke of declines in foreign aid. Regardless of their nationality, no one was unscathed by this event.

Then, there was the discussion about what the government should or could do. Foreign students expected a response from government, while my American students decried such actions. The Chinese students couldn’t understand why the Americans wanted tax breaks. After all, the savings rate among Chinese is around 25%. The Indian students were totally baffled by our legislative process. Doesn’t the ruling party just tell everyone else what to do? My student from a former Soviet country (don’t ask me to spell it) railed against finance as a non-productive industry—farmers and manufacturers, that’s where value lies! And my students from Nepal just smiled politely but had puzzled expressions on their faces.

In my lifetime, I’ve witnessed many changes, but the pace of the change appears to be quickening. The most recent crisis reminded me of the smallness of our world and of the connectedness of each and every human being. As the dust settles, I can see that America still leads the way, but things are changing.

Before I draw my last breath, our lead may be shared by China and India. And there may be other countries poised to break out of the economic pack. Developing countries have studied our economy and our markets. They have learned from the good and bad. They have adapted our model to fit their cultures and their goals. And they are charging ahead at full speed.

At this point, my greatest concern is for our American students. As I try to get them to listen to those new voices on our campus, do they understand that this is not just another foreign student? This is their future competition!

The playing field is leveling. It’s one of the results of education. I hope our American students take advantage of the education being offered by our foreign guests. Learn about them. Learn from them. Train your ears to a foreign tongue. If you don’t, you will lose.

This has been a chance for me to learn, as well. As I wrap my tongue around foreign names and strain to listen to new voices, I’m learning that we are more alike than dissimilar. All college students, regardless of nationality, like to have fun. They don’t always show up in class, and they don’t always do their work, and love is always in the air on a college campus. The difference with many of our foreign students is a hunger for something better. Our American students already have everything they could want.

Having faced the most difficult financial crisis of modern times, I found myself disheartened by events and the state of our political system, but I found optimism among these new faces. One student told me, “You don’t understand. There is no German dream or British dream or Australian dream. For us, there is, still, an American dream.”

For all the difficulties of the last few years, I know that Americans are living the dream that people across the globe envision.

Recently, I attended an International Festival on campus. The highlight of the evening was a multicultural fashion show. As I watched my students take to the runway in the same auditorium where I attended chapel years ago, I could hardly believe my eyes. In Clinton, Mississippi, it really IS a small world.

Nancy Lottridge Anderson, Ph.D., CFA, is President of New Perspectives, Inc., in Ridgeland, 601-991-3158.  She is also an Assistant Professor of Finance at Mississippi College . Her e-mail address is nanderson@newper.com, and her website is www.newper.com.

State skips big declines

By Nancy Anderson, CFA

Published in the Clarion Ledger, November 22, 2009

We don't have a lot to crow about in Mississippi. Don't get me wrong. I love my home state, but I'm realistic about our problems and the pace of progress here.

We have the lowest median household income in the country and the highest infant mortality rate. Sixty-six percent of our eighth graders receive free or reduced lunch, and we only graduate 61% of our high school students. Every list published puts us at 49 or 50 in the desirable categories and at the top in the negative fields. Thank goodness for Arkansas!

But with the country experiencing the biggest meltdown in real estate to date and the deepest recession since 1929, being on the bottom is not such a bad place to be. In fact, we actually DO have some things to crow about.

While California, Florida, and Arizona were experiencing triple digit gains in property value, here in Mississippi, we just plodded along. Typically, real estate values increase 4-5% per year. For most of the state, we kept the same pace.

The Coast may be the exception, as values skyrocketed after Hurricane Katrina, but the jump in values was related more to demand for structurally sound and flood-zone free housing after the storm than to speculative activity.  Many values there have since come back to earth. Meanwhile, the rest of the state didn't see huge increases which means that we're not experiencing the kind of declines seen throughout the country.

That may help explain our below-average foreclosure rate. Stable values mean fewer upside down mortgages. Stable values also mean fewer speculators. We didn't experience the great "pop" of the real estate bubble, because our market was more like a slow-growing blob than a quickly expanding bubble.  Of course, if you talk to local real estate agents, they'll tell you business is tough. Houses are sitting on the market longer, and many sellers have given up in this environment.

Nationally, the foreclosure rate is a little more than 1/4%, as measured by actual foreclosures to number of households. While that doesn't sound like much, it can wreak havoc when bad mortgages get pooled with the good ones. Delinquency rates are hovering in the 6% range, so the threat of foreclosure is on the horizon for many homeowners. In Mississippi, our foreclosure rate is about half the national average. In fact, we rank 43rd on the list-- quite an accomplishment!

Foreclosures and unemployment go hand in hand. Our national unemployment rate now stands at 10.2%. That's the highest it's been since 1983. Michigan boasts of the highest rate at 15.2%. For states dependent on manufacturing, this recession has been a double whammy. High paying factory jobs were already heading for other shores, but the difficult economy has made things much worse. How do you recoup when a town loses 10,000 jobs with one slam of the door?

Mississippi is also facing a difficult jobs market. Ask any college graduate! Our unemployment rate is 9.2%, but that's below average. It's only been in the last couple months that I've heard of layoffs, and most have been scattered throughout industries and individual businesses. We haven't seen wholesale closings of big facilities such as those in Michigan and Ohio.

Of course, if you rank among the unemployed, it doesn't matter what the number is. You're still hurting. Prospects for finding new employment are dim. For those of us still working, it's also a worrisome time. In some cases, employers are keeping positions open but are cutting hours. Others are instituting forced unpaid leave time to cut labor costs. Our unemployment numbers look decent, but we may be living on less.

Also, we have seen a hesitance to hire or start new projects. Tupelo sits with an empty automotive plant, just waiting for Toyota to start their engines. I'm told they still plan to use the massive facility, but they won't make a move until the economy improves. Commercial development is at a standstill for the same reason.  Stimulus money is helping some businesses with new, shovel-ready projects, but this money will dry up by 2010.

About two-thirds of our economy depends on consumer spending for things like groceries, fuel, clothing, and entertainment. Confidence is the fuel for our economy. When we are confident about the future, we buy new houses, take vacations, and spend like drunken sailors. Right now, we're not confident about anything. In fact, a cloud of pessimism seems to hang over every household.

Consumers won't open their wallets until they know their jobs are secure. Businesses won't hire until they know consumers are spending. Right now, business and the consumer seem to be at a stand-off. The engine is not at a dead stop, but it's on slow idle.

Even in Mississippi, the distribution of unemployment is uneven. The Mississippi Gulf Coast is one of the hardest hit areas of the state. Its economy depends on tourism, and that's one of the first things to get cut in the family budget. Service workers tend to be less skilled and easier to lay off and rehire at a moment's notice. Combine this with a boom and bust real estate market post-Katrina, and you can understand why the coastal counties are really feeling the pinch of this recession.

Here in Central Mississippi, we are somewhat insulated. While the Governor has been cutting our state budget, most government employees are secure... for now. State government offices and federal government offices located in the Jackson area help to shield us from the downturn. In addition, we are the home of many top-notch medical facilities. Healthcare reform aside, these businesses tend to fare better during a recession. Lastly, we have several colleges in the area. When the jobs market gets tight, the classrooms get full. Everyone is trying to beef up their education and resumes.

Our Governor is also taking steps to keep our state budget under control. While public universities are screaming about cuts, they are not facing the staff cuts like those in California. We are not in danger of turning out the lights at the Capitol, either. For the most part, we won't notice a big change in government service. State agencies are scrimping, but they're still in business. Of course, if things continue to deteriorate, the shrinking government budget may add to our employment rate.

For a state struggling to get off the bottom, cutting education may seem like cutting off your nose to spite your face. I contend we have no choice in this current economy. Education represents 60% of our budget, so the only way to trim expenses is to cut across the board. My hope is that some cuts will be restored if revenue projections turn out better than expected.

Our economy is still in the ditch, and we don't expect a quick turnaround. This was no regular, run-of-the-mill recession, and it will take time to find our new normal, but it's a good time to be in Mississippi. In fact, I'm doing a little crowing! Our foreclosure rate is half the national average. Our unemployment numbers are below average. Our state government is not in danger of bankruptcy. This time, Mississippi is on the right side of the numbers!

New Perspectives, Inc.

A fee-only financial advisor.

1.00% of assets or $150 per hour. 

Nancy Lottridge Anderson, Ph. D., CFA
601-991-3158