By: John J. Kohut

What’s This Election About?

On the day after his crushing defeat of Newt Gingrich in this week’s Florida GOP primary, pundits waited to see if the victorious Mitt Romney, who had spent five days mocking the former House Speaker (and gloating over poll numbers that reflected the impact of almost $16 million in Super PAC spending), would now slide back into his Mr. Nice Guy persona. Unfortunately for Romney, his victory lap was overshadowed by yet another verbal misstep as he clumsily confided that his campaign would not be focused on the poor in America but rather the middle class. The press pounced, Democrats chortled and the right wing of the GOP admonished the former Massachusetts governor for breaking the electorate into three classes.

Putting aside the whole question of why a well-funded former governor who’s been running for president for more than five years still can’t get into the rhythm of effectively speaking on the campaign trail, this incident does highlight the way Romney speaks about “the economy.” And while everyone agrees that this presidential election (like all the ones that came before it) will be about “the economy,” a closer look at the language being used by Romney and by President Obama suggests the real choice that the electorate will have to make just ten months from now.

While the GOP frontrunner does use real world settings (foreclosed homes and abandoned factories) to frame his economic arguments, he is most comfortable speaking about the economic challenges facing this country in aggregate terms. Thus, “turning things around” is a question of “improving the markets and the economy.” His economic plan is buttressed on cutting corporate taxes, reducing the burden of federal regulations on corporations, and lowering taxes on investment gains. (Repeal of both “ObamaCare” and the Dodd-Frank law is an addendum.)

The assumption inherent in his proposal is that if you set the stage to encourage the markets, the markets will improve and so will the economy as a whole and this will fix all its adherent problems like unemployment and a crippled housing market. He’s not selling a jobs plan or a housing fix (he wants it to hit bottom on its own). Fix the markets and let the nature of capitalism take its course. In short, “improving the markets and the economy” is the language of Wall Street and given his background at Bain Capital, it’s no wonder that Romney speaks that language well.

President Obama does not talk about “markets.” Instead, he spent most of last year focused solely on the issue of “jobs” and how to create them. In his November speech invoking Teddy Roosevelt, he pivoted to tie all the problems of this economy (unemployment, housing, tax burdens) to the broader question of income inequality.

Now his State of the Union address, which he has taken on the road in a series of swing states speeches, pushes the concept of “An Economy Built to Last.” He still talks about the need for jobs (and how to entice outsourced overseas jobs to come home to communities hard hit by unemployment) but also invokes struggling homeowners (who need mortgage refinancing) and easily shifts into crowd pleasing exhortations that demand “fairness” and “playing by the rules” and the need for everyone to “pay their fair share (the Buffet Rule).”

The president is no Bill Clinton on the stump but he is well experienced in playing to the personal level of his audience and looks for any opening to put his arguments in terms of the basic concerns of his audience, which has been largely left beaten up and dazed by the last three years of this economy. In contrast, Romney remains the more aloof statistician whose reason for being is rooted in “my years of experience in the private sector.”

While he’s proud of his businesslike coolness, it’s the fly in the ointment to the conservative wing of his party. They are fueled by rage – against the president, against Democrats, against Wall Street bailouts, against the media, against “elites” in general – and they want Mitt to get angry. Obama may want this race to be about jobs and fairness and Mitt may want to right the markets but for the Sarah Palins, Mark Levins, and Rush Limbaughs of the world, the election is supposed to be about deficits, spending, big government, and “taking our country back.”

The Occupy Wall Street crowd wants this race to be about only one thing – putting capitalism on trial. And multi-millionaire Mitt Romney and his Super PACS will serve as an easy foil.

The Obama campaign apparatus wants this election to be about Mitt Romney.

Democrats in Congress want this contest to be about Republicans who “put millionaires over Medicare” funding.

Republicans in Congress want this race to be about waiting out the president until they can take control of the Senate and maybe the White House too.

The Washington establishment knows that this election is only about the long list of critical fiscal decisions that must be made in 2013.

What’s this election about? It depends on who you ask. And that’s the problem.

Washington Words:

“Gingrich is Goldwater. In the general election, Gingrich not only takes down his ship, he takes down the whole flotilla.”

Democratic pollster Peter Hart

“Ever since the Republicans lost the presidency in 2008, the party has been much more dominated by the grass roots than by the grass tops. The Republican Party has flattened out, rather than just reacting to Washington and Wall Street.”

Ken Duberstein, former Reagan White House Chief of Staff

“The Romney people seem to feel that every time they win a state, it should be the end of the campaign.”

Former Rep. Bob Walker (R., Pennsylvania), chair of the Gingrich campaign

“[Super Tuesday] is tilted toward Dixie, and Super Tuesday plus another check from [Gingrich Super PAC funder Sheldon] Adelson preclude the establishment from forcing Newt out.”

GOP media consultant Alex Castellanos

“One of the keys to Newt is that he’s always seen politics as war.”

John Pitney Jr., political scientist, Claremont McKenna College

Registration is now closed.
If you would like to added to our waiting list please contact
Elizabeth Bontrager at ebontrager@mminst.org

February 9th – 10th, 2012
InterContinental Miami | Miami, FL

Summit Co-Chairs

Marilee Ferone Executive Director, UBS Financial Services, Inc.

Stuart Parker President Prudential Investments

by

John J. Kohut

The Damage is Done

Whether or not Mitt Romney wins next week’s Florida GOP primary, his candidacy’s air of inevitability has vanished and his original campaign narrative has been permanently rewritten. The patrician businessman/politician who came onto the national scene in the 2008 race suddenly appears out of place and time just four years later. It’s as if [George H. W.] “Poppy” Bush decided to enter the fray again twenty years after losing to Bill Clinton. With his reserved manner and inability to deliver simple off-the-cuff sound bites, Romney has morphed into the stranger in a strange land come down from the big house on the hill to rub elbows with the ordinary folk.

Putting aside the candidate’s limitations and some campaign missteps (i.e. delaying the tax return release), the Romney campaign is largely a victim of circumstance. This is the first presidential election since the birth of the GOP’s rowdy, unpredictable step-child: the Tea Party.

The great big disconnect of campaign 2012 is the bewilderment of the GOP establishment in realizing that this faction of the party cannot be co-opted into the service of the greater good – electing a moderate front-runner who can appeal to independent swing voters in the fall. Much as House Speaker John Boehner cannot corral their votes when he needs them, neither can campaign surrogates lead them to drink the Romney water.

Newt Gingrich’s rise is solely due to his ability to tap into Tea Party-fueled angst and rev it up to full throttle. The thousands of Tea Party-aligned voters who turned out to hear him speak in Florida this week care little if Karl Rove and other GOP establishment mouthpieces are wringing their hands about the general election. Newt speaks the language of the crowd: anti-establishment anger. The opening lines of his South Carolina victory speech hit “the elites in Washington and New York” and “the powers that be.” His audience cares not about his past personal excesses because he is the only person on the primary stage speaking to them with the bravado and bombast they crave. “Wait until he debates Obama!”

This is not your father’s Republican Party. Today’s GOP is roughly forty percent “establishment,” forty percent Tea Party, and twenty percent a new generation of Libertarian-leaning college kids and internet acolytes under the tutelage of field marshal Ron Paul, who at a moment’s notice could bolt from the pack, taking his troops with him.

The Tea Party’s Washington influence goes well beyond their small numbers in the House because they carry with them the constant threat that they could muster their forces to “primary” any moderate Republicans who stand in their way. Just watch what they are doing to six-term GOP Sen. Orrin Hatch in Utah.

Given these circumstances, a Romney candidacy seems to forever be forcing a square peg into a round hole.

If Romney loses Florida:

If Newt Gingrich wins the Florida primary, it will at once fuel further Tea Party support for his candidacy in the coming caucuses in February, while weakening perceptions that Romney still “has what it takes.”

The GOP establishment will go into full melt-down mode. The party wise men will amplify their newly tested line that in giving the nomination to Gingrich, they could lose control of the House in November (most probably true).

The intra-party chatter that Republican voters would “love to see someone else enter the race” would blow up big time despite the fact that the constraints of the primary calendar and its filing deadlines make this increasingly unlikely.

But the most important aspect of a Gingrich win in Florida is that the former House Speaker will undoubtedly continue bashing the one-time GOP frontrunner – the GOP’s nightmare scenario.

Meanwhile the next barrier to be crossed would be the Nevada caucuses on February 4th. Romney is so strong there that if he were to lose or just barely win (the biggest of long-shots), his continuing candidacy would really be in question.

If Romney wins Florida:

A Romney victory would take the air out of the Gingrich balloon. Newt can still play through February (which will be a pretty quiet month with sparse contests) but the March 6th “Super Tuesday” schedule, with its ten state primaries, would most probably put an end to things. But, again, win or lose, how much further damage can Gingrich inflict over the next five weeks? After all, given what’s been said, is there anyone anywhere who foresees a defeated Gingrich graciously leaving the stage and giving Romney his endorsement?

The bigger question is what does Romney do post-Florida? Can a retooled Mitt Romney 2.0 appear with a fresh reason to entice Republican voters? Will his rhetoric have to continue to tack rightward to curry favor with the extremes of his party or will Mitt decide to begin his long walk back to the middle in preparation for the general election? A presidential candidacy that fails to steer its own course through the primary season will find it near impossible to suddenly find its true bearings come Labor Day.

Finally, the growing fear among GOP insiders is that their once entertaining prime-time reality show that is the GOP primary debates has, like Fonzi, jumped the shark and that there’s no going back. Jeb Bush, please call your office!

Washington Words:

“The establishment is right to be worried about a Gingrich nomination. We are going to demand real change in Washington.”

Former House Speaker Newt Gingrich

“The inevitability of Romney has now been wiped away. He didn’t live up to all the hype.”

Former Pennsylvania Sen. Rick Santorum

“The more delegates I have, the more leverage I have. We’ll go after the delegates, and we have staying power.”

Texas Rep. Ron Paul

“Mitt’s problem isn’t Newt. It’s Mitt!”

Chris Matthews, host of MSNBC’s “Hardball”

“Banks aren’t bad people.”

Former Massachusetts Gov. Mitt Romney

—ADDITIONS ENHANCE BREADTH OF SPONSOR REPRESENTATION–

Washington, D.C., JANUARY 3, 2012 – MMI, the national organization for the managed investment solutions and wealth management industry, today announced two new members to its Board of Governors. Jeffrey Wilk, VP and Head of Broker Dealer Products, MetLife Broker-Dealer Group and William Golden, Head of U.S. Product, Legg Mason join the board of 35 executives from member firms whose assets represent more than 90% of the advisory solutions’ $2.1T.

Mr. Wilk’s seat was added in recognition of the growing role that insurance providers play in the advisory solutions industry, and MMI’s commitment to a heterogeneous board. Mr. Wilk leads MetLife Broker-Dealer Group’s Product Management area. Mr. Golden replaces Matthew Schiffman, who was a longstanding MMI governor. William (Bill) Golden is a Managing Director and Head of U.S. Product for Legg Mason Global Distribution.

To address the now clearly identified wants of investors, MMI member firms are utilizing an expanding set of investment solutions. One of the areas experiencing the greatest growth has been Unified Managed Accounts (UMA) whose assets doubled from 2009-2010. UMAs can include almost any investment vehicle. Both Mr. Wilk and Mr. Golden bring extensive industry experience and broad product knowledge. Mr. Golden is responsible for the management and development of Legg Mason’s US product set across all vehicles, including open-end mutual funds, SMAs, closed-end funds, alternative fund structures, collective trusts, variable insurance trusts, and the Scholar’s Choice 529 College Savings plan. Mr. Wilk has responsibility for managing the full suite of investment, advisory and variable products for the MetLife Broker-Dealer Group, and has been a stalwart supporter of MMI’s educational workshops.

“These two new governors bring deep experience and differing perspective to our established board,” said Chairman Seuffert. “Their unique viewpoints will expand the collective wisdom of the board and increase its expertise as we address the complex issues facing the evolving advisory solutions industry.”

The Money Management Institute (MMI) Since 1997 MMI has been the leading voice for the global financial services organizations that provide advice and professionally-managed solutions to individual and institutional investors. Through industry advocacy, educational initiatives, regulatory affairs, data reporting and professional networking, MMI supports and advances the growth of managed investments. Our members’ advice-driven investment solutions are responsive to an evolving worldwide financial landscape and their organizations are committed to the highest standards of fiduciary responsibility and ethical conduct. For more information, visit www.mminst.org.

Washington, D.C., December 13, 2011 – Money Management Institute (MMI) announced that it has selected Coates Analytics, a division of Albridge Solutions, Inc., a BNY Mellon company, to be the supplier of a new industry standard sales and reporting solution. MMI and Coates Analytics have entered into an exclusive five-year marketing agreement that will allow Coates Analytics to be the provider of choice for both sponsors and money management companies that are members of MMI.

“This represents a major milestone for our membership. We believe carefully crafted analytics can revolutionize the way managed money products and programs are developed and distributed in the marketplace. We are very pleased to have selected Coates Analytics as the firm to deliver these analytical solutions to our membership,” stated Christopher L. Davis, president of MMI. “The selection process was a rigorous one in which a number of firms responded to an RFP we sent to potential participants earlier in the year. Coates Analytics is the firm that our Board of Governors believes best addresses our members’ interest in accurate sales information,” added Mr. Davis.

The new initiative will grow the number of contributing MMI sponsor firms (broker-dealers) to broaden the breadth of business intelligence data that can be utilized by both asset managers and broker/dealers to increase the sales and distribution of fee-based products, as well as mutual funds and ETFs. The breadth of research and reporting that will be available to the MMI membership is expected to dramatically increase with the participation of more firms.

This initiative represents an enhanced and broadened role for MMI and Coates Analytics in the areas of sales and distribution intelligence. “We are extremely proud that Coates Analytics was selected as the provider of choice for this important initiative by MMI. We consider it a privilege to work with senior executives throughout this industry to enhance the use of analytics to drive successful business practices,” added Dennis Kelleher, Head of Business Solutions for Coates Analytics.

MMI and Coates Analytics will be working closely together over the next several months to consult with MMI member firms. “It’s an exciting time for our members and we will develop a terrific partnership to provide solid benefits to our industry for years to come,” added Mr. Davis.

About MMI

Since 1997 MMI has been the leading voice for the global financial services organizations that provide advice and professionally-managed advisory solutions to individual and institutional investors. Through industry advocacy, educational initiatives, regulatory affairs, data reporting and professional networking, MMI supports and advances the growth of advisory solutions. MMI members’ advice-driven investment solutions serve an evolving worldwide financial landscape and their organizations are committed to the highest standards of fiduciary responsibility and ethical conduct. For more information, visit www.mminst.org.

About Coates Analytics

Coates Analytics, a division of Albridge Solutions, Inc., a BNY Mellon company is a business intelligence and analytics provider specializing in distribution, key accounts management, compliance, risk management and workflow solutions—exclusively for financial services firms. We are a market leader in three major technology solutions: Distribution Management System, Intelligent Dashboard and Subadvisor Certification Solution. Our Distribution Management System provides critical sales reporting and competitive market analytics to help asset managers identify their best distribution opportunities and analyze key drivers of profitability. The Coates Intelligent Dashboard offers exception‐based processing and critical metrics in an intuitive display to help firms mitigate risk and evaluate performance. Our Subadvisor Certification Solution is a compliance workflow solution that streamlines the oversight of subadvisor relationships by standardizing the process of collecting, reporting and evaluating compliance data. For additional information on how Coates Analytics can help your firm succeed, visit www.coatesanalytics.com.

Market Volatility Continues

In the 3Q 2011 advisory solutions assets contracted by $177b. Assets in advisory solutions declined from  $2.3 trillion to $2.1 trillion. The reduction was largely driven by poor equity market performance. The S&P 500 and the Russell 3000 posted negative numbers for the quarter returning –13.9% and –15.3%. For the S&P 500, it was the worst quarter since 2008. Advisory Solutions were slightly more resilient declining only 7.5% as compared to broader indices.

Note: There is a file embedded within this post, please visit this post to download the file.

 

The market has become extraordinarily complex. Investment options run from stocks and bond investments to commodities, real estate funds, private equity, long/short funds, currency hedges, financial futures, and structured products, not to mention an enormous array of alternative investment possibilities. Further, these options are available in a tremendous range of investment vehicles, including exchange-traded funds (ETFs), mutual funds, managed accounts, annuities, 529 plans, and hedge funds. Simply determining which of the investment vehicles and strategies might be the most appropriate and cost effective for an investor’s particular situation is in itself a complicated task.

Read the full paper: Note: There is a file embedded within this post, please visit this post to download the file.