“I think that goes with the Fed over time,” said Clark. “They’re just kicking the can down the road and buying time to hopefully get the fiscal and legislative and regulatory bodies to do something that works.”

Gold

As Randy Hallier observed, a wave of advertising has been putting a good deal of pressure on clients to buy gold and other commodities. He asked his colleagues how they dealt with that.

“It’s our job to dictate to the clients what we think is the right move for them,” said Molly Kerr, “rather than the media dictating what we are going to do.”
She said of the media pressure to buy
gold, “It’s a play on fear. It’s a play on the dollar. It’s a play on potential inflation.”

Still, there is no denying the pressure to buy gold. “When it goes up,” said Steve Soden, “and they don’t own it, it drives a lot of people nuts.”

“Someone told me there are vending machines where you can buy gold,” said Chris Costello. “Is this not an indicator that markets have topped? This reeks of the tulip mania of the 1600s here right now.”

“If it’s not a bubble,” agreed Randy Hallier, “it’s bubblish.” China has added to the pressure, said Mike Brown: “They’re buying up the world’s supply of gold as we speak.”

Greg Spears sees a different dynamic with gold in that doomsayers view it as a safety net. “If the world falls apart,” he said, “and we have a major depression, they think, ‘well at least I’ve got gold to support me, and I’ve got something that has value and always has historically’.” The combination of appreciation exuberance and doomsday anxiety keeps the pressure on.

Said Mike Brown wryly, “We tell the doomsayers to buy lead.”

Pete Martinez asks his clients how they feel about trading currencies. They typically decline because there’s too much risk. “Gold really is a currency more than anything else,” said Martinez. “There is an exuberance right now because of what’s happened in the last five or six years, but if you look at the 20-year averages on gold, it’s not that great.”

“It doesn’t generate any income, either,” said Brian Perott. He tells his clients that if there is the hedge in the portfolio, it is diversification. He is not keen on seeing gold continue to go up because that means that the majority of other assets are probably down.

China

Mike Brown referred to the People’s Republic as “the big elephant in the room.” He asked his colleagues whether their clients pressed them for information on China’s intentions, and if so, what they told the clients.

Brian Perott noted a downturn in client interest because Chinese equity markets have been performing relatively poorly. For Aaron Clark, the questions he has fielded have been more philosophical—regarding protectionism, jobs, currency depreciation, and the like.

“Some of the questions I’ve had about China,” said Pete Martinez, “are whether they’re going to call our bet? Are they going to cash in their bonds?” Martinez believes we are in a symbiotic relationship with the Chinese: “They need to produce their trinkets and we need to by their trinkets.”

Chris Costello does not believe China will use its reserves to bail out Europe, as has been suggested. The question that Chinese citizens might ask is: “How could they help people in Europe that drink wine and eat steak for dinner when a third of their population is living on rice?”

UMB remains a little wary of the Chinese experiment. “We’ve never made a direct investment in China,” said Molly Kerr. “We don’t like that idea. We like to play around the perimeter.” UMB, she noted, is “just not comfortable” with that investment.