The Power Of Imagination: A Brief Retrospective & Steve Sjuggerud (Video)

Long long ago in a market galaxy much unlike today, I started my post-MBA career at Mark Twain Bank working for their Chief Lending Officer Bob Butler. Maybe someday I’ll go on about Bob–a truly classic personality and exceptional banker.

On my first day on the job, I was handed two tasks. The first: a bag stuffed with around 500 phone messages (remember those old pink forms) stretching back about a year with the single instruction: “Call each of these people back and see what they want.” The second was a folder full of documents concerning a barge partnership.

As to the latter, a group had purchased a number of barges to lease/rent to various companies transporting grain and other products up and down the Mississippi River. At the time, contracts for these barges traded on the Merchants Exchange in Saint Louis. Like its larger relatives in Chicago, this was an open outcry market, operated periodically, where one could buy the use of an “open hopper” barge at a fixed price on say September 15 from Winona, Minnesota to Alton, Missouri, or other destinations. With the Prime Lending Rate standing around 20% in the midst of then-Fed Chairman Paul Volker’s monetary policy and, subsequently, with business activity at a standstill, these barges were mostly tied up watching the mighty Mississippi roll on by. Needless to say, prices were low and revenue was scarce.

They Never Saw It Coming
Inside the offering documents were tables showing how well the barges would do under a variety of conditions. If prices for barge rentals rose, the partnership would make a killing. If prices fell, it would still come out fine since, after all, there was a huge depreciation deduction as a benefit. Unfortunately, neither of these scenarios contemplated anything as drastic as what actually happened. They were off by factors involving whole number multiples. In other words, they completely missed the mark.

This was my real introduction to scenarios and the possible outcomes that might be imagined. It’s something I have seen over and over again during the past 34 years. Traders, financial analysts, commentators, and business owners sometimes build elaborate spreadsheets that show what could happen. Then they realize – oftentimes too late – that reality moves quickly outside the boundaries of their wildest imagination into literally uncharted territory.

Now, It’s Steve Sjuggerud’s Turn
Long-time friend and “True Wealth” creator Dr. Steve Sjuggerud has also done some thinking about imagination. Exiting the Great Recession, many in the market felt that the Federal Reserve would be able to briskly step away from its various versions of Zero Interest Rate Policy and Quantitative Easing. As time wore on, however, it seemed like these policies had gone on longer than any of us could have imagined. Within this calendar year, when most commentators (not our own Chuck Butler) felt it was in the cards for the Fed to raise rates in June, then September, and now December, imaginations and predictions have been proven wrong once again.

Recently, I spoke with Steve about imagination and what might be coming down the road with Fed Policy and its impact on the markets. We also got into a little imagination of our own as we discussed the downtrodden resource and mining markets. Let’s take a look at the video.

(Click here to view video.)
As Obi-Wan Kenobi warned Darth Vader in the first Star Wars movie nearly 40 years ago, “If you strike me down, I shall become more powerful than you can possibly imagine.” Perhaps we all need to expand our imagination a little as we contemplate where rates and the markets will trend today.

Until the next Daily Pfennig® edition…

Frank Trotter
EVP & Chairman
EverBank Global Markets Group