Podcast: Speaking of Quality: Wealth Management Insights with Hank Smith
Season 2 Episode 8 Title: Speaking of Quality … Looking Back at Season 2

Episode Transcript:

Maxine Cuffe 00:06
You’re listening to Speaking of Quality: Wealth Management Insights with Hank Smith, a podcast by the Haverford Trust Company. On Speaking of Quality, Hank chats with authors, influencers and wealth management experts to bring a sense of clarity and calm to the complexity and stress of personal finance. And now, here’s your host, Hank Smith.

Hank Smith 00:26
Hello, and welcome to another episode of Speaking of Quality: Wealth Management Insights. I’m your host Hank Smith, Director and Head of Investment Strategy at The Haverford Trust Company. On this podcast, we explore topics ranging from quality investing, retirement resilience, stock market trends, estate planning, small business ownership, behavioral psychology, and more. Today’s episode marks the conclusion of another insight-driven and story-packed season of Speaking of Quality, chock full of outstanding leaders, mentors, journalists, celebrities, and more. Season Two was one I’ll never forget. Joining me today is the voice you hear at the beginning and end of every episode, our Vice President, Senior Analyst, and Director of Global Strategies, Maxine Cuffe, welcome back, Maxine.

Maxine Cuffe 1:16
Thanks, Hank. Great to be here, I really enjoyed the season, so many interesting moments in these episodes.

Hank Smith 1:24
It’s hard to believe the second season is ending already. It feels only like yesterday sitting down with Joe McLaughlin, Tim Hoyle and John Donaldson to discuss our 2024 outlook in the beginning of January. Two themes from that outlook podcast that one we got right, and one not right, yet. We still have several more quarters to go for that second forecast. But we certainly got right that rates would stay higher for longer. It’s something our Head of Fixed Income John Donaldson has really been talking about for the past 15 months, that wherever the terminal rate is set for the Fed funds rate, it’s going to stay at that level for much longer than the market expects. Once again, at the start of this year, he was correct because expectations in the market were for up to six, possibly even seven cuts and now that has come down to two or three, and in our view, perhaps just one cut and maybe even none this year. Another theme that has yet to play out is the broadening of the market that we saw begin in the fourth quarter 2023, but did not continue through the first quarter of 2024. But it is still our base case forecast that would be very healthy for this market, it would be very good to sustain the bull market, because you just can’t have a handful of stocks drive a 500-stock index indefinitely. So, that is a theme that we continue to think will play out.

Maxine Cuffe 3:17
The big change that happened a couple of weeks back that forced the market to reevaluate the Fed’s actions was really when the inflation numbers came out. Inflation has been coming down pretty dramatically over the last year, but that seems to have stalled out and, if you’re looking just at the quarterly numbers and annualizing, it’s actually started to head back up. Another one of our themes was that there’s just a lot of anomalies happening in our economy right now. We’re certainly seeing that in the inflation numbers where, who would have expected, but our car insurance was suddenly the thing that was driving inflation higher. So, we’ve gone from expecting six, down to four now down to one. There are even people talking about a hike for interest rates at some point this year. But I think we’re still firmly in the camp that we’ll have one cut by the end of the year.

Hank Smith 4:08
Our economic adviser Ed Boehne is pretty adamant that he does not think the Federal Reserve is going to entertain a rate hike, but would rather keep the Fed funds rate at this elevated level longer as opposed to actually a rate hike. But he also emphasizes this Fed as in previous Feds are data dependent. I think since we’re in an election year, Maxine, he continues to point out that the Federal Reserve has consistently been nonpolitical. Although many on the street believe just the opposite, that Fed heads are very political.

Maxine Cuffe 4:54
Yeah, very good point. It’s going to be interesting to see how this year plays out, especially with the election coming in November. So, the second podcast episode was with Sam Hankin, the founder and owner of Wellington Square Bookshop in Exton. He’s also a fellow podcaster, as host of The Avid Reader. I’ve actually listened to a couple of episodes myself. Very interesting. Well worth a listen. Sam talked about how COVID was both a challenge and an opportunity for him and his bookstore. So interesting that our use of technology has really changed since COVID. That ability to use Zoom has really opened up new avenues in his case for authors to reach audiences and drive book sales. But we see that across other industries too, including our own.

Hank Smith 5:41
Yeah, it’s interesting, several of our guests this season, Maxine, have their own podcast. And I would encourage our listeners to tune in to those podcasts because they’re really well done. I would also encourage, as I did during my podcast with Sam, if you are in the Exton area, you should visit the Wellington Square Bookshop, it is one of the most unique bookstores. But don’t go there if you’re expecting to buy one of the more popular books that you get at the airport, these are an eclectic and unique set of books. But I’ve got to admit, I do not share his love of science fiction, which really motivated him at a very young age to become an avid reader. I admit to not liking science fiction, whether it’s in books, or on TV shows or movies.

Maxine Cuffe 6:36
Sam also had some really great advice on success for small business owners, really focusing on people, on your staff and providing great service and then the business will come. It reminded me how we think about service here at Haverford.

Hank Smith 6:51
No question about it. Our founder, George Connell, always felt that the first priority is the people in your organization. You have to take care of the people in your organization, because how can you expect them to take care of clients if you’re not, as a leader, taking care of people. And that comes through in several of the other podcasts. Next comes clients, and next comes philosophy, performance, and then finally profitability. So it’s very interesting, as a 45-year-old company, we have consistently put profitability as fourth in terms of importance. I think the clients know that we put their interest and the interests of our colleagues right at the top.

Maxine Cuffe 7:46
The next episode was leadership and healthcare excellence with Madeline Bell, the CEO of CHOP. Madeline had had such an interesting career moving up the ranks from the ground up, she started off in nursing, and then moving into management. That’s really given her this different perspective and her role, the ability to really connect with patients and staff in a unique way.

Hank Smith 8:08
And yet, she has taken CHOP, in relatively speaking a handful of years, from much more than just being a Center City facility. I just happened to have lunch today with one of the directors of CHOP, and he pointed out that if they didn’t have the King of Prussia facility, they would have to have turned away thousands of patients. That all came through Madeline Bell’s leadership. As it is now in Center City, that facility is anywhere on any given day 95% to 100% filled, and she’s doing so much more in terms of helping the community and helping people with better homes, because better homes that aren’t leaking that don’t have issues have better health outcomes.

Maxine Cuffe 9:06
Yeah, it really came down to that idea of being super focused on the health outcomes and having that big picture, holistic approach was not just about being focused in the hospital, but really about the broader community and not just being focused on getting the best rankings for CHOP, which it has anyway.

Hank Smith 9:23
It’s either been number one or two for decades, and I don’t think that’s going to change anytime soon.

Maxine Cuffe 9:32
Certainly, not under Madeline’s leadership.

Hank Smith 9:34
Absolutely and she, too, has her own podcast: Breaking Through with Madeline Bell.

Maxine Cuffe 9:40
So, the next episode was the past, present and future of financial news with Chuck Jaffe, the veteran financial journalist and the host of the Money Life podcast, so another podcaster. I think Hank, you’ve actually been on his podcast. What was that like?

Hank Smith 9:55
Well, it was a lot of fun. It was very nerve-wracking because it was the first podcast I’d ever been a guest on even though I do plenty of media, both TV, radio and print. Anything new creates its own anxiety. And I remember distinctly where I was, it was the beginning of the pandemic, the summer of 2020. So, we were working remotely. And again, that brings its own level of anxiety, because normally, I go to a studio downtown, VideoLink, I’m not even sure if VideoLink is even there anymore, given the fact that everyone’s doing interviews from their desktop, laptop, what have you, either at home or in their office. But his is an excellent podcast, he’s been doing it for 13 years. I was allowed to go through our investment philosophy, and all our investment strategies, and then pick a handful of stocks that viewers write into him that they would like his guests to make comments on. I’ve been on that podcast now for I guess half a dozen times and look forward to the next time I’m a guest.

Maxine Cuffe 11:21
And Chuck is also a well-known author, he’s written a number of books.

Hank Smith 11:26
He has even though he doesn’t like writing books, perhaps he has the same problem I do, I’m a terribly slow writer. But two that I think are really critical books: Getting Started in Finding a Financial Advisor, and The Right Way to Hire Financial Help. It’s critical in hiring a financial advisor that they have these two characteristics. One, a clearly defined investment philosophy and investment strategies that emanate from that philosophy. And two, sticking to that. Number two’s probably the hardest, because anytime you have a singular investment philosophy, there are going to be periods during a cycle where you’re out of favor. And you can’t just lick your forefinger and stick it up and see where the wind is blowing, and then change the way you’re managing money so that you always have the wind at your back. It does not work that way. It is very important to hire the right person.

Maxine Cuffe 12:43
That’s probably even more relevant today, because of just how much financial news is out there. People are really following their investments day to day much more than ever before in previous generations. And we know that when it comes to investments and money, people are very emotional. That’s where an advisor comes in and really adds value by really helping you stick to your principles and your discipline.

Hank Smith 13:07
You’re right, there’s so much more information out there, and not all of it is good information. As you said, it’s critical to find the philosophy that matches your investment goals, your risk tolerance, and getting the right asset allocation so that you can stay invested through the full cycle. That’s where the critical importance of a good investment advisor comes in.

Maxine Cuffe 13:40
Chuck also had a really funny story about his cat named Millie. I wonder how many of our listeners will remember the Millie Index where he let his cat pick stocks for him, and apparently the stocks were amazing investments. But you know, his reflection was that people liked their portfolio to be relatable, and that their investments are understandable. I think that’s really true today, especially at Haverford.

Hank Smith 14:06
Yeah, it’s very much the hallmark to invest in great companies that are highly recognizable, not distressed companies, not companies that are working through massive amounts of problems, so that when you do encounter a bear market and you look at the stocks you own, you realize I have nothing to worry about in terms of these companies going out of business. I can be patient – all bear markets are followed by bull markets, and bull markets, in terms of time, vastly outweigh bear markets. So, the key is to get invested and stay invested, and that’s one of the keys to investment success.

Maxine Cuffe 14:52
Absolutely. In episode five, you spoke with Lauren Cristella, the CEO of Committee of Seventy, a nonpartisan organization promoting civic literacy and community engagement based right here in Philadelphia, helping voters get informed about the election process starting even in kindergarten, which I thought was very surprising.

Hank Smith 15:13
She was really quite interesting, because I had never heard of Committee of Seventy. I doubt any of our listeners have heard of Committee of Seventy. Ever since I did that podcast, I’ve asked every friend and acquaintance, and no one’s heard of Committee of Seventy. So, she has a challenge in front of her but a tremendous opportunity to get that name out and talk about the critical mission of improving civics. And a big part of that is voting, and being an informed voter. It’s really terrific, based on a change in the law in Pennsylvania a few years ago, that now they are able to go into schools, in lower school, middle school, high school, and even college and teach these critically important civic lessons that really had been abandoned for the last four decades.

Maxine Cuffe 16:13
It seems to be having an impact because she said that the voter turnout in Pennsylvania was now over 70% and had really increased in the last few years. So, 70% in the last presidential election. PA is such as swing state, you know, that could really determine the election if the amount of people that go out. Generally the U.S. ranks below a lot of other major countries on average voter turnout, because there’s this thinking that people feel their vote doesn’t matter the way the system is set up. She talked about the possibility in the future of having a national popular vote. What do you think? Do you think that’s something that could take off?

Hank Smith 16:52
You mean, replacing the electoral college? I don’t think so. But it’s a topic that comes up every four years, it’s always from the side that loses, but I think the electoral vote has stood the test of time and will continue. But one factor that’s increasing voter turnout is it’s easier to vote today than ever before in terms of mail-in ballots. Look, I know there’s a ton of controversy around whether that creates the potential for more fraud, but it certainly makes it a heck of a lot easier than being only able to vote on one day. And then you have your job that could interfere with it, you have weather that could interfere with it. So, I think overall, more people voting is clearly better than fewer people voting.

Maxine Cuffe 17:56
Absolutely, I’m looking forward to meeting Lauren in person at our upcoming Speaker Series for Women. The next episode was success under pressure with Dick Vermeil, Super Bowl champion and an NFL Hall of Famer and co-owner of Vermeil Wines.

Hank Smith 18:13
Yeah, as an avid NFL fan and particularly a Philadelphia Eagles fan and for decades a season ticket holder of the Eagles, that was a special privilege to be able to podcast with him.

Maxine Cuffe 18:31
He had just a fascinating life story, from football coach to NFL to entrepreneur. I loved hearing about his particular style of leadership, his philosophy. There was a quote from him, “Nothing else matters unless people know you care.” I thought that was powerful. He really likes to set the example. Seems that he could be tough on people, but he really took care of his players and that was really the key to his success.

Hank Smith 18:55
Maxine, he ran notoriously the hardest training camp, perhaps in NFL history. I know this for a fact because one of my dear friends was his tight end for eight years, John Spagnola. And John said, if he played for another coach, he might have gotten three or four more years out of his career. Dick beat them up so much during preseason, and then even during the regular season, his practices were very hard, but the loyalty he has with his players is just unbelievable. He talked about being inducted in the NFL Hall of Fame in Canton, Ohio, and having seven players from the high school football team he coached show up. He truly cared about his players both on the field and off the field, what they were doing in their personal life. When people know that you care about them, they will go through a brick wall for you. And they certainly did for Dick Vermeil.

Maxine Cuffe 20:05
I loved his comments that the one thing that you have in your control is your own preparation, really words to live by. That the more prepared you are, the better. It shows that you’re not wasting people’s time. It really shows your character, and again comes back to this idea of caring about people.

Hank Smith 20:22
Somewhat similar, Maxine, our former longtime president, Binney Wietlisbach, would always emphasize, “You are in complete control of your attitude.” And so it’s very similar. You’re in complete control of your preparedness. Those are great words for any student or any young person starting their work career.

Maxine Cuffe 20:57
Dick talked a lot about his wine. I know you ordered some has, has it come yet?

Hank Smith 21:03
Yes, I am now a member of Vermeil Wines. I did get my first case and I can personally attest these are outstanding wines, and worth every penny. Although I’ll admit, these are these are relatively high-end and higher-priced wines, so be prepared for the sticker shock there, but they are very, very good.

Maxine Cuffe 21:27
Good to hear. The last episode was navigating economic terrain with our very own Ed Boehne, senior economic adviser and director and former president and CEO of the Federal Reserve Bank of Philadelphia.

Hank Smith 21:40
Yeah, what a pleasure to podcast with Ed. When he retired from the Philadelphia Federal Reserve Bank, he was the longest serving president of the Philadelphia Reserve Bank, and maybe perhaps any of the reserve banks in the United States, serving nearly 21 years. He retired in 2020 and became our economic adviser. He’s just been invaluable in terms of helping us with a very, very steady hand and using a lot of common sense. He was a graduate from Indiana University and got a doctorate there in economics, and a friend said, “Hey, there’s an opening at the Philadelphia Federal Reserve Bank.” He came to Philadelphia in 1968 and has never left and was a staff economist for many years, and then was promoted to President at the very young age of 40.

Maxine Cuffe 22:51
Well, we certainly appreciate his expertise and his knowledge. He joins us every Monday for our Monday morning meeting and always has some fantastic insights. One of the themes of many of these episodes has been the different styles of leadership – that’s come up quite a lot. What did Ed have to say on the subject of leadership?

Hank Smith 23:12
He said his leadership came from listening. When he was at the Philadelphia Federal Reserve Bank, both as a staff economist and then even as the president, he made it a point to get out and about throughout his district, having lunches with business owners, with consumers with constituents, and just listening. Just listen. And, boy, that’s very, very good advice, because we should all do a little bit more listening and a little less bloviating – that’s coming from someone who bloviates on TV and at various conferences that I speak at. But listening is a really important and critical skill, and Ed’s been doing it for many years.

I also asked him about the different leadership styles from two iconic economists that he served under, Paul Volcker followed by Alan Greenspan, both Chairmen of the Federal Reserve boards. And he said they had very different leadership styles. Paul Volcker was hired really as a turnaround specialist. We had inflation that was just rampant that was embedded into the economy. It required the Federal Reserve Chair to do some really tough things, and very, very quickly. There wasn’t much room for collegiality and for listening. He had a job to do, and that was to break the back of inflation, and he took the Fed funds rate up to 20%. Think about that. We’re complaining right now that it’s at five and a half percent. It was 20%. Very, very difficult but it was required and it took incredible leadership. Ed just thinks he is one of the true saviors, if you will, of the U.S. economy. Alan Greenspan: very different, much more collegial. The challenge with Alan Greenspan is you never knew quite what he was saying, because he spoke in a way that was very opaque. I said, the financial press would spend a page after his press conferences trying to figure out what the heck he actually said. Ed shared a couple of stories that were really quite funny. One was a senator that was on the Banking Committee and the senator said, “Mr. Chairman, thank you for your presentation. I’ve been listening to you for many years on this committee. And I’ve got to tell you, this is the first time I actually understood what you said.” And Greenspan’s reply to that was, “Well, Senator, if that’s the case, I have not done my job today.” Then the other one was on the occasion of a party for the engagement of Alan Greenspan and Andrea Mitchell, Ed approached Andrea and said, “Congratulations, Andrea, may ask how Alan proposed to you?” And she said, “Well, actually twice, I didn’t understand what he was saying the first time.” But since Alan Greenspan, the various Fed Chairmen have been much more easily understood and it’s paid to take them at their word and that includes today’s Federal Reserve Chair, Jerome Powell. He has explicitly said he does not want to repeat the same mistakes in the 70s that allowed inflation to build up and become really embedded in the economy. Hence, I think, we have even more confidence that rates are going to stay higher for longer, until we truly get inflation down closer to 2%.

Maxine Cuffe 27:54
Yeah, just invaluable to hear Ed’s view on these things every week. I’m sure there’s so many more stories that he can tell of all the people that he’s known and worked with over the years. One of the things that you’ve done, Hank, in every episode is to ask the guests about impactful books that they’ve read, do you want to share with our listeners what you’re reading right now?

Hank Smith 28:16
I have not finished it, but the book is titled Same as Ever by Morgan Housel. We actually had Morgan Housel speak to our clients a couple of years ago on the occasion of his first book, The Psychology of Money, which I highly recommend as one of the best stock market books that has nothing to do with the X’s and O’s of investing. But really, what’s equally as important, the psychology of investing. As you alluded to earlier, Maxine, there’s a lot of emotion that goes into investing. Same as Ever is formatted like The Psychology of Money, in that the chapters are kind of independent of each other. You can read them in any order, because it’s really just a series of anecdotes. I’m just maybe a third of the way in, almost halfway in, and it is a very good book. It really talks about some of the things that never change, even though there’s so much change going on in technology and what have you. These anecdotes point out the factors that have never changed previously and won’t change, you know, for the next generations to come. How about you Maxine, what are you reading?

Maxine Cuffe 29:53
I listen to a lot of audiobooks. I know that came up a couple times in the podcast because some people really prefer to have a real book or a Kindle. I have a long commute so I’m always listening to audiobooks. Right now, I’m listening to the Steve Schwarzman autobiography called What it Takes. It was actually recommended to me by Joe McLaughlin. Schwarzman is the founder of Blackstone and a Philly native of course. So many lessons that came out of this book. He comes from a modest background, and he remains very humble despite just enormous success. It’s a really thoughtful reflection on how he got to where he is. Like many of the guests on the podcast, he talks about the importance of culture at Blackstone and how it’s really embedded in their DNA. And he talks a lot about leadership skills. I think this is a great book for any young person who’s starting out in a career. There’s great advice on how to get a job, how to interview, how to make connections, and the importance of really advocating for yourself, which I think young people find hard today.

Hank Smith 30:58
Maxine, thank you so much for joining me for another season finale. This is a season I’ll never forget, and I want to thank all our guests for the incredible stories and personal anecdotes they shared with our audience. Of course, this podcast would not be possible without our listeners. Thank you to each and every one of you for tuning in, sending suggestions, and sharing feedback. Keep sending us your thoughts and ideas, and we’ll try to incorporate them into upcoming episodes. We already have an exciting lineup of guests for season three, which we’ll be kicking off this summer. In the meantime, please send suggestions or questions for me or the Haverford Trust team to marketing@haverfordquality.com. And don’t forget to subscribe, rate, review and share this podcast. Until next time, I’m Hank Smith. Stay bullish.

Maxine Cuffe 31:52
Thanks for listening to this episode of Speaking of Quality: Wealth Management Insights with Hank Smith. To hear future episodes of Speaking of Quality, please subscribe on Apple Podcasts, Spotify, Google podcasts, or wherever you listen to podcasts. To learn more about The Haverford Trust Company, please visit www.haverfordquality.com. This podcast is provided as general commentary and market overview, and should not be relied upon as research, a forecast or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt an investment strategy. Any opinions expressed are as of the date this podcast was recorded and may change at any time, and are the opinions of that commentator, not Haverford’s. Any opinion or information provided are believed by Haverford to be reliable at the time of this podcast recording but are not necessarily all inclusive or guaranteed for accuracy. Before making any financial decisions, please consult with an investment professional.