Tiburon CEO Summit XV included a special general session panel discussion on the credit crisis. The panel constitutents included John Cammack (Head, Third-Party Distribution, T. Rowe Price Group), Ron Cordes (Co-Chairman, Genworth Financial Wealth Management, Genworth Financial), Harold Evensky (CEO, Evensky & Katz, Fiduciary Network), Ken Fisher (CEO, Fisher Investments), Neil Hennessy (Chairman, Hennessy Advisors), & Paul Schaeffer (President, ReFlow, Sutton Investments), with Chip Roame leading a discussion that focused on four aspects of the credit crisis, including severity, culprits, winners & losers, and medium-term impacts. Because of the uniformly positive feedback from attendees (who appreciated the opportunity to listen to and participate in a lively debate among peers with varying opinions on a topic everyone was thinking about), future CEO Summits will implement a general session current events panel discussion loosely based on the solid foundation laid down at Tiburon CEO Summit XV.

• Chip Roame opened the discussion with a brief introduction of all the panelists, wasting no time addressing the first aspect of the debate, the perceived severity of the credit crisis. All of the panelists shared the view that the current market conditions are the worst they've seen in their respective lifetimes, but with varying views as to what this truly means
  
  • John Cammack's serious tone underscored his concerns about the dangerous structural issues of having a bond market with no liquidity. He also talked about the violation of trust that has occurred across the board and the resulting lack of confidence in the system. Mr. Cammack also specifically referred to the "Magnificent Nine" banks that have emerged as players, who are effectively biding their time, and alluded to America's pastime by saying that we are "in the the third inning" of this potentially very severe crisis
    
  • Ron Cordes said that on a scale of one-to-ten, with ten representing the Great Depression, the current crisis would fall somewhere between seven and eight. He also briefly mentioned that the 24-hour media coverage of the crisis serves to heighten the concern and lead people away from the core issues
    
  • Harold Evensky cautioned that the fundamentals that have always governed the industry have disappeared or been completely ignored, saying that there is also a lack of accountability. He said there is no question that this situation is clearly bad
    
  • Ken Fisher smiled wryly and said that the crisis is really bad if you got it wrong, that "nobody gives a rat's ass about bankers or investment bankers" and that this is just another big bear market
    
  • Neil Hennessy said that this is clearly a severe situation, but that maintaining perspective by understanding the historical downturns such as the S&L crisis is important when it comes to taking any kind of action
    
  • Paul Schaeffer defied the common catchphrase "credit crisis" by saying this is a solvency crisis, where the problem is structural rather than economic, and said that the real severity of the crisis will not be measurable until the commercial credit issues and implications of derivatives trading are fully realized
    
    
• The next order of business was addressing the culprits behind the current market conditions, with the panelists from opposing sides of the political spectrum having markedly different perspectives
  
  • John Cammack mentioned as culprits the home ownership mentality of the early 2000s, the influence of 9/11 and the response of Alan Greenspan, the new classes of investors to the marketplace, the introduction of the concept of self-regulation, and the surge of hedge-funds and other non-transparent investment vehicles
    
  • Ron Cordes blamed the self-regulating nature of banks, the introduction of sub-prime mortgages to the marketplace, and the bad rolled up commercial paper
    
  • Harold Evensky talked about the massive failure of the regulators and the fact that greed amongst those in power got out of control
    
  • Ken Fisher argued that in his experience greed is good and that if you don't believe in greed you will go to hell, assailing capitalism as the high material spiritualism of our age. He then blamed the "two stooges, Ben Bernanke and Hank Paulson," for their non-feasance and malfeasance, respectively, in how they have bungled their handling of the crisis over the past 18 months
    
  • Neil Hennessy went in a different direction, blaming the lax rating agencies and discussing the CMOs with more and more traunches, causing paper to lose value
    
  • Paul Shaeffer said that the culpability for the current market conditions falls to the cultural lack of fiduciary responsibility that now pervades, blaming both political parties equally, and saying that a firm like LPL Financial Services that is prospering is doing so because of its focus on fiduciary
    
    
• Chip Roame next introduced the concept of winners and losers, those who might gain and suffer as a result of the credit crisis. The panelists shared similar views when it came to addressing this question
  
  • John Cammack said that banks that are risk management oriented versus growth oriented will win big, whereas large investment banks with tarnished reputations will be the big losers as they will struggle to hold onto their employees as well as their clients
    
  • Ron Cordes sees the big winners as the independent providers of advice. Like Mr. Cammack, Mr. Cordes expects the big losers to be the huge institutions with the brand names who have lost tremendous credibility amongst the skeptical public
    
  • Harold Evensky said that the winners will be those companies that turn their focus back to fiduciary responsiblity, transparency, & process rather than product, and, in simple terms, that losers will be those that fail to do so
    
  • Ken Fisher said the big winners would be the major banks as the public's focus returns from investment banking back to traditional banking (including lower risk), and that the big losers would be the wirehouses because dollars will be subjugated by the retail banks
    
  • Neil Hennessy said the winners will be the independent financial advisor and the independent investor who realizes that we've been here before and that there are opportunities everywhere. He also said that Ken Lewis and Bank of America are in a position to win huge. Mr. Hennessy mentioned as losers those that fail to see the opportunity
    
  • Paul Schaeffer thought that a company like LPL would come out a big winner because of its focus on fiduciary responsibility and that those that didn't already have such a culture or fail to quickly re-align will be the losers
    
    
• The final question that was posed to the panelists asked what kind of medium-term impacts could be expected as a result of the credit crisis
  
  • John Cammack said that the inevitable increase in regulations will be constraining to wealth creation in the medium-term
    
  • Ron Cordes said that the next administration, led by Barack Obama, will face very tough obstacles in getting out from under the current problems and setting new programs in motion
    
  • Harold Evensky said that there will be a massive shift from product to process that will increase the focus on transparency
    
  • Ken Fisher said that stocks are cheaper than ever compared to long-term interest rates and that there is a beautiful world ahead; after all, after every bear market there is a bull market
    
  • Neil Hennessy said that the crisis will not last long and that the medium term impacts will include increased focus on transparency with massive opportunities for investors in the long-term
    
  • Paul Schaeffer addressed the concept of adapting to the market conditions, which includes re-thinking business models with more attention paid to transparency and risk management.  Mr. Schaeffer also talked about a shift in party politics that would create more focus on cooperation and pursuing alternative investments
    

The panel was extremely frank and the net impression was that while there is a tremendous amount of uncertainty amongst the general public, the industry should not buckle to what might sometimes be seen as panic. This has happened before, will happen again, and no matter what anybody says, the future holds opportunity. More specifically, the future will impose regulations, firms must exhibit more transparency, and risk management will win out over leveraged growth opportunities.