President's Letter

Fellow NABE members:

While generally thought to be an ancient Chinese curse, the saying “May you live in interesting times” may be a more modern invention.  By some accounts, the earliest usage is traced only to 1936, and no definitive reference to an ancient Chinese curse has been found.  Whatever its true origin, the sentiment is widely understood to mean the speaker wishes the recipients of the curse to experience upheaval in their lives.  Of course, this is generally a bad thing, and we need look no further than the current financial and economic crisis to be reminded of the human cost that often accompanies upheaval.

Most of us are experiencing one or more facet of this upheaval. Some are shared by the population in general, and others are more likely to be unique to NABE members.  Among the more common afflictions of the current upheaval are the loss of wealth in our homes and retirement accounts, loss of bonuses, loss of clients, loss of a job…the list goes on. 

Moreover, due to the large number of our members heretofore employed in financial services, our membership may face a disproportionate rise in job losses as this industry consolidates.  More unique to at least some of our members are the increased demands on our time and our capabilities from our internal or external clients to help extract signal from noise and give some clarity to a rather fuzzy outlook, either for the economy generally, an industry, our firm, our employer, or clients.  The uncertainty and fuzziness that obscure our view extends from changes in investor appetites for risk, to the details of asset pricing, to balance sheets, to market functioning, and on up to the broadest of macro views.  We do indeed live in interesting times, both because of potential or realized personal upheaval, and the increased demands we face professionally.

How many times of late, in conversation with colleagues or in the media, have you heard the word unprecedented used to describe some current financial/economic event or condition?  Many, I’m sure.  The sudden sharp increase in the frequency with which unprecedented appears demonstrates just how interesting are the times in which we live.  Many of us are being challenged in ways we have not been challenged previously.  We are running flat out to process the rush of new facts and fashion a coherent story. We are working harder, thinking more critically about assumptions and risks, paying even closer attention to the minute details — which of late seem to quickly and unexpectedly morph to become major factors. 

Which brings me to another Chinese saying: “Heroes (leaders) are made over turbulent times.”  (Ironically, this may in fact be the source of the better known saying referenced above, and the meaning is totally opposite.)  The relevance of this saying today is that it is at times like these that those of us who understand the modes and benefits of economic analysis can be of significant value, whether we rise to hero status or not.  For example, incentives still matter.  Relative prices matter.  Even though risk aversion has increased, straining and making less stable some of the normal relationships, indications are that investors, firms, and households are still responding to incentives…even if more weakly for now.  The basic framework of analysis continues to be helpful, even if made somewhat less useful in the near-term because of shifting parameters.  The kind of careful analysis we are trained to do is needed now as much as ever.

It is my belief that NABE members can shine in this environment, by demonstrating that their analytical tool kit can shed light on a host of problems that have arisen in this period of financial and economic stress.  But, it will require working both harder and smarter to process what is new and to adjust our “models” as needed to new realities.

In Missouri, we have another saying: “What doesn’t kill you makes you stronger.”  I wish you all a “strong” finish to 2008 and a healthy, stronger, and prosperous 2009.

Best regards,

Chris Varvares
President, NABE
President, Macroeconomic Advisers, LLC