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Gregory L. Powell: “How we can fix the student loan crisis”

Book learning only goes so far — people need to see results to understand. The 401K system has democratized wealth and at the same time been a great instructor on the power of compounding. My first recommendation would be to communicate more broadly how well 401K investors have done over the decades. It is critical that as […]


Book learning only goes so far — people need to see results to understand. The 401K system has democratized wealth and at the same time been a great instructor on the power of compounding. My first recommendation would be to communicate more broadly how well 401K investors have done over the decades. It is critical that as many people as possible take full advantage of this opportunity.
The student loan debacle is the ugly side of the compounding story. It utterly baffles me that you cannot buy a beer in this country until you are 21 but you can sign papers at 18 that can permanently ruin your finances. Borrowers should have to pass tests on the mechanics of compounding interest. Sample questions: If you start borrowing $5,000/year your freshman year and then defer payment while you are in graduate school, how much will you owe when you are done? How will that compare to the average salary of someone with your major?
I also question the wisdom of the government guaranteeing so much of the debt. You might argue that it expands opportunity. Perhaps. But just like easy mortgages lead to bigger houses, easy student debt has led to excessive building at colleges and an explosion in non-teaching personnel. My daughter’s undergraduate institution once sent me a very large bill combined with a newsletter touting a new meditation center. While this may be ‘nice to have’ it is certainly not necessary for furthering education. This type of spending is utterly unfair to students borrowing their way through college.

I had the pleasure of interviewing Gregory L. Powell, PhD, Deputy Chief Investment Officer at Miller/Howard . Greg focuses on the firm’s Income-Equity portfolios. Greg joined Miller/Howard after a distinguished 19-year career as a portfolio manager and director of research at AllianceBernstein. At AB he managed a team of 12 analysts and a suite of products with $11 billion in AUM, including equity income, long-only value, diversified value, and long/short hedge funds. He also served as head of fundamental value research there, redesigning the analyst role with an emphasis on investment success and training analysts in all aspects of the position. Prior to AB, Greg worked for 12 years at General Motors in Detroit and São Paulo, Brazil. He began his career as a senior economist and became general director of market research and forecasting. Greg holds a BA in Economics/Mathematics from the University of California, Santa Barbara, and a PhD and MA in Economics from Northwestern University.


Thank you for doing this with us! Our readers would like to learn a bit more about you. Can you tell us the “backstory” about what brought you to the finance industry?

The story is a bit unusual. I was working as an executive for General Motors in Brazil when our youngest child was diagnosed with autism. GM was great — they transferred me back to Michigan right away so that we could get the best help for our son. We ended up using a consulting firm out of New York City to design our in-home therapy program. They flew in a team once a month and we employed local college students to carry out their instructions. So when I got call from a headhunter regarding a job with Bernstein in New York City it was an easy decision — we could use the consulting firm in NYC full-time. In that era the Bernstein buy-side looked favorably on people who had worked for large corporations and were not at all bothered by my lack of experience in the financial industry. Multiple interview trips to New York, followed by a research project on Vons Supermarkets and capped off with a six hour IQ/personality assessment by a psychologist — and then I got an offer. Easy!

Can you share with our readers the most interesting or amusing story that occurred to you in your career so far? Can you share the lesson or take away you took out of that story?

During my time in Brazil we contracted to import thousands of Opel Astras at a low tariff level. One morning on the way to work I heard a news report that the tariff had risen to 35% overnight. I doubted my Portuguese so I checked with a Brazilian colleague as soon as I arrived at work. Yes indeed, our imports would have to pay 35%, creating a big loss. What I remember most is that every American I spoke with that morning said the same thing, “No that can’t be. That’s impossible.” It’s a lesson in human nature — sometimes facts that are outside the range of our expectations are just impossible to accept. I’ve tried to bear that in mind throughout my investment career. Sometimes I have fallen prey to the same fault but I try to learn from that experience. An example of when we got it right at Bernstein was when the general counsel from a major pharmaceutical company made comments to investors, shrouded in legalese, about severely adverse outcomes. Hundreds of Wall Street’s best minds were at the meeting but they missed what our analyst detected. She said, “That means their drug is killing people.” It turned out that was true. We shorted the stock and did well. The point is that we as investors, have to be open to the possibility that something out of the ordinary is happening at any given time.

Are you working on any exciting new projects now? How do you think that will help people?

We really have stuck to our knitting over the years. The same principles of dividend growth, sustainable income, and ESG investing that Miller/Howard was founded on still guide our activities nearly thirty years later. You see a lot of companies jumping on the ESG bandwagon since it has become very popular with younger investors, but we’ve been doing it since day one. It continues to play an integral part in risk mitigation from an environmental, social and governance perspective. We identified a more recent need to vocalize investor concerns in the midstream space regarding environmental disclosures and transparency. So while you might say that some projects involving ESG engagement with midstream companies are new, we’re actually in lockstep with our originating principles.

Ok. Thanks for all that. Let’s now jump to the main core of our interview. According to this report in Fortune, nearly two-thirds of Americans can’t pass a basic test of financial literacy. In your opinion or experience what is the cause of these unfortunate numbers?

It’s a combination of two factors. First there is just the obvious need to make sure that education imparts some practical skills. Somebody in a fifth grade math class might become an engineer, but every single student will have to balance a checkbook and know how to evaluate interest rates. But the tougher problem is actually teaching students about compounding, both its power to build wealth as well as the destructive potential of debt. Compounding is alien to the human mind — we want to think that everything is linear. Only with age can we see the seemingly improbable result of small savings in our younger years growing to a substantial sum, or conversely the destructive impact that debt can have.

If you had the power to make a change, what 3 things would you recommend to improve these numbers?

Book learning only goes so far — people need to see results to understand. The 401K system has democratized wealth and at the same time been a great instructor on the power of compounding. My first recommendation would be to communicate more broadly how well 401K investors have done over the decades. It is critical that as many people as possible take full advantage of this opportunity.

The student loan debacle is the ugly side of the compounding story. It utterly baffles me that you cannot buy a beer in this country until you are 21 but you can sign papers at 18 that can permanently ruin your finances. Borrowers should have to pass tests on the mechanics of compounding interest. Sample questions: If you start borrowing $5,000/year your freshman year and then defer payment while you are in graduate school, how much will you owe when you are done? How will that compare to the average salary of someone with your major?

I also question the wisdom of the government guaranteeing so much of the debt. You might argue that it expands opportunity. Perhaps. But just like easy mortgages lead to bigger houses, easy student debt has led to excessive building at colleges and an explosion in non-teaching personnel. My daughter’s undergraduate institution once sent me a very large bill combined with a newsletter touting a new meditation center. While this may be ‘nice to have’ it is certainly not necessary for furthering education. This type of spending is utterly unfair to students borrowing their way through college.

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?

Mike DiGiovanni, my first boss at General Motors, shook me loose from the narrowness of my education. We were on the Economics Staff, one part of a massive bureaucracy in Detroit. Mike’s focus was on “what needs to be done?” rather than “what can we do?” As just one example, we spearheaded a project on how to reduce costs in our truck assembly plants. We brought no expertise to the project but marshalled the right people, studied our competitors’ practices and had a real impact in the end. Of course there were bigger problems at GM, but I will always be thankful to Mike. I have tried to channel his energy throughout my career.

Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?

The economist Herbert Stein said, “If it can’t go on forever, it will stop.” Usually the quote is rendered as, “If it can’t go on forever, it won’t.” This was massively important to my career. In the late 90s I was working on a value-based hedge fund that was hugely short the dot.com stocks. People forget how crazy that time was — money-losing companies would raise 6 to 8 quarters of their cash burn in an IPO assuming that the window would always be open. Investors like us “didn’t get it.” But what could not go on forever, did indeed stop. Our hedge fund significantly outperformed in the ensuing years. If the outcome had been different, no doubt I would be working in another industry. The lesson, however, was balanced. True there was a reward to having conviction, but the situation was truly extreme. Less provocative dislocations can go on almost “forever,” so having lived through the 90s actually made me a tougher grader on what others consider to be table-pounding investments.

You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger. 🙂

Hmm, I’m pretty sure that the next great movement will not come from an investment guy. Actually I’m more of a “let a thousand poppies bloom” person rather than thinking that one single movement is the answer. The focus of my professional life has been on helping people achieve financial independence. With fewer financial worries, individuals can pursue their own passions and, for the most part, this will make the world a better place.

Thank you for the interview. We wish you continued success!

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