Lumina chair Mutz preps for a W downturn

August 31, 2009
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A growing number of indicators, both official and anecdotal, suggest the recession that began in late 2007 is over. Industrial production is up, consumer confidence is rising, and so on.

All well and good. But the chairman of Lumina Foundation, the Indianapolis group that focuses on improving college education levels, is digging in for another downturn before things improve for the long haul.

John Mutz, who remains active in a number of roles including a board seat on the Indiana Economic Development Corp., says Lumina Foundation in the past couple of months has shifted part of its investment portfolio to cash, corporate bonds and other safe harbors despite recent improvement in the stock market.

And the former lieutenant governor has enough confidence in the strategy to follow suit with his personal investments.

Why? Because the U.S. still faces two major headwinds, he says.

Consumers, who drive the lion’s share of the economy, won’t be spending much for a long time. The home equity that fueled much of the pre-recession bubble is gone, so consumers wouldn’t be able to go on another spending binge by borrowing against their homes if they wanted to. Consumers also have learned a painful lesson about spending beyond their means. “Frugality is going to be with us for a while,” he says.

The second headwind is education levels. One of the most under-reported stories is that the U.S. is falling behind other industrialized countries in college attainment, Mutz cautions. He warns the erosion of the country’s competitive position doesn’t bode well for a lasting economic recovery.

Add it up, and the U.S. economy probably won’t emerge in reasonably strong condition for another three years, Mutz says.

A sobering assessment, to be sure. What do you think about it?



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