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ALAN TURNER: A conversation with Knight Kiplinger

I had an opportunity to visit with Knight Kiplinger recently while he was in town for a Regions Bank event, and our discussion ranged over a broad spectrum of economic and business issues.
Kiplinger’s company, based in Washington, was originally founded in 1920, which makes it one of the oldest financial information publishing companies in the United States. Even more noteworthy is the fact that it’s been under family ownership for that entire time.

Knight Kiplinger sees more Washington gridlock ahead.

Knight Kiplinger sees more Washington gridlock ahead.

The company publishes the well-known “Kiplinger Letter,” a magazine, various tax newsletters, and other web and print based products, including a retirement report for “affluent retirees”.
Before joining the family business, he spent 13 years as a Washington correspondent for the company that owned the Wall Street Journal at the time, so he’s had plenty of experience “inside the beltway.”
“Even today,” he said, “the Wall Street Journal would still by my desert island read.”
Knight told me that he enjoys coming to Mississippi, and has had numerous friends and acquaintances in the Magnolia State.  He’s also driven the Blues Highway, which he found to be “a great experience.”
I asked him whether he feels the banking and finance industry is now over-regulated.
“In general, the pendulum has probably swung too far in that direction,” he said. “It’s all too easy to over-react after the events of 2008 and 2009.  Still, there are some good aspects to regulation, if it can prevent another event like we saw then.”
He doesn’t foresee another housing bubble in the near future. In fact, he would like to see “a modest loosening of lending standards for first time homebuyers, but only modestly.” From his point of view, today’s lending standards are generally a return to how mortgages were handled in the past.  He did point out that a “healthy housing market is a vital part of our economy.”
I asked him whether the GOP is likely to win the Senate in November, and his one word answer was “no.” He thinks there are 3 states where the “Republicans may be surprised,” though he didn’t specify which 3 states he was referring to.
“Either way, there won’t be any relief from the gridlock that has been the rule in government for the past several years,” he suggested.
He believes some good things have actually come out of Washington, pointing to the significantly reduced budget deficits of the past couple of years, a trend he attributes partly to the sequester’s impact on spending, along with the facts that some of the “rescue money” is being returned to the Treasury and tax rates have increased for upper income Americans.
“However,” he cautioned, “I’m not sanguine on the long-term prospects for deficit reduction. I think the deficit will turn up sharply beginning in 2016 and will grow rapidly,” pointing to the rapid ramp-up in entitlement spending for Medicare and Social Security with the retirement of the baby boom generation.
I asked him if we’re seeing an equities bubble, with the rapid growth of the markets.
“In some segments of the market, yes we are,” he said.  He suggested the market might be due for a correction of “up to 12 percent,” but doesn’t see any drastic downturn on the immediate horizon.
He expressed concern for the long-term employment picture in America.
“We’re seeing 1.5 trillion in retained earnings,” he said.  “Corporations are sitting on huge amounts of cash, rather than investing in people and infrastructure.”  Asked why this is the case, he sees much of the problem as being one of “uncertainty and concern about regulation and other issues.”
So, what is his prognosis for the typical investor?
“You make sure you’re balanced, and take a long-term view. You ride out a correction,” he suggested.

Contact Mississippi Business Journal publisher Alan Turner at alan.turner@msbusiness.com or (601) 364-1021.


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