Dr. John Rutledge is chief investment strategist of Safanad, a global principal investment house, and a member of its investment committee, directing investments in private equity, real estate, and marketable securities. Dr. Rutledge wrote the Business Strategy column for Forbes magazine for more than a decade and was a regular cast member of Forbes on Fox for many years. He is a senior research fellow and clinical full professor at Claremont Graduate University where he teaches complexity economics and finance and chairs dissertations. He is a member of the board of directors of several privately owned companies including Global School Management, Pansophic, Early Learning Academies, and Element Critical data centers. Dr. Rutledge has had a long career in private equity investing and served on many boards of directors. He is the founder of Rutledge Capital, a private equity investment firm focused on US middle market companies, where he led more than 30 leveraged buyouts.
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Forget the Fed. By holding rates too high, for too long, they have damaged regional bank balance sheets, shut down business lending, and frozen both the residential and commercial real estate markets. September will be the first of many interest rate cuts.
Inflation will continue to surprise on the downside. Structural flaws in the CPI produced overstated inflation numbers for the past year. Even those flawed numbers will be below 2% through yearend. Spending, GDP, and jobs will continue to grow but at modest rates. COVID cash has been spent.
Lower rates will support the prices of high-growth, high-margin stocks with large cash holdings. Individual prices will more and more reflect company performance, not Fed policy.
Investors need to understand intrinsic value, a company’s ability to generate growing, sustainable cash flow and to return cash to shareholders through dividends, debt repayment, and stock buyback programs. Investors should also focus on intrinsic risk, the factors that can shut down free cash flow.
Bottom Line: After 40 years of Fed-driven markets, investors need a new set of ideas and a new set of tools to identify and capture intrinsic value and monitor and control intrinsic risk. This talk will help investors understand and use those tools to protect and grow their net worth.