New normal a lot like the old normal: Ariel's Hobson

The seemingly endless discussion about the “new normal” is just a lot of talk — at least according to Mellody Hobson, president of Ariel Investments LLC, and Liz Ann Sonders, chief investment strategist at Charles Schwab & Co. Inc. “I have nothing but plenty of respect for Bill Gross and Mohamed El-Erian,” Ms. Sonders said of the co-chief investment officers of Pacific Investment Management Co. LLC in a panel discussion Tuesday at Schwab's Impact conference. “But my concern about the ‘new normal' is that it's a story that everyone is telling.” In truth, there was nothing “normal” about the state of affairs that got the U.S. economy into the mess in the first place, Ms. Hobson said. “We think we went through a period that wasn't normal,” she said. “Was it normal to buy a house without any paperwork?” she asked. Ms. Hobson also noted that before the market crash, the average American had five credit cards and $11,000 in credit card debt. “What we are seeing now is normal,” she said, noting that people are now saying, “‘Oh, I'm getting a house, and I have to show you my financials.'” Indeed, Ms. Hobson and Ms. Sonders are both optimistic about the economic recovery. “We are on the other side of the gloom and doom,” Ms. Hobson said. Advisers, however, need to focus their clients on long-term investing, Ms Hobson said. “We are doing a disservice to investors by talking about short-term in general, and specifically about three-year returns,” she said. But whether the U.S. is in full blown recovery or not, some advisers believe that long-term, buy-and-hold strategies are a thing of the past. “Ten years ago 80% of advisers' portfolios were buy-and-hold,” said Tom Lydon, president of Global Trends Investments, who is attending the conference. “Today, that's 30%. It's much tougher to make money these days.”