Nov 07 2016

Is This the End or Just the Beginning…

“Let us not seek the Republican answer or the Democratic answer, but the right answer.  Let us not seek to fix the blame for the past.  Let us accept our own responsibility for the future.”   – John F. Kennedy

 

On the Eve of the 2016 US election, the range of emotions runs from bland apathy to utter terror.  Most will agree there is reason to be concerned based on the baggage that both major party candidates are chained to.   Regardless of who wins, the next president will face intense hostility and constant opposition.  In fact, it is quite possible that the loser will actually be the winner in the end.

 

And yet, as always, we must move forward and make the most of the situation regardless of what happens.  It is little consolation for those of us that can vote because it doesn’t seem there is any good option, but for the rest of the world that must sit by and watch from the sidelines, it is even more painful.  I know as I was a powerless bystander when Scotland voted to leave the UK and then most recently when the UK voted to leave the EU.  In both cases my life was significantly impacted and all I could do is watch as events unfolded.  So for all of us that must live with the consequences of the democratic processes of the day…here is a toast to what was and what will be!

 

Now for a word of advice (because I need this as much as anyone).  I suggest the following from Stephen Covey:

“Proactive people focus their efforts on their Circle of Influence.  They work on the things they can do something about: health, children, problems at work.  Reactive people focus their efforts in their Circle of Concern – things over which they have little or no control: the national debt, terrorism, the weather.  Gaining an awareness of those areas in which we expend our energy is a giant step in becoming proactive.”

 

Wow!  This is good stuff Stephen – thank you.  And a few prayers can’t hurt no matter which Circle you spend your life in.

No responses yet

Jan 04 2014

A Brighter 2014?

“Man is not the creature of circumstances, circumstances are the creatures of men.  We are free agents, and man is more powerful than matter.” – Benjamin Disraeli

 

So Happy New Year and hopefully the weather this January for most of the U.S. and other parts of the globe is not an indication of what we should expect in the broader economy.  Wow – it has been brutal!  I honestly don’t expect much of a correlation but it is a bit difficult to predict if 2014 will be better or worse than 2013.

 

Fortunately there were some good things that happened in 2013 despite the political nightmare that is Washington D.C.  Many of us enjoyed watching our stock portfolios increase in value (condolences to those overinvested in municipal bonds) but it is difficult to believe this rising tide can continue for another year.  My gut is telling me that a correction is coming – but when exactly?  I remain generally optimistic that 2014 can be a better year for many – assuming the political infighting does not spin out of control during the upcoming budget negotiations – BUT…caution should be a key concept in 2014 when making financial decisions.

 

For those planning to invest or rebalance this year, don’t overlook the following possible perils:

1.  Negative impact from withdrawal of monetary stimulus by the Fed.

2.  Resurgence of sovereign debt problems in Europe.

3.  Significant correction after 4.5 years of gains in the U.S. equity markets.

4.  Further Chinese stock market decline or slowdown in economy.

5.  Oil supply shocks due to Middle East unrest or terrorist disruption.

 

While most agree there is reason for optimism in 2014 and sitting on piles of cash is not a good investment strategy, the prudent humans will continue to diversify exposure.  All the best to you in 2014!

No responses yet

Sep 03 2012

In about Five Months…

“What we collectively decide about how to bail out our economy, how we pull our economy out of a ditch and what rules we put in place to make sure this problem does not happen again, will shape our country for the next 50 years.  This is it.” – Elizabeth Warren

 

After surviving the worst economic wipeout of the past seventy years or so, I remain hopeful that those in positions of great influence and power will never allow this to happen again.  And yet as the end of the year approaches, there are some troubling issues looming once again here in the US.

 

About a year ago, we had the great debt ceiling stand-off.  The entire world watched with great anticipation as members of Congress duked it out before finally punting the issue about twenty yards down the field.  So in a few months we will be dealing with significant budget cuts to defense and non-defense programs at the same time we will see an increase in taxes…unless the two parties can somehow come together and get something right before the clock strikes midnight.  This doesn’t even consider the presidential election or what is going on elsewhere on the planet.

 

In case you are not aware, Europe is in a deep recession, China’s economy is slowing, India has all forms of trouble brewing, Russia is trying to keep a social powder keg on ice, and Japan is probably a little worse off than the US.

 

Will the world as we know it come to an end if Congress can’t get it right and avert the automatic budget cuts and tax increases?  I don’t think so, but the thousands of people that will lose their jobs combined with reduced spending will most certainly impact the economic recovery – and I don’t see how it will be positive.  Surely our leaders will take the proper course of action and avert more economic turmoil…surely…

Comments Off on In about Five Months…

Apr 10 2011

Interesting Times Indeed

“It was in the reign of George III that the aforesaid personages lived and quarreled; good or bad, handsome or ugly, rich or poor they are all equal now.” – William Makepeace Thackeray

 

For those who thought I gave up on the blog, I can understand why – but rest assured I have not.  It has been a terribly busy period in my life and something just had to give for a while.  Even now there are quite a few things that I need to get started on but I feel compelled to capture my thoughts before the moment slips by completely.

 

It would be an understatement to suggest that 2011 has brought great turmoil and change so far.  Going back a few months we saw regimes in Tunisia and Egypt fall in a matter of days or weeks.  Many other governments in the Middle East and North Africa are quite unstable and leaders are concerned they will encounter mass demonstrations or worse.  At this moment it seems the US, Britain and France are trying to help a ragtag group of rebels overthrow Muammar Gaddafi and his government – for what legitimate reason I have no idea.  I suppose it is remotely possible that prudent leadership will gain power in these countries and bring a better future for the people, but I am far too cynical to believe it is likely.  In this region of the world, I think all we can honestly hope for is a reasonable level of stability under strong and often militant leadership.  Western democracy just doesn’t work very well as there are too many radical groups that will challenge power at any cost.

 

As if this isn’t enough to deal with, the Earth has been delivering some deadly natural distasters of late.  Haiti, Chile, China, New Zealand and most recently Japan, have all been rocked by terrible earthquakes.  Japan’s 9.0 earthquake was the worst in over 100 years and the subsequent tsunami wiped many coastal towns off the map and started a nuclear disaster that is still unfolding.  It is as if Pandora’s atomic box has been opened and no matter how hard the humans try, we can’t contain the deadly, seeping force from within.  Tens of thousands died from the earthquake and tsunami and more will die from radiation sickness at some point in the future.  I have many friends and colleagues in Japan, so this has been very difficult for me.  Japan is an amazing country and I have the utmost respect and appreciation for the Japanese culture.  If there is any good news from this disaster, it is that it happened in Japan where people will work day and night to fix the problems and rebuild what has been destroyed.  I know this doesn’t erase the death and destruction but it is my best attempt to consider a brighter side (as dim as it might be).

 

Finally we have the quagmire that is the United States right now.  The once powerful nation that is so divided and buried in debt that we can’t seem to figure out what to do – except start wars in the Middle East and North Africa.  I only hope that God hasn’t given up on us yet because it seems he is the only one that can save us from ourselves.  Time will tell and so we will just wait and see.  In the meantime we would all be wise to pray for a brighter tomorrow.

 

As I watch Charl Swartzel slip on the Green Jacket at Augusta National, I can’t help but wonder what the World’s Greatest Golfer, Bobby Jones, would think about the 21st Century.  Like me, he probably wouldn’t know what to think.

Comments Off on Interesting Times Indeed

Dec 04 2010

Hubris, Ignorance, Goldman and the Fed – with some good advice in the end

“None of them would have survived without government help.”  – Timothy Geithner, Treasury Secretary

 

Last week the Federal Reserve released detailed information on the steps they took to stabilize the financial markets during the uber tense period from early 2008 through 2010.  Most of us were quite surprised to learn of the magnitude and frequency of intervention.  Although some will never completely agree, it was quite clear to me that we were truly on the edge of the abyss and without the Fed’s intervention there would have been a complete wipeout.

 

To add to the intrigue, my favorite system manipulator, Goldman Sachs – which once suggested it had plenty of cash to weather the storm – borrowed 84 times during the crisis window and more than $20 billion on at least one occasion.  I could add a few comments on this but I will take the high road at this time.  One thing you can say about Goldman, they know how to create their own destiny.

 

Shortly after this broke, the U.S. jobs report came out with dismal November job growth – so poor compared to other more encouraging indicators that many are questioning whether the report is accurate.  Regardless of what job growth actually is, while most of the key economies around the world have stabilized, there are still many potholes in the road to Shangri-La.  All you have to do is consider, Greece, Spain, Portugal and Ireland.

 

Since this blog is supposed to be about prudent personal finance and the global economy, my suggestion as we hopefully enjoy the 2010 holiday season, is to keep your job if you have one, find a job if you don’t and in both cases avoid excessive debt and save every dollar (or pound, yen, rupee, euro, etc.) you can.  There are and always will be investments worth pursuing but be very cautious unless you have adequate liquid to cover any possible losses.  Cheers and All the Best during this special time of the year!

No responses yet

Jul 17 2010

A Break from the Storm

Published by under US Economy

“Justice, sir, is the great interest of man on earth.  It is the ligament which holds civilized beings and civilized nations together.” – Daniel Webster

 

July 15th was a big day in case you didn’t notice.  Most important by a mile, British Petroleum reported that “no oil was leaking into the Gulf of Mexico from the Deepwater Horizon oil spill” for the first time since it began on April 20th.  It is hard to imagine than anyone would not be relieved to learn this, but of course some could care less.  While the leak is now plugged, it is estimated that nearly 5 million barrels of crude oil gushed into the Gulf at a rate of up to 62,000 barrels per day.  The market value of this oil would have been approximately $350 million – instead the cleanup and litigation will cost many tens of billions.  It is so dreadful to think of the mass destruction, pain, suffering and death this tragedy has caused and by no means should this be minimized, but at this very moment it is nice to know that the leak is stopped and a little sun is peaking through.

 

On this very same day, the SEC announced that Goldman, Sachs & Co. will pay $550 million and reform its business practices to settle SEC charges that Goldman misled investors in a subprime mortgage product just as the U.S. housing market was beginning to collapse.  It is rather ironic that in agreeing to the largest ever penalty to be paid by a Wall Street firm, Goldman merely acknowledged that the marketing materials for the subprime product contained incomplete information.  While this is a setback for our friends at Goldman, I suspect the firm had the best (and most expensive) minds working on this little resolution.  After all, Goldman makes money going up, they make money coming down and they will always find a way to get back on their feet – bet your bottom dollar.

 

July 15th was pretty good if you ask me.

No responses yet

Jun 09 2010

Pandora’s Summer

Published by under Global Economy

“With the strengthening of the administration, the rescheduling of debt and a broad package of social and economic measures.  Dutch island governance should restart in a stronger position.  Because public finance is of crucial importance for residents and visitors alike, greater financial supervision is being implemented.”  – Els Croon

 

As you might have noticed, it has been a few months since my last entry.  This was largely due to the fact that I have been extremely busy with work but I must also confess that the depressing state of the world played a part.  There have clearly been more than a few rough periods in the history of mankind but for me this is a real low point.

 

Most of the countries around the globe are struggling to maintain their positions of power as their respective economies sputter toward recovery.  In the U.S., constant missteps by the administration and congress are very disheartening and it is all but certain that elections later this year will alter the political landscape once again.  Britain and Japan have just installed new leadership and both are desperate for something positive to happen from the bleakness.

 

As if all this isn’t enough, there is a hole in the Gulf of Mexico that has been spewing toxic oil at a rate of roughly 100,000 barrels per day since 20 April.

 

Quite frankly, it is all just too painful to think about – so if you don’t mind I will try to enjoy my family vacation and commit to a more inspired entry in July.  Hopefully I will have some good news by then. 

No responses yet

Mar 28 2010

Ultimate Tax Refund

“Complex societies are focused on a center, which may not be located physically where it is literally implied, but which is a symbolic source of the framework of society.  It is not only the location of legal and governmental institutions, but is the source of order and the symbol of moral authority and social continuity.  The center partakes of the nature of the sacred.”  – Joseph A. Tainter, The Collapse of Complex Societies

 

It was a rather frantic month for me and most of the headlines missed my attention.  I did notice one rather curious article about JP Morgan Chase’s $1.4 billion tax refund.  Apparently JP Morgan Chase is capitalizing on a provision in the American Recovery and Reinvestment Act which allows the mega bank to take losses from 2008 and 2009 and apply them against taxes paid during the previous five years instead of the previous two.

 

And the train has departed from the station because according to an analysis of security filings by Wall Street Journal, more than 250 companies expect $12 billion worth of federal tax refunds under the provision.

 

Maybe I am foolish to be concerned that the provision (…gift, whatever) is expected to cost taxpayers $33 billion during its first year.  I suppose everything is relative and we are playing with trillions now – right?

No responses yet

Feb 28 2010

Greece Is Back

“Tragedy is thus a representation of an action that is worth serious attention, complete in itself and of some amplitude E’ by means of pity and fear bringing about the purgation of such emotions.”  – Aristotle

 

…in the news that is – and it isn’t good.  It seems that Greece has a real financial crisis on her hands.  Greece’s budget deficit is twice what the Government reported as recently as mid-2009.  So once Moody’s downgraded the debt a few months ago, there seems to be serious concern that a sovereign European nation is at risk of default.

 

Greece, in the form of the Prime Minister George Papandreou, is asking for help from other EU countries and while the EU has indicated that it will assist to prevent default, details are sketchy for now.  We will soon find out if the EU will put the money where their mouth is come April and May when Greece has some 20 billion euros worth of bonds and T-bills maturing.

 

Let’s hope this gets sorted out or it could send other European countries like Spain and Portugal over the edge as well.  Interestingly, it has been reported that Goldman Sachs (our favorite investment bank at the center of the universe) helped the Greek government to mask the true extent of its deficit with the help of a derivatives deal that “legally” circumvented the EU rules.  Is there anything that Goldman Sachs isn’t involved in?

No responses yet

Jan 31 2010

It all came down to a lucky guess?

“For if the trumpet give an uncertain sound, who shall prepare himself to the battle?”  – 1 Corinthians 14:8

 

There are still many that believe the U.S. Government should have allowed the big banks along with Fannie and Freddie and AIG to go under.  I recall one colleague explaining to me that the “invisible hand” would have corrected the situation.  He went on to suggest that any institution responsible for this disaster should have to pay for their foolishness anyway.  Being somewhat of a Keynesian, I never believed the government should look the other way and now I am more convinced than ever that we were on the brink of complete global financial wipeout that would have truly changed the course of human history.  The current environment is unpleasant but it could be far, far worse.

 

For those that think this was all some grand conspiracy to change the political landscape or that our leaders are really in control, a recent article by Laura Blumenfeld in the Washington Post about Neil Kashkari, former Interim Assistant Secretary of the Treasury for Financial Stability, and a book by Henry Paulson, Secretary of the Treasury during the darkest hours of the crisis, tell a different story.

 

“Seven hundred billion was a number out of the air,” Kashkari recalls.  “It was a political calculus.  I said, ‘We don’t know how much is enough.  We need as much as we can get [from Congress].  What about a trillion?’ ‘No way,’ Hank shook his head.  I said, ‘Okay, what about 700 billion?’  We didn’t know if it would work.  We had to project confidence, hold up the world.  We couldn’t admit how scared we were, or how uncertain.”

 

And according to Paulson, after he and Timothy Geithner failed to find a buyer for Lehman Brothers, “My stomach tightened up and it was one of those times during the crisis where I was momentarily overcome by fear.”  He then called home to his wife Wendy: “And I said, ‘Everybody’s going to be looking to me for answers, and I don’t have any.  Please help me, pray for me.’  But boy, that was, that was a dark, dark hour.”

 

We will never know what would have happened with a different group of leaders – but I for one am grateful it didn’t turn out worse.  The question is: did we learn from our dreadful mistakes?

One response so far

Next »