Monday, May 31, 2010

Finance and Remembrance

The veteran global investor Mohamed El-Erian (a regular on CNBC Squawk Box), who runs Pimco and has lived through many a financial crisis, recently issued a report describing the new, perilous state of today's global economy. He described it like this: "The world is on a journey to an unstable destination, through unfamiliar territory, on an uneven road and, critically, having already used its spare tire."

America used its spare tire with a stimulus bill to prevent a collapse of the banking system and to stimulate the economy after the subprime market crash. The European Union used its spare tire recently to prevent a run on European banks triggered by the meltdown in Greece. Are there any spare tires left? I do not believe so and that is the problem for the future.

President Obama has issued in a new progressive period of spending in Washington. The President signed a health care bill that was the biggest expansion of the safety net in 40 years. Congress is in the final stages of a bill that would tighten Wall Street's rules and probably shrink its profit margins.

What this all means is that Americans must be debt free, liquid and invest as much in their savings as they can. Secondly, leadership at every level of government; from the local city council, to the school board, to state and federal government, to private business, to our nonprofit institutions, matters more than ever. There is no margin of error left. We have diminished the resources, whether to moderate the markets or to fund better health care, schools and infrastructure for growth. Leadership is now about taking action to generate new resources, being smart and disciplined about every nickel we spend and invest. The Treasury is empty, we cannot continue to leverage our future to China, India, and the world.

In this economic climate, we need to be more frugal and make tougher choices in our private lives. We cannot fake it or fool ourselves anymore, and we need to be less tolerant of politicians who cannot make these decisions in our public life. My finance point of view this month is this, be accountable in your private financial affairs and demand accountability in your politicians and representatives. The sooner the better. Because if Americans and the world wait, postpone, spend, as we have been, life as we have grown to accept will drastically change.

Memorial Day - In visiting the Riverside National Cemetery today I was never more proud of being an American citizen. I know that sounds corny but it is true. To witness thousands of citizens paying their respects to friends, family, and those who have served in our armed forces was truly a great experience. Though many times in my life I have disagreed with the motives of our leaders in sending our citizens into battle. The sacrifice these individuals have made and continue to make is above all discussion and disagreement. So thank you Gene Hasse, thank you Charles Hasse, thank you Dan Oldewage, thank you Dick Lewis, thank you Charlie Vasapoli, for all your service and making my life better.

Next week a review of the playoff season and a look forward to the summer.

Until next Monday, Adios.

Claremont, CA
May 31, 2010

No comments:

Post a Comment