Cover Up 'Cause the Storm is Coming!
The other night a friend of mine asked for my opinion on the current recession and when it might end. We had a lively discussion and ultimately found out that he is a true Pollyanna optimist and I tend more toward Scrooge. Basically, I think the saying "in for a penny, in for a pound" applies here... and we are going to get pounded. Here's what I think is coming up in America.
I think this recession will persist through 2010. Yes, 2010! Maybe even early 2011... We have yet to feel the impact of the 2nd wave of mortgage defaults (ARMs and "exotics" reset early next year) nor the 3rd wave anticipated to begin in Q3 2009 (good people with good credit and no jobs, deflated housing value, and no further access to capital). Housing prices will remain low, inhibiting many consumers' ability to refinance or reinvest. Consumer credit will remain tight to non-existent for all but the very best "risks."
Small businesses are failing at a rapid rate due to lack of access to credit, and the ones that survive will experience the "deflation" of pricing (and therefore profits) caused by too much money (thank the bailouts and economic stimulus packages) flooding the markets. Layoffs will extend into previously "safe" occupations (law firms, hospitals, schools, local government and non-profits among others). Employees who are "left alone" will see wage stagnation or even cuts, as employers won't need to pay as much when available talent is everywhere.
The dollar will become weaker against foreign currencies (again due to flooding the economy with bailout / stimulus money) and our trade deficit will grow. As our money becomes "less attractive" in foreign markets, we will see hard assets (office buildings, shopping malls, real estate, apartment complexes and entire companies) purchased by foreign investors... often at fire sale prices. The NYSE will likely not exceed 10,000 during this period. City and state governments will be forced to cut services and employees, and some may even vanish in a cloud of bad debt and lower tax revenues. The intertwined systems of the world's economies will prevent any one nation (i.e the U.S.) from dragging the rest of the world out of this mess early.
Sorry to be pessimistic but this is the natural extension of the failure of "good sense" in our financial markets and then an ill-advised "rush to triage" those failed businesses that perpetrated this fraud. The survivors will find that "Depression-era" economics and disciplines (savings as a foundation, limited consumer debt, delayed gratification) as well as "keeping your powder dry" so as to capitalize on bargains and opportunities are those things that will create prosperity after this recession fades. Of course I'll be completely wrong if we have some kind of really dramatic "stimulus" like a big, big war that allows Ford and GM to make plenty of tanks ( the kind that shoot AND guzzle fuel). As bleak as my outlook may be... that would be far worse.
Labels: business failures, credit crunch, layoffs, mortgage defaults, recession, trade deficit
Now Is No Time to Pile Up Debt
“Bad debt is sacrificing your future day needs for present day desires.” - Suze OrmanSuze Orman is one of the most popular and respected personal financial advisors in America today and her show on CNBC is watched by more people on a weekly basis than any other of its kind. Orman grew up in Chicago as the child of working-class Russian immigrant parents and after losing money due to bad investments in the stock market, decided to become an account executive with Merrill Lynch. Years later, she rose to become a Vice President with Prudential Bache and ultimately found her voice as a writer and TV personality. Orman later served as director of her own financial planning firm, resigning when her writing career took off. She has written six best-selling books, including
The Road to Wealth and
Women and Money: Owning The Power To Control Your Destiny and is a highly sought after speaker on the lecture circuit.
She writes a regular column for Oprah Winfrey’s magazine and over 1 million people downloaded her latest book when it was offered free for 33 hours on Winfrey’s web site. Suze Orman is a two-time winner of the Daytime Emmy Awards, the most successful fund-raiser in the history of public television, and in 2008 was selected by
Time Magazine as one of the most influential people in the world.
It would be easy to interpret Orman’s quote as simply that of a financial advisor with a fairly conservative approach to the market. In fact, she has frequently been criticized for being too simplistic. For me though, I think the quote is more complex and especially relevant to our most important relationships. I know I piled up a lot of bad debt when I let my immediate desires outweigh the long-term health of my relationships with those closest to me. I promised to be home right after work only to accept an invitation for “a few drinks”, usually not calling home to communicate and frequently arriving way too late and not in any condition for dinner with my family. Everyone suffered and unkept promises turned into a decided lack of trust in what I said I would do. It was particularly hard on my children. Morning golf rounds turned into late afternoon arrivals home because it was too important to continue rehashing the day with my buddies. Even something as simple as sharing the excess family money only after my needs had been taken of, created more cracks in relationships that were most dear. I nearly lost any long-term value because of my focus on short-term gratification.
About a half-dozen years ago, the light bulb finally went on. I needed to adjust my perspective and place it squarely behind the relationships with family and very close friends. Today, I might be accused of being a homebody or, maybe worse, boring but I’d rather make an investment that slowly but surely appreciates than continually seek the quick hit. Having that perspective means that I’m in favor of taking a long-term approach in my most personal relationships, revealing more of myself and helping others instead of being the quick-witted prankster or shallow conversationalist. While I don’t think many of my friends consider me boring, I do know they consider me patient and supportive. To me, the security of knowing that my daughter actively seeks my advice, my teenage sons enjoy spending time together even when it doesn’t involve me spending money or my wife says “I love you” in the middle of a Saturday afternoon in our kitchen is worth so much more than the best joke I ever heard in a bar. Knowing that my friends feel good about confiding some tough stuff about their lives is so much more invigorating than discussing the latest starlet’s sexcapades over too many beers.
Suze Orman’s quote may be simplistic investment advice but it’s right on the money when it is applied to our most important interpersonal relationships. Bad debt is simply that… bad debt. It happens when we can’t apply a sense of perspective to the present situation. Many analysts believe that lack of perspective created the present housing and foreclosure crisis. I believe, for me at least, that a far more damaging home foreclosure crisis would occur under my roof if I lose the perspective that it makes no sense to pile up bad debts chasing after momentary satisfaction. I’m in this for long-term appreciation and I hope you are too.
Labels: bad debt, CNBC, financial analyst, Merrill Lynch, Suze Orman, The Road to Wealth, Time Magazine, Women and Money: Owning the Power to Control Your Destiny
Beyond the Bricks and Mortar
“You can design and create and build the most wonderful place in the world. But it takes people to make the dream a reality.” - Walt Disney
To read Walt Disney’s biography is, to say the least, humbling. The man must have had at least a few clones to help with all that innovation. Disney got his start in the 1920’s drawing and producing short-subject cartoons for a theatre in Kansas City. He moved to Hollywood and founded the company that would eventually become Walt Disney Studios. Throughout the ‘30s and ‘40s, Disney revolutionized the animation business and introduced sound accompaniment with such memorable characters as Mickey Mouse, Donald Duck, Goofy, Pluto, Snow White and Dumbo. He expanded into feature films, immediately producing such classics as
Fantasia and
Bambi and eventually winning 26 Academy Awards in his career. As if that weren’t enough, he created such live-action feature films as
Treasure Island, 20,000 Leagues Under The Sea and
The Parent Trap. Seemingly never at rest, Disney produced
The Wonderful World of Disney which became a Sunday night appointment for millions of Americans in the early days of color television. As if that weren’t enough, Disney built the first grand-scale amusement park called Disneyland and was the Head of Pageantry for the 1960 Winter Olympics. That’s what I call non-stop achievement, packed into a life that was cut short by lung cancer in 1966.
What is most revealing to me about Walt Disney’s life is his love of people. Many of his achievements were acknowledged as collaborative, with a loyal group of associates and employees who dearly loved him. When he originally sketched out Disneyland, he envisioned it as a place where his employees could be with their children. He wanted a train to surround the park because it evoked memories of entertaining his daughter and her friends. To Walt Disney, the awards, accolades, possessions and recognition meant nothing without people around to share the joys. For him, having perspective is all about remembering that it’s people not things that matter most.
I know that I frequently get caught up in the possession trap and forget the people who make all the striving worthwhile. What good is a brand new Lexus if you don’t have any passengers? Isn’t that big screen pretty blank without someone by your side on the couch? Winning that big contract or getting that great job seems sort of hollow without anyone to celebrate your brilliance. Losing a parent or suffering through a debilitating illness is all the more devastating with no close friends to share the weight. No matter the circumstance, good or bad, people make it better.
Recognition, however, is only the first step toward change. What do we do now? Well, for me it’s a constant challenge to remember that life is all about people. My perspective is to totally immerse myself in those relationships that really matter. I may not always, or even frequently, succeed but I will never stop trying. No matter how difficult the person or situation, if it’s worth having it’s worth working for. I want to take the long view and look for real value, not pick through the minutiae creating mountains from molehills. My perspective is to have a vibrant, loving and respectful relationship with my daughter regardless of her independent streak and know-it-all demeanor. I want to confer true value on my friends and business partners, conveying a sense of respect and honor even in difficult times. I want to validate my wife and our partnership even as we face daunting financial troubles or issues with our children. These are real world decisions that we can make every day and there are many others that will enhance your long-term orientation and perspective. It really is all about your people and the fanciest bricks, wood, leather, wool or electronic circuitry will never change that. They might be “in addition to” but never “instead of” if you want to live an abundant, fulfilling life. Walt Disney knew that and I am forever trying to learn it.
Labels: Academy Awards, animation, Disneyland, personal relationships, perspective, Walt Disney
