Monday, October 13, 2008
One commentator put it this way: “If you aren’t anxious and frightened, you aren’t paying attention.” Another called it the financial equivalent of the collapse of the Twin Towers of the World Trade Center. For many of us, it’s simply headline news and numbers on a page. So far, abstract. But not for long.
Many are enraged that such a collapse could result not by the savage assault of some foreign enemy, but by an enemy within. Greed. Misrepresentation. Disregard for the rules in pursuit of quick, front-loaded profits. Wealthy money-lenders put vulnerable borrowers at risk and pocketed the cash. Naïve borrowers accepted the offer to take on impossible debt. Housing values reached unsustainable heights. The resentment is at a fever pitch, and will certainly be a factor in the coming election. The real impact all of this will have on our personal lives remains to be seen. Untold wealth vanished in a week’s trading. The flow of money came to a screeching halt. Giant institutions turned up with empty pockets. Politicians shrugged. The finger-pointing reached new levels.
The enormity of this economic earthquake is difficult to grasp. We wake up each day with new questions. And yet, for now, most of our lives remain pretty much the same. Those of us who’ve been around for awhile have seen the markets crash and burn and then recover. We know the cyclical nature of capitalism. Adam Smith taught us that free markets inevitably purge themselves of wrong-doers. And yet, this one seems qualitatively different than the others. Theologians and prophets will point to the simple wisdom that has held society and culture together for time immemorial: ignore your Creator and the revealed rules of the game at your own peril. Eventually, we will reap what we sow.
As the week unfolded, I’ve observed two personal responses from close range that will stay with me; two friends who faced the blistering hot winds of the storm from differing vantage points. I’ll not name them for reasons that will be apparent. One has a considerably large portfolio of investments. The other divested himself of his stock holdings in December of last year.
The first, let’s call him Bill, is one of the smartest financial guys I know. He’s a numbers guy who has spent his career patching up sizable companies who have lost their way. He knows balance sheets as well as profit and loss; receivables and payables and exotic financial instruments and the strategies of principals for whom cooking the books is a way of life. Not that long ago, he sat in a penthouse conference room in New York with some of the high level executives at AIG to sort out a company’s woes; he said it was like jumping into a lagoon stocked with hungry, agitated Great White sharks. Over the years, he’s built up a respectable, well diversified portfolio of high quality stocks and bonds. He’s a conservative at heart; no hedge funds. No short selling. No options trading. Just good dividend producing stocks. Carefully selected. And these last two weeks, he’s seen a substantial, devastating drop in the value of his hard earned investments.
“I’m angry,” he confessed to our small group. And we knew it was true. Bill understands the headlines better than the rest of us. “All my life, I’ve taken pride in taking control of my own future, working hard for my clients and caring for my family. And like never before, I feel I have no ability to control my financial destiny.”
My second friend, let’s call him Pete, is also a hard-working businessman. He’s helped countless others open and build small town businesses. Lots of the Inland Empire gas stations and convenience markets are serviced by Pete. He’s also built a solid financial base. And when he saw oil break one hundred dollars a barrel and continue upward last year, he knew it was only a matter of time before the stock market would be hit. In December, he went to cash.
All of us would like to say we had Pete’s insight and fortitude to go against the popular tide of optimism. This week, Pete is not concerned about his personal portfolio – his concern is actually more profound. It’s his business guys. Volumes are way down. Spending has come to a standstill. People don’t stock up on those extras at the convenience store when the economy slows. He’s wondering how many of his people will survive.
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It’s Monday morning, you are a leader. The dark clouds are forming over there on the horizon carrying a message of gloom. The politicians have lost their ability to persuade. Business leaders and the executives of financial institutions have diminished credibility.
As the week came to a dismal conclusion, both my friends had good advice. Pete said, “Ken, you know it’s always been my philosophy to travel light.” It’s true. He has. Stick with what you need, Pete’s always advised. Don’t feel you have some sort of claim on excess; some kind of divine right to the trinkets that give the impression of wealth.
Bill’s remarks continued the other night, and were moving. He went on to tell the group – “You know, I’ve never before been so challenged to think about where my security really comes from.” It was a rare, vulnerable moment. My strength, he added, does not come from politicians or my capacity to fill a need in the marketplace or my month-end statements, for that matter.
“My security,” Bill said, “comes from the One who lives and loves and protects and sustains.” And then he added, “Really, I’ve got nowhere else to go.”
So there it is. Travel light. Trust God. Open heart. Open hand.
You and me. Pete and Bill. We’re in it together. And we’re not alone.
Copyright Kenneth E Kemp 2008