Missing Link

It’s a turbulent time for the US  and world economies.   Investors and brokers are scared, as are the general public.  It seems all doom and gloom and as though the recession is never going to end – certainly there’s no end in sight.   Week after week we hear of companies failing,  banks requiring astronomical bailouts in order to keep functioning and the various markets plummeting – unable to stage meaningful rallies. 

In the face of such news it’s incredibly difficult to remain optimistic about the future, and many investors are pulling out completely and waiting for the dust to settle before returning to the markets.  I can’t say I’m immune to the fear, though I can say I’ve not acted on it. This is in part because I have a financial advisor who I trust managing things for me – which certainly helps – but also as a result of some discussion and article sharing with my Dad which has taught me to be patient.

When I first met with my financial advisor several years ago, he explained to me the importance of investing long term.   He explained then that the market , while up at the time, would not remain so.   There would be periodic dips – recessions and in some rare instances depressions – that reflect a marked reduction in value of investment assets.  Overall, however, the market has continued to trend upwards and generate value.  The key to prosperity there is to stay the course through the down times and reap the rewards when the markets recover.   Hence – invest long term.   

Obviously I am leaving out some aspects of this – I am not a financial mastermind, I don’t have any degrees dealing with economics and certainly don’t have a wealth of experience to draw on.  I do have common sense, though.

It’s really difficult to look at an investments value and watch it decline day after day.   It’s difficult when you see half of your net worth disappear in the course of a month and you didn’t do anything to cause it and couldn’t do anything to prevent it.  It’s incredibly tempting to say “ENOUGH! PULL MY MONEY OUT NOW AND PROTECT IT!” which is something I’ve been incredibly tempted to say many times in the past few weeks. 

Common sense, however, has prevailed in my case.  I’ve declined to utter those words.  In fact, I am almost tempted to pump more money INTO my investments.  Sure they may decline in value some in the coming weeks (and by “may” I mean “WILL”), but they’ll recover and I’ll end up better off for it.

If we look at past evidence of how markets perform after turmoil such as what we’re experiencing now we see that not only do the markets recover,  in some cases they recover incredibly fast and generally lead to significant prosperity for those who stayed in the game.   

I’m certainly looking forward to the recovery of the markets – once investors and brokers realize it’s not the end of the world and start investing again – and the prosperity that will follow.  

Keep in mind, though, this is stuff I’m in no way, shape or form qualified to talk about – but I’m willing to bet that time will show that I was right.

I’ve been thinking a lot lately about money, spending, budgets, etc.   This has been prompted by the global financial crisis.  It started with me looking at my own spending, money and budget – looking at where I could do better (there are plenty of areas…).   I then turned to the government, with it’s HUGE deficit and the national debt which grows by staggering proportions every day.

One of the big problems that caused this crisis is the housing bubble that burst in the recent past – which was driven by the subprime mortgage industry.    This was an industry that, essentially, let people (temporarily) live beyond their means.   And, ironically, that’s exactly what caused the whole industry to implode in such a spectacular fashion that it took several Wall Street investment banks, and several regional banks, along with it (not to mention the rest of our economy…).

One of the things I was taught by my parents is that it’s important to live within your means – essentially the principle that you have to have a budget, and your spending cannot be more than your income.  Preferably your spending is LESS than your income so that you’re saving money and – if you’re smart – letting it work for you (stocks, mutual funds, however you want to do it) via long term investments.  That’s how I was raised, and that’s how I operate my finances.

So, with that in mind – and with my thoughts turned to our government – I had to ask:  Why doesn’t our government do that?

It would seem that our government hemorrhages money.  It’s horribly fiscally irresponsible, and yet we’re looking at THEM to answer our financial crisis?  A group of people who have an addiction to spending money (and who wouldn’t if they could just keep printing more!?) are supposed to tell us how to fix the economy?   Excuse me for being blunt but I have to ask – are we all retarded?!

The solutions proposed are nothing more than a band-aid.  They MAY fix problems temporarily, but if I were to guess I’d say the problem will resurface in the not-so-distant future and likely things will be much worse than they are now.  

We NEED to reel in our leaders and demand fiscal responsibility.  Our spending is skyrocketing, yet very few are seeing any benefit from it.  Is our national infrastructure better?   Have we fixed health care, or schools?  Have we made any inroads in helping people in our own country?   No – we haven’t.

Schools are worse, health care is lagging, unemployment rates are up, our economy is going south. 

Where are we spending these billions upon billions of dollars?   

Well, recently, to bail out companies that took unacceptable risks and made incredibly poor decisions.  Decisions and risks that were made possible by….. OUR GOVERNMENT!  

We’re also spending BILLIONS a month in Iraq to wage a war very few here really want to be involved in, for some reason that is nebulous and difficult to really ascertain. Does anybody really know what we’re even doing over there anymore? They have a government and, presumably, a military and police force… so why are we doing all the work for them? More importantly, why are you and I paying for it?

We need to take some of the power back from the government, demand that they live within their means, and hope and pray we can get some fresh minds in Washington who aren’t going to keep on going with the status quo and will actually do their jobs – work for the people.