Financial Conservation – A Clear-Eyed Perspective On The Changing Economic Environment

Had there not been such a significant breakdown in the ethical standard of enforcing the rules and regulations that have been on the books for some time, “crisis” would not be the dominant word used to describe our current economic situation.

When we get behind the wheel of a car, it is the responsibility of each and every one of us to drive their vehicle in such a manner that maintains safety for themselves and others, regardless of what the road and weather conditions may be — or we pay the price.

Through Core Asset Conservation, the individual takes back control and ownership of their future. By taking the initiative to reduce the level of risks associated with one’s core assets, the individual is in a much stronger position to keep themselves and their families in step with the unalterable cycles and milestones of life, regardless of what a changing economic environment may put before them.

Ultimately, ethical systems that stand the test of time are built, maintained and sustained by a preponderance of ethical individuals… a simple fact of life.

We’ve left our small and mid-sized businesses behind [that employ 80% of our workforce]; and we’ve left our American people behind… This does not an economy make.

President Obama is trying to nudge banks in the right direction, at least on the surface:

-Make more loans to small and medium-size businesses.

-Increase modifications of underwater mortgages.

-Bring executive compensation under control.

-Give more support to legislation overhauling financial regulation.”

The point is made with all due respect: Military recruitment has gone up as unemployment has risen. Is this the best type of job opportunity we have to offer our young people?

or “The United States of Wussess”?  Read on…

http://finance.yahoo.com/tech-ticker/article/382117/The-United-States-of-Wusses?tickers=SPY,DIA,XLF,EEM,%5EDJI,%5EIXIC,QQQQ

As indicated in my previous post, in its struggle to get back to reality, Japan has finally brought in a new breed of politician who is actually delivering on the campaign promise of bringing real transparency to how government spends the peoples’ money.

In the following link Howard Davidowitz lays out how our current problems (artificially low interest rates and a bailout culture, to name a few) are similar to those that have dogged Japan for two decades. 

In their search for answers, the  Japanese sought advice, no less, from the same guy who now has our president’s ear, Lawrence Summers, Director of the White House’s National Economic Council, and he’s been singing a different tune recently.

Is it overly optimistic to think that maybe we can learn from the experience of others and not take the same long, hard road back to recovery?

http://finance.yahoo.com/tech-ticker/article/381901/Howard-Davidowitz-Sees-Our-Future-And-It-Is-Japan?tickers=%5En225,spy,dia,udn,uup,qqqq

The review has gotten plenty of air time on television and seems to be reviving public interest in politics, which many Japanese have come to see as largely irrelevant to their lives.

‘This kind of thing is fundamental to democracy. Before, things were too secretive,’ said Yoshitomo Yokoyama, a 77-year-old retiree who came to watch. ‘This is definitely a positive change.’

A survey conducted Nov. 21-22 by the Mainichi newspaper showed more than 70 percent of respondents supported the budget review.

Taxi driver Koji Iwano said the public review will bring some fiscal discipline to Japan.

‘It’s clear that the spending until now was irresponsible,’ said Iwano, a 43-year-old from Saitama, north of Tokyo. ‘If Japan were as careful as many mothers are about watching their family’s budgets, we’d be better off.’”

http://news.yahoo.com/s/ap/20091127/ap_on_bi_ge/as_japan_budget_slashing

The Fed stated in documents released from it closed-door meeting held earlier this month that in its efforts to fuel the recovery it is holding to its bank lending rate at basically zero. It acknowledged that there is the possibility, although “relatively low” in their estimation, that it “could lead to excessive risk-taking in financial markets” causing another speculative bubble.

The Fed anticipates that it could be five or six years before employment levels and the economy return to consistent health.

The Fed also announced that it has tightened its regulations regarding conflict of interest rules governing the boards of directors of its 12 regional banks.

Unlike pre-crisis days, I take it as a positive sign that there is some movement from public officials towards a more realistic and forthcoming attitude about dealing with our current state of affairs.

http://finance.yahoo.com/news/Fed-superlow-rates-could-fuel-apf-2316913196.html?x=0&sec=topStories&pos=main&asset=&ccode

http://finance.yahoo.com/news/Fed-tightens-conflict-of-apf-3362409628.html?x=0&sec=topStories&pos=6&asset

‘Unfortunately, the regulatory regime that failed so terribly leading up to the financial crisis is precisely the regulatory regime we have today,’ Treasury Secretary Geithner declared. ‘We need comprehensive financial reform.’

There is a way to have a financial system with a ‘reasonable degree of stability’ and ’serves a public purpose,’ Galbraith says. ‘But it does require having a government which is not run by the financial sector.’

Galbraith didn’t use the term ‘Government Sachs,’ (see link to New York Times article in the attachment) but said ‘we’re not going to get where we need to get…if you have this revolving door where all the people from Wall Street go down to Washington and offer their services and basically serve their own worldview and the financial interests of their friends.’”

MED Comment: Arsonist or Firefighter?  You can’t wear opposing uniforms at the same time.  Which one is it — really?

Secretary Geithner served in key economic roles such as an Under Secretary of the Treasury for former Secretaries Robert Rubin and Lawrence Summers (current Director of the White House’s National Economic Council for the President), and more recently as President of the Federal Reserve Bank of New York.

Clearly, Secretary Geithner and other members of the major insiders club who exercised powerful influence on the economy while shuttling back and forth between Wall Street and Washington — in both democratic and republican administrations — knew all to well the state of the “regulatory regime” during the 20-30 year period of time that our severly under code financial house of cards was being constructed. 

Now that the house is on fire, these public displays of concern and outcry are following the standard script.

The media thrives and depends on obsession of all types.  It is becoming increasingly more obvious how the tremendous focus given to the democrat vs. republican win-at-all-costs obsession is serving as a convenient sideshow distraction to divert the little guy’s attention away from a power-clique virus that, with no allegiance other than self-dealing interests, has targeted and infected the heart of our economic system.

It defies common sense to accept the notion that this inbreeding of revolving officials, who wear for show hats from all sides of the political spectrum, will suddenly in earnest stop enabling and start demanding from fellow co-dependent power club members — with heavy interests in the status quo — the kind of across the board transparency critically necessary to restore the health of our economy.

It’s out there, but we need more of that real type of independent stand-up leadership that when the heat is on will not shy away from flipping on the lights to dissolve these veils that cover the hidden agendas of those — on all sides — whose priority is not finding real solutions to society’s real problems beyond their own tight circles of self-serving interests.

Real change for the greater good sounds and feels warm and fuzzy, but it’s just another empty slogan until you back it up.

http://finance.yahoo.com/tech-ticker/article/375918/%22A-Govt.-Not-Run-by-the-Financial-Sector%22-James-Galbraith’s-Rx-for-Wall-Street-Reform?

The New York Times – Banks Bundled Bad Debt, Bet Against It and Won

http://finance.yahoo.com/banking-budgeting/article/108476/banks-bundled-bad-debt-bet-against-it-and-won;_ylt=AsPpoe6hS0WywAGeBYg5NUwy0tIF;_ylu=X3oDMTBua24wNzBoBHBvcwM5BHNlYwNhcnRpY2xlBHNsawMx

Bull:

Liz Ann Sonders, chief market strategist at Charles Schwab, represents the more bullish point of view saying, “It’s very clear we’re in the midst of a V-shaped recovery.” Tech Ticker credits Ms. Sonders with keeping its viewers ahead of the curve. It goes on to say, “In October 2008 she said the recession was upon us and would be deep. Remember, this was months before the NBER’s official declaration and at a time when most economists were debating whether or not a recession was in the offing. In June 2009 she said the recession was ending, if not already over, a highly controversial statement at the time.”

Ms. Sonders says, “I’m on the more optimistic end of the spectrum,” she says. “I’m not expecting the kind of pop in growth you’d normally see after such a big compression, but probably [growth] still above what is a very low level of expectations.”

http://finance.yahoo.com/tech-ticker/article/369869/On-the-Money-So-Far-Liz-Ann-Sonders-Is-%22On-the-Optimistic-End-of-the-Spectrum%22?tickers=%5EDJI,%5EGSPC,SPY,DIA,SCHW,TIP,%5EIXIC

Bear:

Robert Prechter, founder of Elliott Wave International and author of Conquer the Crash, is on the other end of the spectrum cautioning retail investors to “stay away… for now.” He was bullish near the lows in March, but now says the stock market “is in a topping area.” Mr. Prechter compares the current market to those of 1966-74 or 1929-32, where massive bear rallies gave way to another “big leg down”, i.e., a W-shaped recovery.

Mr. Prechter is predicting another crash in 2010 that will bring stocks below this year’s lows. His word to the wise, “be patient, don’t rush it” keep your money in cash and cash equivalents for now and wait out this bear market. His analysis further indicates 5 or more years before we turn the corner into real bull territory and “it’ll be the buying opportunity of a lifetime.”

http://finance.yahoo.com/tech-ticker/article/367008/Bob-Prechter-Bear-Market-Rally-Is-Over-Stocks-Headed-For-New-Lows?tickers=spy,qqqq,dia,%5Egspc,%5Edji,uup,udn

Ms. Sonders and Mr. Prechter are professionals who have both made, through extensive research and study of the same market history, reasonable sounding arguments for their diametrically opposing views.  They represent armies of experts on both sides of the ongoing bull vs. bear debate.  Whether the market as a reflection of the underlying economy will experience a W, V, U, “Square Root” or whatever shape of recovery, remains to be seen.

As emphasized in my previous posts, my personal view is that we will be stuck in a volatile environment until we have seriously tackled the underlying structural rigging problems of our economy that were decades in the making.

However, I am optimistic that, unlike before, these problems are being dragged kicking and screaming out of the shadows into the public eye where with full recognition — over time – they will be resolved.

How to Solve the Dilemma: Core Asset Conservation

First, let’s stop buying into this Wall Street notion that we have to “climb the wall of worry” for the rest of our lives. There are alternatives.

As a financial planner, I specialize in the management and preservation of what are defined as Living and Legacy Core Assets.  For my clients, the bull vs. bear dilemma is solved by placing these core assets in a step structure that provides, safety of principal, locked-in gains as credited and liquidity.  By utilizing the indexing method, clients are able to share in the upsides of the market, but have an automatic defense system in place that eliminates the possibility of losing principal or credited gains whenever the market wave patterns turn negative.

When you know that your Living and Legacy Core Assets are safe, with non-core assets that have direct exposure to the markets, you are in a far stronger position — financially and psychologically — to either try and time the upswings and downswings, or just ride out any of the more severe downturns which may occur and not be forced to sell at the wrong time.

From the standpoint of timing, milestones in life — college tuition, an untimely death, guaranteed retirement income, etc. – are totally indifferent to whatever state the economy or the markets may be in at the time they arrive. 

In today’s world, true asset allocation is adding the guarantees of the step structure as a permanent feature to the mix of diversifying risks among the wave patterns of various assets classes in order to provide the stability you can rely on to support life’s milestones for yourself and those who depend on you.

For a more detailed explanation of Core Asset Conservation, click on the following link:

http://www.financialconservation.com/core_asset_conservation.php

“Repealing Glass-Steagall was ‘obnoxious’ and a bipartisan ‘absurdity’…

The end result of the repeal was you have ‘taxpayers subsidizing risk-taking’ on Wall Street…

‘It’s the most anti-capitalist thing I’ve ever heard of in my life.’

…Glass-Steagall wasn’t regulation, ‘it was common sense’…”

http://finance.yahoo.com/tech-ticker/article/369201/Why-Jamie-Dimon-Wants-to-Silence-Paul-Volcker?tickers=JPM,GS,MS,WFC,BAC,C,XLF