I have seen the enemy, and the enemy is us.

Understanding why the current dilemma in Washington happens.I was trying to explain the current problems facing all of us to a colleague the other day. It seemed for some reason I just couldn’t get the point across so I came up with this to make my point.
( You fill in The blank because it fits anyone.)…called their Government the other day because they saw that if others were getting a ( Handout or Bailout, you decide.) they should ask also. It wasn’t like they didn’t have any problems, or needed a lot of money. Just something to get them by till the tough times went by.

The phone was answered by a very monotone voice and asked what they needed. Once they were told the voice said…We need to check for funding Please Hold….As they waited, they heard a vehicle screech to a halt at their neighbors home. A number of government officials forced their way into their home, and left with what appeared to be money. The monotone voice came back on the line and stated funding for the request had been appropriated.

The caller putting what they thought happened into words asked if they just took the money from his neighbor? The voice replied. Of course. The government doesn’t really have money of it’s own. It all comes from tax payers. They used to teach that in school, but for other reasons that had been stopped.

Feeling uncomfortable with what happened they asked if their neighbor would know? The voice replied that if they were uncomfortable with taking from someone so close, they could get the final funding from someone else in another region of the country.

Feeling better that they wouldn’t know the person directly they said …That would be better. The voice said fine and hung up the phone.
Later during the year they heard a screech of tires outside their garage. It was the same men they seen go into their neighbors home, but this time they were going into the callers garage. When they asked what they were doing, they were told they had come for one of their cars. Since they had two, someone needed the other. But the caller yelled ” I just bought that! ” Undeterred the government officials put the car on a truck and informed them, that the car was going to a needy cause, and might only need it for a short time, however just in case, if it’s needed for anytime longer, they had better save up because they would still be liable for any repairs or fuel charges. The caller just hung their head, and said I guess what comes around, really does go around.

The problem is not with the pendulum.

You keep hearing this explanation and that explanation for the trouble with the economy. One says “blame this”…another says “blame that”….all seem to be missing the bigger point.  Let me state right here, right now…”There is ..NO…I repeat NO….single reason for the current economic crisis. The situation was caused by a multitude of problems that accumulated, and once they reached the tipping point it was an all out assault to the downside.

Everyone from TV to Radio to what ever has an opinion they want to share saying theirs is correct. Problem is most of them are. An accumulating total of bad ideas gone wrong is what happened, and that brings us back to the pendulum.

Pendulums swing back and forth. We have just witnessed one side of the swing…The other side is now taking place.

Just as hard and as fast as the former swing went, the return stroke can be just as hard, and fast. What most are unaware of is where they are on the swing. Some got off earlier and thought they were safe. Some continued to ride thinking it would go on for ever. Both are coming to realize they were wrong. The problem inherent in a pendulum swing is once you get knocked down, it’s not the first strike that’s lethal. It’s the strike that happens as your trying to regain your footing, and unprepared for the second swing coming from the opposite direction. In a weakened state, and thinking the worst was behind you most will allow themselves the time of being vulnerable to do what they call” Healing from their wounds” not realizing the next punch can be much more severe than the last.

The only thing one can do to be prudent in these economic times is to realize a pendulum swings..That’s what it does, and that’s what it will do. You can not stop the swings in life, nor in economic terms. Your best defense is to grasp the pendulum in it’s swing knowing you’ll have to release at some point. Or make sure your not vulnerable to the swings, and either move out of the way, or Duck!

Mark

© 2009 Mark St.Cyr All Rights Reserved

The difference between Clarity, and Politics

One would have just crawled from under a rock, or beamed in from another planet to have not noticed what is happening in our financial markets. Everyone, and I mean everyone, has an opinion on the cause, the root cause, the projected cause,  and on and on and on and…….. You get the picture.

What most are witnessing, but have truly never been exposed to, is the truism of the saying…” The markets are looking for clarity.”  Most difficulties in any environment wont come to full fruition until the extremes are met by both sides of the problem.

Politics by it’s very nature surrounds itself in the ( “Grey Area”)  of problem solving, and problem recognition. Financial matters by their nature only resolve themselves with clarity ( “Black and White”) resolutions. The more vague you can be in the political arena, the more you can bend, and twist, or spin answers and ideas to fit your needs. That is not so where  “Real Money” lives, and works.

If the goal of the government is to try and be as vague as it can to support a political party, or ideology……The worse the financial markets will be.  In fact, they’ll  recede from making any decisions to spend, and or will only take positions that  give “Safe Harbor” to their money, and assets.

This in turn is exactly the opposite of what each side wants, and that  creates the negative feedback loop that we all hear about in the media. It’s at this point when the politics of the day, however political in ideology it may be, must have clarity for the markets to understand so that it may resolve itself to move forward, for good, bad, or indifferent.

Mark