Finding Yourself in an Investment/Economic Outlook

Dear Jack,

This morning I attended a Lancaster Chamber of Commerce event at the newly re-opened DoubleTree resort, entitled “2010 Banking and Financial Forum.”  To be honest, I don’t think many people really knew what was going to be presented with such an ambiguous event title, but it was enough to pique the interest of 325 individuals from all kinds of different industries.  I go to these banking/finance forums for sheer networking, and a bit of entertainment, value.  I say this because most of the time the presenters make some outlandish prediction of what the investment world or economy will do in the next three months and how it will effect everyone – and they have no idea what they’re talking about.  They overwhelm and dazzle the attendees with charts and statistics that aren’t put in perspective, and since no one wants to swallow their pride and admit ignorance, people nod and drink the Kool-aid of whatever the economist delivers.

But not today.

Today, the presenter, a Mr. James M. Meyer, CFA, of  Tower Bridge Advisors, did a pretty good job at not making any outlandish claims.  He presented the facts of both the investment and economic worlds, made some casual remarks that things aren’t quite as bad as we think they are, nor are they as good as they could be, and really left it at that.  He then introduced a panel of local bank executives, and – well, it’s not important.  Suffice to say, I didn’t find much value from the bankers’ discussion points.

My own recap of Meyer’s talk is this:

  • Productivity, corporate profits, and GDP are all at record or almost record levels, but are there at the expense of employment
  • Businesses aren’t borrowing, Americans are saving, disposable income is rising, and households are paying down debt
  • Government spending and the Federal Debt are nearing levels of post WWII
  • Business recovery (Gross Domestic Product) is within the range of normal, but is still below average
  • The key to getting our economy back on track is confidence
  • Washington has to work with the private sector, not against it
  • There is no double-dip recession and no deflation – these are fabrications of journalism.  (I mentioned this once).

So, what does this mean for the individual?  What does this mean for you and for me, who have little control over such things as national debt, in/deflation, unemployment, economic recovery, the regulation of derivative trading?

If I can be blunt: it means nothing.

The advice I give you to, Jack, and the advice we give to all of our clients, is the same – no matter what the economic or investment world is doing.

  1. Spend less than you earn
  2. Build liquidity
  3. Set long term goals

These never change!  At most economic forecasts or outlooks, and all the time on the media outlets, projections and recommendations are always changing.  It’s dizzying to keep up with what the latest economist is predicting (and maybe that’s why no one seems to cross check their claims from years/months/days past to what actually happened).

For us, it’s simple.  Spend less than you earn, build liquidity, and set long term goals.  I can guarantee you that if you follow those principles, you can ride out any economic or investment storm, no matter who is saying what about how bad or good it is.  Till next time, Jack.

Sincerely,
J.

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