September 22, 2008: Ruminations

Is it only me, but do you sense that the current crisis of confidence in our economy is going to manifest itself in ways we have not witnessed for decades?

Every generation or two, a financial panic rips through our country. Panics in the nineteenth century were quite horrid. Without a basic social safety net, thousands died or had their lives fractured in unalterable ways. The sleaze on Wall Street was worse than today in terms of totally unregulated greed. Not only were stocks manipulated, but the entire stock exchange system was in the hands of a few men.

This time, the financial mess is international and moving at warp speed.No one can predict with certainty how things will be sorted out. I believe we are in for a few years of depressed economic activity, and perhaps a realignment of the world monetary system. After a very long run, the dollar may have seen its best days. With the printing presses humming at the Treasury, look for a spike in inflation. A big spike.

That said, to panic is to court financial disaster. I have started to write about potential safe havens for your investments. I would begin to look at ETFs or Mutual Funds that diversify your currency to other countries and that pay a dividend. I strongly believe that rental real estate, appropriately purchased, will be a huge winner in the new economy. And, I believe that generally accepted portfolio diversification models will be adjusted significantly to include more foreign exposure.

This crisis shall pass. The investor who succeeds will be an individualist that will insist upon more than domestic stocks and bonds in a portfolio - and who will think holistically about portfolio investments in vehicles other than paper securities.