Wednesday, November 19, 2008

Belly-dancing in Rome

Quote of the week:

'Cowardice asks the question: "Is it safe"? Expediency asks the question: "Is it politic"? Vanity asks the question: "Is it popular?" But conscience asks the question:"Is it right?" And there comes a time when one must take a position that is neither safe, nor politic, nor popular but one must take it because one's conscience tells one what is right.' - Martin Luther King Jr. (Hat-tip to Mr. & Mrs. Pappano Hussain)

Some previous articles from the IWB have been picked up by the International Business Times. Please click here, drive up traffic and leave some comments.

Commentary of the week:

Belly-dancing while Rome burns:

At times of economic stress, many of the most unusual sources become the best places to find entertainment. For example, when times are good, we become very trusting of people in power and begin to speak of concepts such as Leadership and Experience. We begin to admire expertise in exotic fields of study and begin to perceive of the people in those fields as people that know what they are doing. When times are bad, pronouncements that would usually be seen as prophetic and full of wisdom come to be seen as they really are: comedic guesses in the dark. The economics department at one of the banks comes to mind here, but since we shouldn't get personal (not that the economics department at a bank is very personal), we shall let them escape unnamed. What is more alarming than our minor pop-economists though is that our full slate of 'Global Leadership' is completely and utterly flummoxed and confused at how to deal with this crisis. While Ittihad does not yet have a complete solution to the world's problems because our photocopier is being difficult, we do recognize bad ideas when we see them - and at the moment, all these various 'solutions' that we have come across seem to be terrible ideas.

Idea #1 is a bailout of all, if not most failing businesses, especially if they are in the financial space or in the business of manufacturing bombs or cars that might as well be tanks. Idea #2 is to let people who took on unsustainable debts pay it off over longer terms. Idea #3 is to let the government buy everything. Idea #4 is to not do anything but talk a lot. Idea #5 is for everyone to take up farming. Needless to say, there is a good story we can tell around each idea but it won't save your retirement funds because half of those are toast already and they won't allow your kids to buy the shiny new car they want in their first year of college. So what is a good idea then, you ask? Well, as I said the photocopier is not working so the full plan cannot yet be shared - but once again, each losing investment has its own dynamic so specific advice over the newsletter is difficult. Nevertheless, there are some general timeless principles that we would do well to keep in mind and I will share two of them with you today.

The first thing to do at times like this is to manage cash-flow such that unexpected events have a minimal impact on the family finances. Although I have spoken about the dangers of uncovered debts before, this would be an excellent time to take two pieces of paper and make up two statements. One is a balance sheet of your assets and liabilities to get a handle on what you owe and to whom. The other is a statement of cash flows that shows on a monthly basis how much is coming into the house and how much is being siphoned away by the marketing departments at the companies that keep sending you bills. Once you have an accurate picture of these, look at how you can move your outgoing cash from your discretionary spending and needless bills (you do not need satellite TV for example, or a TV for that matter) to the regular paying down of your liabilities. For most of us, liabilities come in the shape of a gigantic house that is not sealed too well and so gets very hungry for natural gas in the winter, so the sooner we can get it away from the clutches of the friendly neighbourhood banker, the better it is. For others, these come in the shape of cars that protect us from the company of bus-people and bicyclists so the sooner we can actually own the wheels that move us the better it is. The idea here is to weather the coming economic storm in a manner that does not leave you too vulnerable and exposed to happenings outside your control that can still be messed up further by our political and economic leadership.

The second thing is a little less financial and a little more personal. All of us at some point find that we are at some plateau in our careers and that we are neither moving forward at a great speed, nor dropping into the abyss of becoming forgettable. If this is where you are at work, then my friend, this is a dangerous time for you. With the way things are shaping out, the teenage math prodigy who couldn't get a job designing weapons of mass destruction but found one designing debt instruments which are almost as bad has ensured that your company will probably lose customers over the next little while. This means that you have to become indispensable, which may mean that you have to improve your schooling, your areas of expertise, or be willing to do more than what is merely your job in order to ensure that neither you, nor none of your colleagues at work get laid off for 'economic reasons'. Be the person that will make and facilitate the creation of indispensable teams that pull in the same direction and accomplish great things. Be the pleasant antidote to the slow poison that is workplace stress, and then go home and be even better with the family as well. A few years of being excellent at work and considerate at home will get you into the habit of being that way forever and will IA rub off on your kids and significant other as well - finding you some peace at a time where there seems to be only strife.

The one thing that you cannot, under any circumstances, even think of doing, is trusting that what is happening inside the circles of power around the world, particularly the financial world, is somehow guaranteed to provide your family with some benefit. While this may be the friendly cynic in me speaking, I fail to see much inspiring leadership around this economic crisis at this crucial time. Just as the Emperor Nero once played the harp while half of Rome burned down, we seem to have our own makers of useless noise. The difference is that while the sound of the harp is somewhat soothing, our policy-makers seem to be doing little more than belly-dancing of the noisy and tasteless kind. All this managing of the public's emotions and the relentless flip-flopping is making some of us quite dizzy. Perhaps you will protect yourself and turn this noisy dance on the nightly news off for a while. After all, you have a job to do and a family to take care of - what are you doing watching all this economic belly-dancing on TV while the education of your kids is at stake?

Noteworthy News

Finance News:

1. The most indebted town in the USA ... read more here

2. As usual, women have it right when it comes to finance. A survey of what 'Financial Success' means ... read more here

3. Swiss Banking comes to Canada ... and leaves with $5.6B tax-free ... read more here

4. PM calls for global peer review mechanism for the financial sector ... read more here

Economic News:

1. Govts. Get together to redesign the Global Financial System (again) ... read more here

2. Reflating the Chinese Dragon ... read more here

3. Home Re-sales down by 14% ... read more here

Islamic / Middle East / Emerging Markets:

1. China calls for the technology transfer of the 'Green' kind ... read more here

Interesting but not all Finance:

1. Does anyone in Toronto really know what Garbage really is, and how the recycling system works? ... (hat-tip to S Qureshy) ... read more here

2. Saudi Arabia has the oil, but Oman has found the rock that consumes CO2 ... read more here

3. How easy it is to make fake news ... read more here

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