Theme 9: Transfer of Wealth

January thought: We should continue to see a transfer of wealth as foreigners purchase depressed equities, real estate and possibly homebuilders. While this is an intuitive progression in the era of globalization, it will likely serve more as a buffer than a savior.

Update: After a string of stakes in financial institutions at the beginning of the year, foreign investors have, for the most part, been on hiatus. Given how quickly they lost money on their initial round of investments, you can’t blame them for taking a step back.

Distressed price points should begin to lure cash flush overseas funds back into U.S assets and I expect “franchise properties” to be absorbed as this process continues.

What remains to be seen is whether this occurs before or after a potential dollar debasement, an occurrence that might arrive if and when China revalues the Yuan.

Theme 10: Run to the Light

January Thought: The financial dynamic will become increasingly difficult but individuals, instead of burying their heads, will demand greater involvement in their financial decision-making process. This evolution of empowerment, or the need thereof, will be a central tenet of our forward progress.

Capital preservation, debt reduction and financial intelligence will stand tall when 2009 comes knocking.

Update: Despite historic government intervention, equity supply mounted as credit conditions deteriorated and the dichotomy was finally brought to bear.

As the owner of a small business, I would benefit from an economic boom that lifts the veil of despair and climbs a wall of worry. While that is my sincere hope, I’ve learned far too often that hope isn’t a viable investment vehicle.

Much like the dot.com prophecy proved true—albeit not before the tech crash—an “outside-in” recovery will eventually usher in the golden age of globalization. Alas, that cannot occur until we see debt destruction.

Once we chew through the process of price discovery, the foundation for a legitimate economic expansion will be in place. There will be fantastic opportunities for those who properly prepared and preserved capital. Our mission in the rain is to arrive there in one piece and avoid getting caught up in the ever-spreading societal acrimony.

I offered on Monday that if we failed to introduce a regulatory response -- one I hoped included clear guidelines, accountability, culpability, full transparency, staggered, strategic funding and the dilution of equity of (and investigation into) those complicit in creating the financial engineering -- there would be profound socioeconomic consequences.

We’ve worked hard in Minyanville to investigate alternative initiatives that protect savers and punish those that abused the system. One such effort occurred yesterday as our community weighed the merits of the Ireland Mandate to guarantee the deposits and select debts in six Irish banks.

The upside of anger is that the sooner we go through this, the quicker we’ll get through it.

Risk management over reward chasing and discipline trumps conviction as we find our way.