Financial Staying Power
"Once in a while you get shown the light in the strangest of places if you look at it right." --Grateful Dead
The New York State Lottery tagline used to be "You've got to be in it to win it." The same can now be said for mainstream society as a whole.
Nestled within last week's corporate communications of human resource related freezes, capital expenditure reductions and non-strategic business divestitures was perhaps the single most important catchphrase for 2009. 
Alcoa (AA), commenting on the current business environment, offered that it would "identify and implement effective responses that strengthen market competitiveness and financial staying power during the economic downturn."
"Financial staying power" isn't a term often used by corporate America as it infers that a more pronounced and prolonged downturn looms. It is, however, something we must consider on an individual basis, as it will define our ability to navigate the prickly path that lies ahead.
While the market has a knack for traveling the path of maximum frustration and humbling us all, all indications are that the forthcoming year will be ripe with risk.
There are two primary ramifications; the first is financial and the second social. In terms of the performance, several elements are vying for our attention. Viewing the market through our four primary metrics allows us to compartmentalize the process.
- Technical Analysis: Perhaps the most daunting dynamic of the price action following the November lows is that mainstay averages have worked off oversold conditions as a function of time rather than price. This is called "churning" in trading parlance and points to lower prices still.
- Fundamental Analysis: While news is always best at the top and worst near the lows, the operating environment has shown few signs of stabilization. All indications suggest business "fell off a cliff" into year-end but the reaction to the imminent earnings will speak louder than the news itself.
- Structural: As the equilibrium between asset classes remains elusive, the single greatest risk remains a seismic readjustment in currency markets. Therein lies perhaps the most profound path of maximum frustration, one that punishes the savers who proactively prepared for the current crisis.
- Psychology: While negative sentiment creates fertile ground for bear market rallies, aggregate risk appetites are contracting as voluntary and involuntary thrift collide.
This continues to manifest despite efforts by government officials to induce borrowing rather than allowing for the painful yet necessary debt destruction required for a more stable economic foundation.
The other side of our finance-based global machination—the same foundation that allowed subjective mark-to-market equations to determine our collective health—is that we, the people, are now tied to the performance of financial assets. As go the markets, so goes society, for better or for worse and regardless of socioeconomic standing.
As we often say in Minyanville, social mood and risk appetites will determine our financial fate and by extension, the way in which we live our lives. That was positive reinforcement during the era of conspicuous consumption but has troublesome implications as we edge through the age of austerity. 
Last month, a report by the U.S. Army War College discussed the possibility of Pentagon resources and troops being tapped should the economic crisis lead to civil unrest, such as protests against businesses and government or runs on beleaguered banks. While the notion of social upheaval once seemed foreign to many, it is entirely more realistic as the bear market claws at those we love.
Here in the heart of New York City, where the financial crisis is most acute, social mood has taken a turn for the worse. Last week, no fewer than eight of my friends were laid off, broke up or told me they're going through a particularly tough stretch. Each and every one of them is fighting depression, which begs the natural question that if society is a sum of our parts, what does that portend for the direction of society as a whole?
We're at a critical crossroads, one that will have far-reaching ramifications for future generations. Some would offer that the mere mention of such topics is out of bounds but I prefer to take a different approach. It's healthier to discuss these directions while we're still in a position to affect positive change. Indeed, if policy makers were more proactive, we would have mitigated our risk long ago.
Staying power indeed. Now, more than ever, it's incumbent upon us to remember that if we're not part of the solution, we're part of the problem. That introspection and execution is not only necessary for a prosperous existence, it's a foundational element of the way we live and the legacy we'll one day leave for our children.
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
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move to japan or convert to yen as Mr. Practical did ? But everybody says, Japan wont allow yen to appreciate any more than dollar.
How can we, the savers, protect ourselves. Everything the .gov does seems to be against "savers" and benefiting "irresponsible"/moral-hazard.
No inference or implication drawn.
Things are tough out there, not doubt.
This should have been a major headline but was lost in the shuffle.
Another "lost" story- Did a German Govt. bond auction fail recently?
How can an individual investor maintain their financial staying power? Options:
Keep everything as is-in cash at least as it shows in my digital world. If we do this, what happens if the dollar as we know it no longer exists?
Cash out and have the actual dollars on hand. Again, how does this help if the dollar is worthless?
Convert to gold-can't exactly buy my favorite brew with gold coins.
Convert to Yen and ride out the US currency problem. Is the Yen insulated from a dollar repudiation? Are Japanese banks immune from a run in the U.S.?
Worry less about a total collapse of the financial or currency markets and more about making the right investments (FXY?)
Great article and site.
I just wanted to say thanks for keeping the discussion going. The "social acrimony" aspect should be worrisome to any thinking person. I am to understand that gun sales are at an all time high here in my state. Recently, I read where a local public housing project will start to allow residents to keep guns in their units. The "Army Times" published an article several months ago about the stationing of an on-call brigade with the "North Command" which includes the US. First time this has ever been done. The brigade will be trained to handle civil disobedience, chemical, nuclear, and bio-hazard attacks. Tough to talk about...isn't it? These are things we have all read about concerning "somewhere else."
You and Mr. Practical deserve our thanks. I will echo Mr. Practical's sentiment that education is the best investment that any of us could ever make in ourselves and the ones that we care about. I see proof of that every day.
Here's a question to further the discussion: Working at a major university as I do, some people have observed to me that certain aspects of the University are "inefficient." As someone with a reasonable amount of corporate experience, I can readily agree. However, I always respond by saying, "How do you feel about the University? Is it a great University?" The answer is always without hesitation, "It's one of the best in the world." Having set the hook, I real them in with, "Well, the inefficiency doesn't seem to have hurt us any. Great things are still happening here." As I look at our country, I ask myself, "Are great things still happening here?" A simple question. No doubt too broadly applied. But I think you get the point. The courage and intelligence of America can lead to great things, but we have lost our way. The fact that the stock market has dropped 50% and will probably drop a lot more doesn't bother me as much as the fact that common folks are rushing out to buy guns. Are great things still happening here? That's the central question.
My very best regards,
Gary
We're here mostly because there weren't enough people of good will around that were willing to go to the mat against the vermin out only for themselves.
We lost all sense of decency, and bought , as a nation, the bill of goods sold by the left. Yes, the left. I ....was never amused.
No truly conservative regime would have allowed the absurdities we have lived with for the last 15 years. From nonsense financial slight of hand to invasions by millions of illegals.
Virtually none of our problems were inevitable. They are the product of systematic pillaging by greedy sob's, of which there seems to be an endless supply.
Sorry if this is a bit off topic, but having to worry that my savings and 'clean living' might amount to nothing does p*ss me off.
While we were defending our country from terrorism greed was tearing us down from within. Bush and Cheney neglected their responsibilities of oversight and regulation. But it was not all their fault and I commend them for doing what I think they felt was the right thing to do in our fight with terrorism. The fight is not over.
Part of the blame falls on the 45 million government workers who are suppose to be manning the oversight, regulation, policing, prosecution, judging and SEC enforcement. Yep while you were sipping tea and attending the barrage of government retirement parties for fellow workers on our tab the world around us transformed into a huge cesspool. While you busy trying to figure out how best to use your vacation time with your sick leave to match your 14 paid holidays and comp time our country went to hell. Every government function is in shambles. Our markets are in ruins. Our jails are full, Gangs are in charge, drugs are every where, millions are unemployed, and people are Hungary and destitute, they are sick and dying for lack of affordable medicine. Our banks are insolvent and our national debt has multiples with decimals from what it was just 10 years ago.
How's that tea tasting? Your little cocoons feeling a wee bit drafty? Worried about your retirement? Worried about loosing your job? Your investment portfolio in the toilet? Welcome to Johnny's world. He's been there for 30 years.
JPM
I see the unpredictable values of currencies manipulated by the winds of speculation, the skyrocketing then exploding values of financial derivatives, the illusory assurance of hedge funds and the volatility of the manipulated prices of silver and gold.
Yet when all is said and done, the writing on the paper may only have the value of ink and paper where the precious metals have a luster and durability that is unmatched by any psychological creation of economic professionals be it done through the mesmerizing manipulation of bits and bytes or the old fashioned method of persuasive jargon.
"How can we, the savers, protect ourselves. Everything the .gov does seems to be against "savers" and benefiting "irresponsible"/moral-hazard."
You have answered your own question!
If you truly want to benefit from current government policy you have to acknowledge that the game has changed and everything you previously believed was financially wise is now foolish.
If indeed you have saved your whole life and have good credit you are in prime position to take advantage of this insanity.
The government wants you take on debt. It is working hard to get you to buy houses and cars and, well, STUFF. It is your patriotic duty to become like all those that got us into this crisis.
You need to max out any and all available lines of credit. Buy a house you can't afford. Heck, buy two. Buy several big SUVs. Max out your current credit cards and then apply for more.
I mean, if we all do it then the government will have to bail us out too.
You think I'm being facetious but when your dollars need to be exchanged for the new currency at a ratio of 100,000 to one, when gold and silver are confiscated and when government work farms are set up for those who then can't pay their taxes won't you feel a little foolish for not at least enjoying the giant government give-away party of 2009?
Those that wanted to 'get theirs' and got us into this mess haven't seen anything until the rest of us workers and savers figure out this game and decide to get ours!
I'm leery of muni's. I think we will eventually learn that many more states and cities are in serious financial trouble and they don't have a clue what to do about it. (Anyone want to buy a muni issued by California? New York?) Corporate bonds? Citicorp bonds are rated "A" by Moody's, FWIW. If Citigroup, or MS, or JPM goes under or is taken over by the government, bond holders and share holders are out of luck. Precious metals? Gold is anything but stable...it could go to $5000.00 an oz and it could just as easily go $500.00 an oz. If some EU Central Bank decided to dump their gold, I wouldn't want to be holding. Government corruption? Very few honest people of either party are in the U.S. Congress at the moment. It looks like the Republicans have no problem with Timothy Geithner and are perfectly willing to accept his explanation why a Fed governor failed to pay his taxes. Actually, he has no explanation but I guess he doesn't need one.
I myself, have sold some very cheap puts. DIA at $50.00. SPY at $50.00. USO at $20.00. I might get something cheap at the bottom or they might keep going down some more. One never knows, do one.
The idea isn't to make money, the idea is just to stay afloat. Try to stay where you are and protect yourself as much as possible
David Gondek's idea makes sense to me. My 800 credit score and four dollars will buy me a cup of coffee at Starbucks any day of the week. If they tick me off enough, I'll just charge all my credit cards to the max and then file bankruptcy. I know how to play this game too. Hope it doesn't come to that. Just another guy's opinion.
