When a person does not seek to hear GOD’S voice before acting, there is a risk of unintended consequences. On a corporate scale, leaders take actions that may have a dramatic effect on the future of their constituents. Not all politicians are conspiring to dismantle America. Not all government employees are part of a scheme to hurt the common man.
Earlier this month, the people of Great Britain staged one of the largest protests in history. See: British Protest Although I am not an advocate of force, this video points out the effect of unintended consequences. In the current force-based system, deterrents are often used to uphold the peace. The threat of sanctioned bodily harm deters the would-be burglar from entering our homes. If you remove the deterrent, do you think the criminal will be held back from their crime?
The sub-prime crisis is in full swing but there is but the next wave is moving rapidly upon us- the commercial real estate crisis. The leverage factor associated with commercial real estate is much higher than the private sector borrowings. All of us that qualified for mortgages "the old fashioned way" have equity built up in our houses and have manageable monthly payments. However with jobs at stake, even once manageable house payments can become a nightmare.
We are at risk of a collapse as early as next month. I say this not to frighten you, but to prepare you. In 1993, I saw this current environment coming and discussed it with friends and as we all know, one of the greatest expansions of the stock market occurred. The problem with seeing in the "Heavenlies" is that everything is presented in the present thus unless Our Heavenly Father specifically tells us when, we can only prepare. Preparation has both long-term and short-term implications.
The thing that I find consistent with all of the rhetoric coming out of Washington is that legislators continue to push their agenda in the face of this financial tsunami. They are taking care of the wealthy Wall Street bankers allowing billions in bonuses to be paid in the midst of the massive bailout. They argue that the banks and other institutions are too large to fail. In the meantime they are standing by while the small companies around the country are "too small to save". The Inauguration speech grouped the financial problems of Wall Street with the rest of us by using the statement: “our collective failure to make hard choices and prepare the nation for a new age”. I don’t know about you but nobody called me concerning the last 25 years of misconduct and abuse of the financial standards?
The only precedent of the current situation is the Great Depression and once again our leaders assume they are smarter than their predecessors. There is also the problem of there being a notable difference between the two eras. In the 1930’s the U.S. had a strong manufacturing base, it was a creditor nation, and an exporter of oil. Today, it is just the opposite. We have a service based economy, we owe everyone, and we export most of the oil we consume. Each of those three attributes individually could take the country down the tubes.
When I was a chief financial officer and we were going to have an unprofitable year, the first expenses I looked at cutting were "services". You don’t cut your inventory or sell you warehouse, you need them to generate revenue. As a consumer, you don’t cut out food, utilities, or housing payments. Instead, you eliminate all the discretionary purchases such as restaurants, retail purchases, entertainment, advanced technologies (such as call waiting, premium cable channels, etc.), and new capital purchases. Retailers in the discretionary spending category make not make it in this crisis.
I expect the stock market to take a hit when December’s revised unemployment numbers come out next month. I am sure that Washington will time its "shock and awe" of trillions to offset the bad news. There is much talk of the formation of an ‘aggregator bank’ to take in all of the toxic debt currently on commercial bank balance sheets. What a deal!
If you step back a moment and look at the big picture, the world is heading for a collapse of some magnitude. Iceland’s government has "collapsed". England is teetering and the value of the British pound is at a 23 year low. Mexico and Pakistan are disintegrating before our eyes. Remember when the U.S. retirees were heading to Mexico for a life of luxury? They may be returning soon. Pakistan is probably the most dangerous place on earth now so keep you potassium iodate handy.
If you put a million dollars in a 30 day Treasury Bill and rolled it over for twelve months, you would receive a total of $200 in interest. So much for being a "millionaire". Pension funds will not be able to sustain retirement payments with the current economic environment. They need a better rate of return on their funds. It is believed that this economic cycle will form a "W" and we are in the first half of the "W" near the bottom. At the first sign of improvement, pension funds will jump back into the market with all of the cash sitting in Treasuries. This will cause a rally of major proportions. This may be your opportunity to cash out of non-defensive stocks. I believe this rally will be short lived and then it may get real ugly.
Men continue to make decisions concerning their country’s future without understanding the risk of unintended consequences.
Only Our Heavenly Father has perfect knowledge of the consequences of an intended path. Who better to seek guidance from in these turbulent times!