"I mean, given this week’s failure of Lehman and quick sale of Merrill Lynch coupled with the impending AIG disaster, a rational person could be driven to worry a bit."
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4 December 2008 Learn More Is Your Home an Investment? 'The collapse in home values is seen by most people if recent polls are to be believed as a temporary problem that will go away soon.'
27 November 2008 Learn More Meet Me Half-way 'In your own business, if you are in the position of needing to go to your lenders or shareholders for more money to get through the crisis, you need to demonstrate buying the ticket first.'
20 November 2008 Learn More Code Words and Good Questions 'One of the problems with trying to figure out what exactly is going on right now is decoding what it is that our leaders are saying.'
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Panic

Panic

 

This week I am going to digress from small business and take a look at the macro conditions that are swirling around us.  I mean, given this week’s failure of Lehman and quick sale of Merrill Lynch coupled with the impending AIG disaster, a rational person could be driven to worry a bit.

 

To my way of thinking, there are a lot of lessons in this mess.  First, no company is too big to fail and add to that the realization if it hasn’t hit you yet that even the high and mighty can be really, really stupid.  Education, school, breeding, whatever are no defense against human idiocy.  This crisis is essentially an artificial one in the sense that it is the current accounting rules forcing securities in company portfolios to be marked to market value all the time that is precipitating this mess.  That regulation came as a result of earlier scandals and crises a la Enron and now the chicken of over-reaction has come home to roost.

 

So, one would think that the powers that be in Washington and Wall Street would heed  the lessons of the past and resist meddling in the markets with more rules and regulations.  Of course, one would be wrong.  Look for more ridiculous rules and regulations driven by a need to look like someone is doing something as opposed to just letting things work out on their own.  You know, if left alone most problems large and small do most of the time.

 

For those of us who are much smaller and therefore at the mercy of the goings on back east, well, there is little that we can really do but wait and see.  The trick here is not to react to every bit of stimulus positive or negative.  For example, do not sell all your stocks, bonds, and funds just because the market looks like hell right now.  Relax.  It is all part of the cycle.  Take a wait and see approach.

 

Most of all, don’t listen to friends and family.  I mean, really, they know next to nothing anyway so why should you pay attention to their opinion unless one of them is Bill Gates, in which case you should listen.  Otherwise recognize that they are just making noise and smile like the Mona Lisa and do the right thing, which for now, is just wait and see…..

Posted by Herb Kay on Thursday, September 18, 2008

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