Only problem is, it doesn’t work; and the last four years of experimenting prove that beyond doubt. We are millions of jobs shy of where we were six years ago (which includes administrations of both major parties) but we have an extra $7.5 Trillion dollars that we are obligated to service!!! Does that sound like something we can afford to keep doing? Does it sound like a good plan?
We think this is what worries Mr. Market. That’s why be we believe we need a well‐reasoned plan, not just to postpone the “cliff” but to move the discourse back in the direction of a free‐market culture; now, that would be greeted enthusiastically in the capital markets. We are not, though, holding our breath.
What Can We Do?
The role of government and its size and cost are millennial issues of great import to all citizens, perhaps especially to savers and investors. Given the importance and the elevated uncertainty about future developments, investors and their financial advisors need to take matters into their own hands and create a realistically diversified portfolio capable of earning a return in the interim.
We have already designed our client portfolios for the likelihood that global economic growth will be sub‐standard for the foreseeable future, and with the expectation that the risk of serious financial disruptions will remain elevated until the debt/deficit conundrum is addressed realistically. We are confident that this will come to pass, and hopeful that the nation’s course will be changed by prudent policies rather than by crises.
For some specifics on how we approach that responsibility at FAI Wealth Management, if you haven’t seen it yet, please read our September 2012 Blue Sheets on Managing risk. (www.investFAI.com )
We are convinced that the free‐market enterprise model which has allowed American citizens to build the freest, most prosperous and harmonious society in all of history will survive the latest governmental experiments. Even now, we see opportunities to put savings to work in well‐managed and innovative businesses, and we expect returns on investment to normalize when the debt / deficit difficulties have run their course, however that eventually plays out. Stay tuned!
J. Michael Martin is founder, principal and chief investment officer of Financial Advantage Inc.. A member of the National Association of Personal Financial Advisors since 1989, Martin served for three years on Napfa’s Board of Directors.