Emotional Discharge in Crisis

We have yet to run the full course of emotional discharge that accompanies crisis. Although, we're getting closer to doing so but judging from the level of anger building over compensation, golden parachutes, corporate jets and more corporate malfeasance, it remains a challenge.

Key question is that what's it going to take to get back on track?

At this stage of the game, there are a lot of things, but most of them are distractions. The real issue is that banks continue to refuse to lend money to consumers who so desperately need it and who just bailed their greedy rear ends out of hock.

I don't want to wrap up on a sour note which is why I remind you that recessions are filled with opportunities particularly for those companies with solid financial resources.

MasterCard Inc. (MA) reported better-than-expected fourth-quarter earnings, surprising some analysts given the tightened credit market. For the quarter, the world's second-largest credit card network earned $243 million, or $1.87 a share, and boosted its revenue by 14.2% to $1.2 billion, Reuters reported. Warren Buffet's Berkshire Hathaway Inc. (BRK.A, BRK.B) is investing 3 billion Swiss francs ($2.6 billion) in Swiss Reinsurance Co.

It is becoming clearer for direction of the US dollar. As I watch the $900 billion stimulus bill wind its way through Congress, knowing this will be piled atop the estimated 2009 deficit of $1.19 trillion. Truth be told, recent market developments have already provided a warning - though I'm not altogether certain that message has been received.

The world is struggling between two basic schools of thought i.e. with a call for the government to stimulate the economy with massive amounts of money so that we can enhance and increase consumer demand. This is where Mr. Bernanke and President Obama's advisors reside. And on the other hand, we have a proponent for the government to step-back and let the invisible cleansing hand of the market wash away the debt before any real economic growth can again take hold in the economy, championed by Irving Fisher.

So, from a currency perspective I think it means this: We will be locked in a sustained period of risk aversion (rising unemployment, deflation, and sovereign debt defaults) as this crisis plays out. And in a world of major risk aversion, that mantle rests at the feet of the world reserve currency — the U.S. dollar.

The best advise to give now is that it's a way to insure that you continue to invest, even when the markets stink. There are many different kinds of risk, however – including the risk of getting left behind. Long-term, most of the growth that's expected in the decades to come will be outside U.S. borders.