Hedging our citizenship
Deciphering the collective psyche of investors in the current economic climate is a challenge, to say the least. There are no easy answers — only many complicated questions.To some, including the growing leagues of protesters, such as Occupy Wall Street, there appears to be a conspiracy of one negative situation after another. It’s easy to see why the daily news headlines creates an apparent cycle of futility, anxiety and habituation. It’s important to remember, especially in this era of instant social media sharing and 24/7 news feeds, that bad news sells and seems to leave a deep impact on our day-to-day perspective. It is also my opinion that the global debt crisis is nearing a boiling point and the specter of double-dip recession and political dysfunction in the developed world haunts the collective moods of many countries.Discouragement is understandable, even psychologically explainable, but we can choose not to make it debilitating. Perspective and patience are keys. It’s important for people to not just languish in frustration, scream at the moon, or to rush headlong into a cash or hard-asset buying binge. We can take steps to leverage our financial and intellectual assets and even hedge our citizenship.How does one hedge their citizenship? I believe the answer comes in two parts. One is political in the widest sense of the term and the other is developing a global and informed vision for our financial wellbeing.Politically, it doesn’t take great insight to see we may have reached a reckoning divide in which trust in private and public institutions has reached an all-time low. But where do we, as citizens, fit in?Historical ironyCitizenship, in the broadest sense, isn’t just a right but a duty to become involved and aware. It has been said that bad officials are the result of good citizens not voting — and I’m convinced it’s equally true that bad policies take hold when good citizens remain silent and special interests dominate. This is a democracy after all.For example, I have always believed that beginning in 1999, the abolition of the Depression era law known as Glass-Steagall — which separated investment and commercial banking and protected the country’s financial soundness for more than six decades — has been a failure and fueled the cycle of self-inflicted financial instability. With less transparency and increased skepticism, we have created an even more potentially volatile and self-fulfilling economic bubble cycle.The essence of hedging one’s citizenship is a combination of Emersonian self-reliance, calculating risks and maintaining a global and historical perspective. Despite all the headlines, there are only a few of us who would consider moving to another sovereign to truly hedge their national risk. But most of today’s investors grew up when the dollar’s exalted status as the world’s reserve currency was never questioned. It has been that way since the Bretton Woods monetary conference in 1944.In a historical context, I believe we are much closer to emulating the Greeks than we might like and less likely to disparage our Canadian neighbors to the north than we have been in years past.Those who had never heard of the tragic political and economic legacy of Weimar Germany or the writings on financial instability by the late Hyman Minsky are reading much more about them lately. Though our national star may be losing some of its luster, that is no excuse to become passive and complacent. If one believes in capitalism and a global range of investment opportunities, then get involved.Countries like Brazil and Australia may provide better currencies to hold, and other economies are growing. Some believe the East Asian financial markets may also provide opportunity because they are more transparent and didn’t embrace the extreme levels of deregulation embraced in other parts of the developed world.There is a historical irony to consider — I believe many countries and foreign markets have done a better job in learning from our mistakes than we have. Our job is to right the imbalance.Tom Sedoric, managing director-investments of the Sedoric Group of Wells Fargo Advisors in Portsmouth, can be reached at 603-430-8000.