The Silver Lining of a Financial Crisis

October 1, 2008

Silver LiningWhat a week! Actually, what a past couple of weeks! Obviously, it wouldn’t be too hard to harp on all of the bad stuff going on right now. So, instead of doing that, I would like to focus on some of the silver lining and maybe some of the positive things that could come out of this situation. Rick Newman wrote an article in U.S. News titled, How to Punish Wall Street, Protect Main Street. In this article, he hits on some things that I really agree with. I feel that some of our current pain, in the long term, may be good for all of us.

The first topic I touch on is the change that will probably take place in the compensation of corporate executives. Currently, CEOs receive a majority of their compensation in bonuses, and they are awarded these bonuses for short-term performance. Once they receive this huge bonus, they move on to the next company and repeat the process. Their only goal is to get earnings per share up in one year and then move on. They never really buy into the long-term success of the company. This could change back to historical norms where executives are rewarded for long-term performance. Why should a CEO’s commitment be any different from that of an investor.  A Long-Term Focus works for both.

The next thing that will have to change is our view on credit. When I was younger, bankruptcy was a bad thing. It carried a very negative stigma. Today, it has become a tool for these large corporations to use. This is bleeding into the lives of consumers and many are no longer ‘owning’ their lives. Rather, they are borrowing and financing their lives. Then, if they can not make the payments, they can just file for bankruptcy and start over. In the last few years this was not that big of a concern because even after bankruptcy it was still very easy to get a credit card, buy a house, or even take out a loan. In my opinion, individuals, just like these CEOs, should not be rewarded for being negligent and careless. At one time, a person’s name was their credit. I believe, due to the current credit crisis, that we will slowly work back towards that. To buy a house it will require the traditional 10%-20% down.

Finally, as I wrap up the show, I read some of your reviews on iTunes. I share the good with the bad, so you will know that I did not cherry-pick the ones to share with you. I go on to explain how important these reviews are, and thanks to the support from listeners like you, we have been able to grow the way we have through a large number of “Five Star” ratings. You’ll notice in one of the negative reviews the listener recommends the MorningStar Video Review. Check it out! The videos are done very well and provide some good takeaway information. This is my attempt of turning a lemon of a review in a sweet glass of lemonade.




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