Tuesday, March 3, 2009

We're in Big Trouble

" this problem is real, very big, and isn't going to be fixed in time...   There is no likelihood whatsoever that the banking system is going to make it...  we are in for a major disaster."
-- USA Today, Feb 15

The above quote appeared in an article in USA Today on February 15, 1999.  It applied not to the present economic crisis but to the looming Y2K problem.  You don't have to spend much time on Google to come up with some examples of really dire predictions about that crisis.  Here's one:  

"the world's stock markets will (crash).... A worldwide run on the banks will create havoc in the investment markets. People who have placed their retirement hopes in stocks and mutual funds will see their dreams vanish. How reliable will stocks and mutual funds be if the banking system has closed down? How will you even get paid? How will your employer get paid? How will governments get paid?"

But, you say, the current problem is MUCH worse than Y2K.  Sure, we know that now.  But at the time, it was the stuff of doomsday predictions.  Truly no  one knew just how bad it would get.  Blogger Paul Kedrosky, whose post last week  gave me this idea, explains what happened and why we the world didn't come to an end on Jan 1, 2000:

"So, why didn't the worst happen? In part what happened is this: People acted. While they were late, slow, stupid, and error-prone, they did what people do when a big enough alarm bell is rung loudly and long enough: They tried to figure out what they could do in the time they had to reduce their risk, and they did those things."

The problems that lie ahead are big.  They're also mostly pretty visible.  What's not so visible are the solutions.  But that doesn't mean that they don't exist or won't arise.  People will act.  

Portfolio update

I bought a little more GE today.  It's still my smallest position, and it's risky, but if/when the market stops going down it should have a good move up.  I just hope that that move comes from somewhere around the present level and not from much lower.

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