TURNING POINTS 11-7-2008

A Watershed Period in US History

The 1960’s will long be remembered as a critical period in American history, and 1967 will likely be heralded as the pivotal year during a decade that ushered in tremendous changes. It was the climax of a period during which we entered into a costly military conflict, were shocked by political assassinations and mourned those whose lives were lost, saw major shifts in civil rights legislation, and began a period of ‘personal freedom’ that many recall as lacking in accountability or purpose. Our nation had recovered from World War II and the Korean conflict, the economy had rebounded from two back-to-back recessions in 1953-1954 and 1957-1958, and though we felt prosperous, there was an obvious separation of classes that added to our nation’s growing unrest. Many political and economic pundits proclaimed the end of American prosperity and predicted decades of decline.

That was now over forty years ago and the world has changed in amazing ways. We’ve rejoiced over moments of peace and prosperity, and mourned the loss of too many lives. We’ve seen our economy rise and fall more than once, and we’ve witnessed the transition from an industrial economy to one driven by technology and service. Our political landscape has evolved but stayed within the framework the founding fathers established more than 230 years ago, and we continue to enjoy the benefits of the freedoms for which so many fought and continue to fight.

Similar to the 1960’s, the early 2000’s will likely be seen as a watershed period in US history, with 2008 being the pivotal year during another decade of change. A retrospective of this period will be highlighted by the 9/11 terrorist attacks on our citizens, government and economy, the awful cost of waging two wars, continued questioning of critical leadership decisions, the most worrisome economic period in some sixty years, and the dream-fulfilling election of the first African-American to the Whitehouse. With hope, we will also clearly see the extraordinary efforts of millions of Americans who struggled, sacrificed, and prevailed.

Each of the leading candidates in the recent US Presidential election proclaimed themselves to be arbiters of change; and with the election of Barak Obama, the US citizenry expects sweeping economic, political and social reforms. The benefits of such ‘change’ remain to be seen, but what is clear is that we are at a turning point in our society. We are poised for decades of technological development that may make the tech wave of the 1990’s and early 2000’s seem insignificant. Corporate America will assemble enormous resources focused on reducing our dependency on fossil fuels, aligning our information systems to maximize our ‘collective intelligence’, supporting innovations in bio-technologies and medicine, and continuing the transformation of how we communicate.

Recent economic events have reminded us that the US economy, though weakened by real estate, credit and energy crises, continues to be the leader in the global marketplace. The ‘de-coupling’ concept, promulgated by many as a byproduct of America’s diminishing relevance in the international financial markets has now been relegated to ‘fairy tale’ status. Burgeoning foreign economies such as Brazil, Russia, India and China (BRIC), though far stronger than in decades past, continue to evidence their reliance on western economic leadership, and other highly developed and relatively mature foreign markets continue to support the theory that when the US sneezes the rest of the world catches a cold. Similarly, though, the moral authority of the United Stated may have been challenged due to various leadership decisions made and carried out, the west, and the US in particular, continue to be looked towards for leadership in wide-ranging areas.

President George Bush #41 called for a kinder, gentler nation and hoped to see a thousand beams of light emanating from the collective efforts of our citizens. President-elect Obama will certainly raise a similar challenge, and with our nation having endured financial, military, and social trauma, perhaps we will be more able to fulfill the dream. It may become Obama’s legacy; it certainly will be ours.


Obama’s Financial Team and the Big Three Automakers

Very soon, perhaps even today, President-elect Obama will formalize his economic team and will likely announce his choice for Treasury Secretary. Among the leading contenders are names with which we are already familiar, including former Treasury Secretaries Larry Summers and Robert Rubin, former Fed Chairman Paul Volker, and current J.P. Morgan CEO Jamie Dimon - each of whom offer impressive credentials and reassuring experience.

Current Treasury Secretary Henry Paulson has evidenced his professional resolve as he has opened the door for the department’s new leadership. Such welcome of a new leadership team is unusual in typically territorial political environments, but it is more than necessary – it is vital. Paulson and others are willing, perhaps gratefully, to turn over the reigns of the Treasury’s massive economic authority to the new administration, while at the same time continue the daunting efforts required to implement TARP provisions and restore health to our economy. History may well remember Paulson as one of the most admirable talents of the Bush #43 administration.

One of the decisions that the newly-announced Treasury Secretary will be asked to influence will be that of just how much support should be given to struggling US automakers. To some, this is a non-issue; to others it is seen as another turning point in the direction of what is still considered to be a free-market economy. There are highly respected and eminently qualified economic minds that are already weighing in on both sides of this issue. What is clear is that Ford, GM, Chrysler, and the 2.5 million US employees whose livelihoods depend on the domestic auto industry are in trouble; and not only are most of the products they manufacture and support less than competitive in the US and global markets, they represent a business model that may be outdated. Regardless of the amount of support that will certainly be provided the US auto industry, there are sweeping changes that must be made in terms of product development, energy efficiency, union influence, and worker compensation – each of which will require sacrifice and may well challenge the electorate’s resolve for the ‘change’ so recently clamored for and sought after.

Signature Update is offered by Richard Haskell Sr., Managing Director of Signature Wealth Management