HUMMONEY - RESPONSIBILITY (Perspective)

By Greg Lewin, 3/21/11

In the aftermath of the 2007 – 2009 market’s decline, many have searched for the pearl, the insight that defines the essence of the problem and thus better illuminates the path forward. For me that jewel came from a single interview with a senior statesman of the capital markets, Seth Glickenhaus. When questioned about the difference between the current crisis and that of the 1930’s (in which he was a young man) his reply was simple. “In the 20’s people looked at themselves to ask what they did wrong. Now people look at others to blame for their misfortune.”     

This point was most beautifully reinforced in a Thomas L. Friedman article where he reprinted a letter written by a friend from the military, Mark Mykleby. Mr. Mykleby wrote, “I’d like to join in on the blame game that has come to define our national approach to the ongoing environmental crises in the Gulf of Mexico. This isn’t BP’s or Transocean’s fault. It’s not the government’s fault. It’s my fault. I’m the one to blame and I’m sorry. It’s my fault because I haven’t digested the world’s in-your-face hints that maybe I ought to think about the future and change the unsustainable way I live my life…”

Read this again. This is the answer, for the larger questions of the world and the more manageable affairs of the individual investor. Take responsibility, make a sober assessment and plot a long-term course for repair and prosperity. The problem with the entire financial complex built to service the individual investor is that 99% of the time they have virtually none of the specific information necessary to craft a program appropriate for you. Their opinions and advice are framed in the business and political agendas of their own circumstance. Your only chance is to dispatch with it all and take responsibility for yourself.

Here is a simple tool to help you take responsibility for managing your own financial affairs. Get a note book and on the top of each page list each important financial asset. These should be assets that you own strictly for financial purposes. For example, a house may be owned for purposes beyond financial gain. The list could include mutual funds, individual stocks and bonds, etc. For each of these assets list 5 reasons you own them, for example, research, recommendations, television.  Be honest and be clear. Now callously evaluate those reasons. First, are they sufficient to invest your precious capital? If no, seriously consider selling that asset because it is not advisable to figure out answers when capital is at risk. If they are sufficient, make sure those 5 reasons are clear, current and complete. Because this notebook should be reviewed periodically and when those reasons either come into question or are no longer correct, a change in your position should be immediately considered. If you can maintain this discipline consistently for all your financial positions your error rate should be reduced and returns should improve.

Be an active participant in all financial decisions, take responsibility for all outcomes and don’t fail to act with discipline. Every financial decision should probably have 5 or so clear cut reasons why you engaged and if those reasons are in question, action should be taken before a new decision is at hand with its own 5 point plan of action.

---The views expressed here are of the author, HUMMoney contributor Greg Lewin; currently a General Partner at TLF Capital, an investment management firm. During the past 26 years he has been a senior money manager or partner in Wall Street firms including Neuberger Berman, Charter Oak Partners and Sailfish Capital.