It was the best of times, it was the worst of times

As Charles Dickens opening sentence in the classic “Tale of Two Cities” says when we look back on this market we will say, “It was the best of times, it was the worst of times”.

We’ll say it was the worst of times because many of you have lost a large portion of your nest egg and unless the market comes roaring back may be forced to work for a few more years yet.

The markets were very corrupt, profits were being made by the few selling to the greater fool securities that were given triple A ratings.

All but a couple of the Wall Street Investment banks have gone and those that remain are joining the ranks of “regular” banks. This may mean far less leverage and speculative investing by banks who should have known better.

We might also say it was the best of times because a financial revolution will take place that will benefit Baby Boomers in the long run.

Provided regulators allow Wall Street the opportunity to make money but ensure appropriate oversight and transparency we Baby Boomers may well be in for a much smoother ride with real profits ending up in our portfolios and not just inflated paper profits that rely on the flawed buy and hold philosophy to maintain the appearance of wealth.

If the regulators can get it right Wall Street will create new ways to invest money that are simple, transparent and understandable for the people who invest in them. These investment will make steady and reliable returns for Baby Boomers.

If government get it right they will make sure no government representative can stay on a finance oversight committee for more that two terms, just like the president can only serve two consecutive terms.

Until now governments have just patched the financial system each time there was a crisis. This time I believe they will modernize the way they regulate the markets and will put in place fast systems that measure transactions, risk and excess at the speed of light and pull those firms that misbehave back into line before they destroy Baby Boomer wealth.

Genuinely bad guys will go straight to jail – no questions asked.

The emphasis will be on regulation that helps money flow to the best investments not to control Wall Street from doing what they do best – make money. There should be reward for “well intentioned failure”, as Hewlett Packard used to say, and punishment for fraud, deception and theft.

Rewards will be tied to the long term result of an investment and not paid out up front from deposits from Baby Boomers. Bonuses will be invested back into the investments that are sold to Baby Boomer by those that sell them. Everyone will have a stake in the outcome of an investment for the long term.

I expect Mutual Funds to completely revamp how they operate after their dismal failure to retain and grow Baby Boomer investments. The easy ride is over. Full audit trails with fees and charges will be fully disclosed. Fund Managers will at last use their talents and skills to get creative about diversifying investment so 85% of the population is not in just four asset classes. Transparency and accountability will be the key to attracting Baby Boomer money into their funds.

Large Retirement Funds will develop strategies to protect their clients wealth as it grows and as their clients near retirement. They will put in place systems to manage the distribution of Baby Boomers nest eggs as retirement income so it will last as long as the client lives.

The emphasis will be on service above all else. By giving service they will gain client respect and loyalty. Having a client for 40 years requires a major commitment to honesty and integrity from fund managers for that client and their money for life. This is something retirement funds will learn to do.

So even though it is the worst of times right now, I can see the best of times in the future when all this financial turmoil will be a distant memory of a time when greed was good.

When the time comes though you need to be ready. You need to educate yourself on how money works with respect to your investments. You need to learn how to develop a strategy that will suit you in your retirement. You will need to learn how to select a good financial planner who will genuinely work with you and protect your interests first.

Above all else you still need to take responsibility for your own financial future in retirement.

These things are possible. Then it really will be the best of times.

One Response to “It was the best of times, it was the worst of times”

  1. […] used the same quote as the subject of my post on October 8th about the results of this debacle and what the future might […]

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