The views expressed in this column are solely those of the
author and do not reflect the views of SVB Financial Group, or Silicon Valley
Bank, or any of its affiliates.
The bugle sounds as the charge begins
But on this battlefield no one
- Iron Maiden
In the rapid-fire atmosphere that is trench
warfare, quick decision making is key in the literal definition of the word.
It's not always important that your decisions be 100 percent correct, but it is
vital you react and counter with rapidity.
The same is true under the
euphemistic interpretation that may apply to a recent bout with your coworker,
debate over budget proposals or spat with your spouse. Reacting quickly and
decisively is more important than accuracy. But in the multitude of moments
leading up to such frenzied activity, a multitude of more measured and efficient
activity can help you avoid finding yourself in the trench in the first place.
The credit/liquidity crisis of 2008 put every financial effort into the
trench, but perhaps it could have been avoided altogether. Determining this was
the behemoth task taken on by the Financial Crisis Inquiry Commission (FCIC).
The FCIC was created by the Fraud Enforcement and Recovery Act of 2009
to "examine the causes, domestic and global, of the current financial and
economic crisis in the United States." Lead by Phil Angelides, the former
Treasurer of California (there's a qualification!), the FCIC interviewed more
than 700 witnesses and reviewed millions of pages of documents, including 19
days of public hearings. The final report, leaked to the New York Times
early last week, found that the financial crisis was "avoidable."
Looking further, it seems the commission decided to blame
just about every single participant in the financial markets including financial
companies, banks, mortgage originators, regulators, the Fed, the Treasury and
two administrations. The only group that seems to be absolved of blame is the
investor who put his money on the line.
This is quite an unfortunate
In the report's conclusions, the commission states:
"The greatest tragedy would be to accept the refrain that no one could have seen this coming and thus nothing could have been done….If we accept this notion, it will happen again."
Well, I submit that if investors putting forth their
own funds do not retain the responsibility for the placement of those funds —
reaping both reward and loss — the 2008 crisis will pale in comparison to coming
crises. The crisis was caused by such mismanagement with countless stories of
investors asking in September 2008, "Now, what do I own again?" Due diligence
where the "buck stops" is crucial. (Do we really have to say this out loud?)
Here, at SVB Asset Management, we invested a lot of time and effort to
build a platform that services our clients as effectively as possible. Our focus
on corporate cash clients and what they really want (capital preservation and
liquidity) versus what is easy for us to sell (yield) allowed us to navigate the
We laid the groundwork for thriving in the crisis long
before it began. In fact, we have not changed one iota of our investment
decision-making model since it was put into place in 2003.
those who did not take their own or their clients' interests seriously is
insulting, but more important extremely impedimentary to a thriving market in
Efficiencies Gone Wild!
Last week, we got our
initial look at Q4's GDP data. The one item that popped out to me was the fact
that the volume of all goods and services produced during 2010 reached the same
level as 2007, even though the number of people working has dropped 7.2 million.
Add to this the number of underemployed we have today and the efficiency
improvements begin to look spectacular.
I have only one question: Why
does it take a recession for managers to optimize employee performance?
The FOMC met this week and, as expected,
the Fed kept the target interest rate unchanged. The Fed stated that the
economic recovery is continuing, but at a rate insufficient to bring about a
significant improvement in the labor market. Additionally, inflation
expectations remain at a level that would still warrant a low rate environment
for "an extended period." The Committee also reiterated its plan to purchase
$600 billion of Treasury securities; however, the $75 billion per month pace was
omitted from the statement.
The U.S. economy grew in the fourth quarter
as consumer spending increased the most in four years. GDP grew at 3.2 percent
on an annual rate, which was slightly less than what economists predicted at 3.5
percent. It seems that the economy is moving from recovery mode to a stable rate
of growth. The Federal Reserve's preferred measure of inflation climbed at the
slowest pace on record, indicating that the central bank may not increase rates
Violent protests in Egypt continue over government
corruption, the weak economy and lack of political freedom, which drove the
markets down last week. This followed the unrest in Tunisia recently and
questions stability in the region.
The views expressed in this column are solely those of
the author and do not reflect the views of SVB Financial Group, or SVB Asset
Management, or any of its affiliates. This material, including without
limitation the statistical information herein, is provided for informational
purposes only. The material is based in part upon information from third-party
sources that we believe to be reliable, but which has not been independently
verified by us and, as such, we do not represent that the information is
accurate or complete. The information should not be viewed as tax, investment,
legal or other advice nor is it to be relied on in making an investment or other
decisions. You should obtain relevant and specific professional advice before
making any investment decision. Nothing relating to the material should be
construed as a solicitation or offer, or recommendation, to acquire or dispose
of any investment or to engage in any other transaction.
Management, a registered investment advisor, is a non-bank affiliate of Silicon
Valley Bank and member of SVB Financial Group. Products offered by SVB Asset
Management are not FDIC insured, are not deposits or other obligations of
Silicon Valley Bank, and may lose value.