All Posts By Michael Lecours, CFP

Five years ago, the United States was rocked by yet another financial disaster – the collapse of Lehman Bros. This came on the heels of a tightening credit market, the housing crunch, struggling auto industry, and numerous large financial institutions that were on the brink of collapse.

Could it happen again? What’s been put in place to prevent another recession from occurring?

Some progress has been made, but not enough. The culprits are not unusual:

Red tape: Financial Regulation reform, known as the Dodd-Frank Financial Reform was designed to usher in a new era of regulation, prevent the Madoff schemes, limit the questionable investment products (mortgage backed securities), and ultimately stop corruption and abuses (which led in part to the recession of 2008 and 2009). It had the best of intentions!

In reality, this legislation has aggravated an already burdened financial system. There has been little or no reform, just more regulation and paperwork. Does it help the investor? Not yet. In fact, this legislation has provided few additional protections to investors.

Bureaucracy: The politics in government have gotten in the way of meaningful reform. Gridlock has slowed the process. The hot issue are health care reform and improving the economy NOT minimizing future recessions.

Uncoordinated Reform and Enforcement: There are numerous government agencies and stakeholders that are looking to better protect consumers. Unfortunately, it’s not always clear which organization is responsible for what area, which leads to overlapping regulations and confusion for investors. This isn’t just a US problem, it’s on a global scale!

Lack of Leadership: There is no organization that is looking at the whole picture. Each regulator has it’s piece, but who is looking at the big picture? Who is making sure that nothing is being missed? Is it ever possible?

Preventing another disaster is a very complicated issue that can’t be solved overnight. Reform to this magnitude can’t be judged as a failure just yet. It needs a thoughtful approach, not a knee-jerk reaction. An over-reaction could lead to over-regulation and that can be almost as dangerous as a lack of regulation. The right balance needs to be developed.

We are on the right path. A path that will ultimately help the investor, but the path is long and we’ve only just started. The headwinds we face will probably be overcome, we just don’t know when.

We will always have to worry about recessions. Hopefully, we will eventually have something in place that will protect investors from events that led to the recession of 2008 and 2009.

This summer, headlines stated that the Euro Zone had emerged from its recession with .3% growth in GDP. It’s no cause for celebration, but an important signal that Europe is making progress in its recovery. Below are a few signs indicating Europe is improving:

• Manufacturing growth has improved in five countries, including Italy and Ireland.
• New orders and new exports have not been this high since May 2011
• Euro zone manufacturing purchasing managers index reached a 26-month high (highest since June 2011).
• Greece continues to lag relative to other European countries, but even it has hit a four year manufacturing high!
• Air freight is at the highest level since 2011.

What we are still waiting to see:

• This growth has not translated into new jobs… yet. Unemployment is still around 11% for all of Europe. (Austria has the lowest rate, 4.7% and Spain has the highest rate, 26.9%)
• National public debt in Europe has hit new highs this year.
• Germany and France are largely responsible for the improved economic situation, which masks the recovery efforts of the weaker economies (or lack of recovery).

We do not expect to see the economy come roaring back any time soon. The end of the recession is an important milestone to reach, but just a milestone. We feel that Europe’s economy will slowly improve for many months and struggle to overcome obstacles to meaningful growth.

Google’s a big company, a really big company. They made over $33 billion last year! And if you’re not sure how exactly how they make that much, the infographic below does a pretty good job summarizing the company:

Image compliments of Best Accounting Schools

Over the weekend, I visited the space shuttle on display in NYC.

I was surprised to learn all the technology developed for space exploration that has found ways into our everyday lives.  Here are just a few:

• Cell phone camera
• Clean energy technologies
• Scratch-resistant lenses
• Water filtration & purification
• CAT Scans
• Invisible braces
• Memory foam (pillows)
• Ear thermometer
• Smoke detector

Maybe someday there will be a huge benefit (life on another planet, colonizing Mars), but until then, these “small” technological advancement can bring value to people today. It can make our lives better, safer, or healthier.

Links to read more:

here and here

I’ve caught a few headlines online and blurbs on the radio about the unusually low price of lobster at this time of year. At first, I figured some environmental condition was the cause. Turns out I was partly wrong. After a little research, I learned about this fascinating lobster story that involves many different factors from changing consumer demands, to successful sustainable practices (maybe too successful) in the Gulf, to underutilized cod packaging plants in Canada, and even involves the collapsed Icelandic banking system.

Even if you’re not interested in lobster, this is a fascinating story about how interconnected the international markets really are.

Read the story