Wednesday, June 17, 2009

The great American dream

I landed at the JFK some 2 weeks ago with a thought that I am visiting a country that is nursing a severe recession and almost expected to see it with my naked eyes. My objective was to identify one catalyst that made ‘The great American dream’ and made America the ‘land of opportunity’.

It didn’t take me long to figure out.

I was humbled when I visited the Ground Zero and my heart goes out to the families of people who lost their lives as a result of the terrorist attacks. The stories about how the fire fighters smilingly gave up their lives ‘proudly’ to save a few others - are moving.

A few blocks away lies the nucleus of global finance (The Wall Street) and I happened to strike a conversation with a few brokers over coffee. It was interesting to note the infectious optimism. Recession was the topic of discussion and almost all of them said “We Americans are smart people and we will definitely figure out a way fast - out of this turmoil”

President Obama’s “Yes we can” reverberates through the soul of this country and through every single citizen.

Americans work hard and party harder. The Pubs are packed. People are still shopping with a vengeance on the 5th Ave.

Recession is a state of mind. Fundamentally nothing much has changed on this planet but for a little aberration in the global confidence. If every single person on this planet gets ones’ confidence back, recession will be over – overnight.

Comprising of 5% of the world population, Americans generate 25% of the world GDP in a country that is rich in natural resources, is the fulcrum of global inventions, and is an economic and military superpower. The vastness of the US is overwhelming.

Warren Buffet is right “No matter what you do – do not bet against the United States of America”.

Investments and Risk Management

The last of my academic modules at Warwick Business School ended at an absolute high.

The Investments and Risk management was a great module. Prof. Ron Watson of Rutgers Business School took us through the finer nuances of valuations of bonds and shares and gave an interesting view about the world economy.

Prof Watson has an enviable experience in the Government (Sr. VP Federal Reserve bank of Philadelphia), Private Sector (CEO of the Custodial Trust Company – Bear Stearns), and is now an academician since the last 7 years.

The wealth of his knowledge helped us understand Risk Management and the variables through which risk can be assessed and mitigated. Diversification is the key to successful investing as no one can either predict the markets nor has anyone ever been able to avoid the troughs that keep recurring at an amazing regularity.

But there are two simple rules that have stood the test of time and can ensure that investments grow and outperform the government bonds over a period of time - Discipline and Diversification.

That’s the only way every investor can achieve one’s ultimate quest to generate positive ‘Alpha’….
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