Financial guru says country is feeling a ‘fiscal hangover’
Keith Fitz-Gerald
submitted
You might be surprised to learn that Beaverton is home to a world-famous financial expert.
Keith Fitz-Gerald runs the Money Morning investment newsletter, which has more than 500,000 subscribers, and is the author of the newly released book “Fiscal Hangover.” The book’s goal, Fitz-Gerald says, is to give investment advice to average people on how they can best profit from the radical changes in the market over the last two years. He started writing the book at the beginning of 2009, and spent months perfecting it.
The Beaverton Valley Times caught Fitz-Gerald by phone while he was in Baltimore this week – he tends to travel a lot, and splits his time between living in Oregon and Japan with his wife and two sons – and asked him about the process of writing the book and what advice he has for new investors.
He says if you see him at the gym, go ahead and ask him about investment. Fitz-Gerald seems to like answering questions.
How did you get into the book? What’s your history with the subject matter?
Well, I’ve been in the professional trading and investment environment for 20 years. Presently, I serve as the chief investment strategist for Money Map Press. In my capacity as the chief investment strategist, it occurred to me that nobody talks about what actually happened. Wall Street wasn’t talking to people the way they should talk to people, and people didn’t have access in a compelling fashion that told us “why did we get here?” and more importantly, “what can we do about it?”
So, the vision to me was very clear: To speak clearly, concisely, and in a down-to-earth fashion. Because let’s face it, most financial books in my opinion are like going to the dentist and getting your teeth drilled. And they’re about that interesting too. This is not that style of book. This is very much designed for the everyday individual.
What do you hope people will get out of the book?
I want them to understand two things. I want them to understand that, yes, this is a very serious financial crisis, and we can’t treat it lightly. But I don’t really tell people that, because there’s a lot of people that have already heard it. But what people don’t realize is that we’ve been in similar situations before as a society. It’s just beyond our living memory. For example, the financial crisis of 1874, the banking crisis of 1904, the Great Depression, which is beyond the memory of all but a very few people. So there’s no living memory here.
The other thing I want people to understand is that every time mankind endures some kind of calamity like this, there is tremendous wealth created on the opposite side. So if anything, the fact that this is such a serious crisis, should be, despite the fact that it feels bad, actually a sign that there is great wealth ahead.
And I lay out a very clear path to that, which is investing more heavily in global stocks than you have ever done before. And the reason for that is very simple: 75 percent of the global economic activity now takes place outside of the U.S.
Where does the term “fiscal hangover” come from?
Well, that, basically, we’ve seen the doubling of a national debt, and a five-fold increase in the lending capacity. It’s like a hangover. We engaged in excessive behavior, and the next day you’re going to pay for it.
Do you think this globalization was a fact of the economic recession, or was it already happening?
The globalization was already under way to some extent, but the fiscal crisis, the fiscal hangover for lack of a better term, clearly accelerated the game. No where is that more evident than with the rapid rise of China, which has been able to propel itself onto the world stage.
As a post-imperialist nation, China really just celebrated 60 years of history, so it’s just getting started.
So how should people change the way they think about investing?
The biggest change in the marketplace right now, and what has been made abundantly clear by the crisis, is that you cannot simply throw darts at the board indiscriminately and hope to do well. It’s like what Will Rogers once said: “I’m not so concerned about the return on my money as I am the return of my money.”
Going forward, investors have to do two things they haven’t done before: One is that they have to think about risk first, and second, they have to have a much higher percentage of their wealth allocated to companies overseas.
The good news to that, for people who aren’t ready to invest overseas, is that you can invest right here in the United States and have an internationally diverse portfolio. Or you can be more aggressive and go directly overseas.
A lot of our readers probably don’t do a lot of investing, what advice would you give to people with limited experience?
It’s the same advice I’d give to anybody. Here’s the thing, I speak to tens of thousands of investors every year, and write for half a million every single day. It doesn’t matter whether you’ve got $500 or $500 million, the principals of investing are absolutely the same. Money doesn’t discriminate, even though investors sometimes do. The key is making your money work for you. Every day you save a buck, that’s a dollar you use later. The second thing is, no matter what investment you’re buying – it doesn’t matter whether it’s a mutual fund or ETF or even your company’s 401k plan – you want to put your money where it’s going to do the maximum benefit and you want to leave it alone for as long as possible.
How do you think the negative image of financial institutions affects the public willingness to invest?
I think it has finally woken the investing public up to what they should have been thinking all along: if it sounds to good to be true, then it is. Don’t trust those people. It has raised the ire of average investors to the point where they distrust the system. I think there are parts of the system that works and that element is what you see in the mirror every morning. If anything, this crisis has dramatically highlighted that it’s time to take matters into your own hands. Don’t trust the system.
It doesn’t have to be complicated. You don’t have to spend huge amounts of time and effort to manage your money. It can be as simple as taking 30 to 40 minutes every year, on your birthday, to look at your portfolio and see if it’s working. Obviously, there’s a little more to that, but Wall Street wants you to believe that you can’t do it.
I’m on a personal mission to right the wrongs here. As a Wall Street insider, I’m frustrated by what as happened. I’m frustrated by the unmitigated disaster that the Fed has perpetuated. I’m frustrated by regulators that were asleep at the switch. I’m frustrated at the legislators who didn’t understand what they were regulating. Millions of Americans, in my opinion, got taken on a white-knuckle ride they didn’t deserve.
For more information visit www.fiscalhangover.com.