When the storehouse is ruined

It took less than 24 hours, but once the news broke, people began to panic.

By now everybody who cares or is affected already knows the news that one of America’s biggest investment houses, Lehman Brothers has filed for bankruptcy or went broke. The even bigger news is that AIG or the American International Group is on life support courtesy of billion dollar infusions by the US government.

As a result, we are flooded with speculation, exaggeration and alarmist commentary particularly by the unqualified and the ignorant. Thanks to them, people are now questioning the virtue of saving and investing.

I myself will not comment or venture on the cause and effect of the bankruptcy, as I am not knowledgeable on the matter. Suffice it to say that unlike the Philippines, the United States has very stringent rules and procedures before you fold up a business that has obligations and financial commitments.

The US authorities have probably been long informed of the matter and like other bankruptcy procedures certain measures have been taken to protect and insure the interest of the public. In fact, as far as the financial regulators are concerned, they probably saw it coming a long time ago, but observed strict professional confidentiality!

US and European Regulators live by the rules and are legally accountable for any impropriety or unauthorized leaks or disclosure on such dire events, which explains the “element of surprise” that caught world media and traders by surprise.

In addition, these professionals immediately work on identifying the problems, developing solutions as well as structuring the process. They don’t simply tell the world that “The sky is falling” and leave the matter for congressional investigations and a media circus. In fact hours after world media broke the news, both the US and European financial authorities already had solutions in place which quickly stabilized market situations worldwide.

Just to tweak your already agitated minds, if things are so bad, why would Barclay pay 1.7 billion plus dollars for core assets of Lehman Brothers if the picture were so bleak?

Lessons we need to learn

Perhaps it would aid our authorities, law makers, as well as the members of media to study the history of bankruptcies in the US and in Europe. What laws, what policies and procedures have they put in place, which effectively manage catastrophic incidents or major disruptions such as what has happened to AIG and Lehman Brothers?

How do they successfully keep tabs and confidentiality on public interest incidents, what are the incentives to early reporting for the troubled companies, what motivates their officials to divulge or to report to regulatory agencies rather than hide, deny or defy government investigation and intervention?

What powers and privileges have been given to regulators in order for them to quietly and professionally intervene? What resources are set aside for contingencies and where do these come from: Taxes, dues, fees, or fines?

Here at home the quick and the glib of tongue will always claim that we are just as competent and equipped, but a review of several bank runs, bankruptcy, and fund diversions reveal that most companies have no motivation to immediately divulge or report to regulators, no motivation to cooperate, and some are not even intimidated with legal or punitive action. It’s like a game of: My lawyers can beat government lawyers!

Do we even have legislation that requires accountants and auditors to report and sign off on audits that indicate that a company is unlikely to survive the next 12 months?

The tragedy is that even in media, we have a long way to go as far as educating frontliners such as reporters and radio/TV anchors concerning the exercise of proper judgment in reporting news that may result in bank runs or panic buying. At the very least, commentaries should based on strength of expertise and not simply because it’s the news. Listening to some radio commentators paint such a bleak and disastrous scenario almost made me think that “The Great Depression” was about to be repeated.

Multiple bodegas

As consumers and investors, we must evaluate our “style” and attitude to where or how we invest our wealth. For decades our grandparents and parents have told us: “Don’t put all your eggs in one basket”. In the book THE STOREHOUSE PRINCIPLE the authors advise readers to invest wisely by having several storehouses.

Don’t put all your wealth as well as your cash in a house because they can catch fire. And if you read “Rich Dad — Poor Dad”, the author considers a house as a hole for budding entrepreneurs where capital gets trapped. If you have numerous properties that’s a slight improvement, but things can still go bad just like in the US where property values dropped because of the glut, again because everybody got into the market, even people who had several homes.

Don’t throw everything into a business because if a great opportunity comes your way, you might not have any capital set aside to buy in. Remember the song “Old McDonald had a farm” where he had several kinds of animals that produce or give the farmer different products.

So write down what particular storehouses you want to build and fill. Unless you have a written goal, just like our prayer lists, which we read and pray about everyday, it is so easy to be distracted and discouraged.

Finally, be honest and realistic.

Are you investing out of need or out of greed? Investments must serve a purpose or a need. Investments must serve you and those you love. If you’re doing it for “tomorrow” while denying your “today”, you may end up regretting “yesterday”.

We cannot control matters that are beyond us. But we can certainly decide if these events will control us.

Anyone who has lived past 40 has experienced enough traumas in life to realize that money is made, lost, earned and spent. We have all survived greater challenges, deeper pain, as well as human loss. We have faced disease and embarrassment, fear and mortality. In all the years, God has always faithfully provided. He will never let disaster overtake “his people”.