Crossover Appeal

Question: what’s contagious, mutates, and can harm its host?

The Swine Flu? Or toxic financial assets? The answer is, both. Both depend upon networks, are highly adaptive, and respond to engineering solutions. We’ve learned a lot since the outbreak of the Spanish Flu some 90 years ago. And we’ve learned a lot about financial contagion. Some of the solutions are quite similar.

Take, communication: by letting people know early about the new flu virus, we’ve greatly improved people’s preparedness. And since the banks’ health has been known, most people have been able to protect their core savings. Second, regulation: by centralizing disease data with the CDC in Atlanta, we’ve provided a needed clearinghouse for diagnosis and analysis. Similarly, by shoring up the core of the financial network, Treasury and the Fed have stopped most of that contagion. Finally, structure: diversity increases resistance to infection in both biology and in banking.

Lessons from disease control directly apply to the economy. Let’s hope that the successes we’ve enjoyed in one arena will inform our approach to the other.

Douglas R. Tengdin, CFA
Chief Investment Officer
Hit reply if you have any questions—I read them all!

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By | 2014-09-04T20:43:15+00:00 May 4th, 2009|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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