The Maestro Speaks

Monday Alan Greenspan, “The Maestro,” told us what he thought the problem is. In a Financial Times op-ed piece Saint Alan says that our financial calculators are just  too simple–if we only had more complex computer models, we never would have gotten into this pickle.

Is he serious? Complexity helped cause this mess. Talk about not seeing the forest for the trees!

By some estimates, we have about $50 trillion of real assets in the world. Factories, land, buildings. But we have about $150 trillion of financial assets. When times are good, lots of people load up on debt and try to exploit the growth with leverage. When times are bad, the assets get sold and the loans paid off. That deleveraging can be really destabilizing. And that’s what’s happening now.

The problem was an excess of leverage combined with a deficit of wisdom. The solution will be fewer loaned dollars, and more common sense.

Douglas R. Tengdin, CFA
Chief Investment Officer
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By | 2014-09-03T17:28:37+00:00 March 19th, 2008|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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