The Solution?

The solution to pollution is dilution.

That used to be the underlying principal when dealing with water pollution. Get the stuff out to the ocean and we’ll be rid of it. But environmental engineers didn’t bank on food chains and concentration. Now, we need to watch out for mercury in our tuna, even though they come from the open ocean.

Dilution seems to be the expected solution to the financial crisis. Got a loss? Dilute your shareholders. Merrill just diluted its owners another 30% to shore up its capital in the wake of over $10 billion in losses. Naturally, the shares have skidded this year.

But is dilution the answer? It seems to me that we need some sort of financial Superfund, something that will buy up the toxic waste and detoxify it. It could be funded by mandatory capital assessments, similar to the way the Federal Reserve is funded now. Want access to the Fed window? Ante up!

Diluting our way to success doesn’t seem to be working. It’s not enough to wash the sludge down the drain. We need to find some way to clean it up.

Douglas R. Tengdin, CFA
Chief Investment Officer
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By |2014-09-03T20:34:53+00:00August 1st, 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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