Enjoying the long weekends of Christmas and New Year, my husband Pete used his free time to embark on a “Godfather I, II and III” trilogy movie marathon. The term “Don,” used in the movies, reminded me of the nickname given to Bernie Madoff by his fellow inmates. One convict at the Butner Federal Correctional Complex in North Carolina said that “To every con artist, he is the Godfather, the Don.”
For pulling off the Ponzi scheme of all time, the 71-year-old received a 150-year sentence for stealing $65 billion from his clients. “Don” Madoff was surprised that he hadn’t been caught sooner. The misuse of his charm and intellect caused devastation for many, many individuals and organizations.
I joke with Pete about using his powers for good, not evil. He is a charmer with a boyish grin that can get him out of just about anything. But charm and grace aren’t licenses to deceive, as Madoff did. The misuse of any asset can become a liability. It is our conscience that keeps us in check. As we approach this New Year and new decade, let’s take a look at the fine line between vice and virtue, as immortalized by Dante and Chaucer.
Gluttony or temperance?
Eating or drinking to excess is the definition of gluttony. In comparison, temperance is a state of calm and balance. Temperance also refers to an additive used to strengthen the consistency of metals. Gluttony and overindulgence eventually yields to more moderate behavior and restraint, as witnessed in the current clean-up of our economic crisis.
Greed or charity?
Greed is an awful lot like gluttony, except that it centers on materialism. Get rich quick! In contrast, it is the opportunity for kindness and generosity that builds compassion and allows us to express our humanity.
Lust or chastity?
To no one’s surprise this past year gave us its share of scandals involving public figures. Desires are natural, but when allowed to run rampantly, can lead to destruction. Faithfulness, loyalty and honesty are worthy qualities.
Envy or kindness?
Envy, the green-eyed monster, begrudges and wants the success, possessions or good fortune of others. See same above for greed, gluttony and lust. Focus instead on the Golden Rule; do unto others as you would have done unto you. There’s that other “golden-rule” of “she who holds the gold, rules” but that’s a topic for another day.
Wrath or patience?
Ex-Lehman Brothers chairman Dick Fuld said “You know what? My mother loves me.” The failure of Lehman Brothers triggered the global economic crisis and certainly the former CEO of Lehman was the recipient of much wrath. But Mom still loves him. After almost a year of silence, the former “Gorilla of Wall Street’s” first words to a reporter were, “You don’t have a gun; that’s good.” Knowing that antagonistic actions and resentments won’t change reality, a better approach is to work towards resolution and solutions. Patience is a virtue.
Sloth or diligence?
Public outrage over white-collar crimes led to the introduction of “Post-Madoff Reforms” by the Securities and Exchange Commission (SEC). The lesson here is that there’s no substitute for hard work. If something is too good to be true, it probably is. There’s a lot to be said for conscientiousness and a good old-fashioned work ethic.
Pride or humility?
As they say, pride goes before a fall. We’ve certainly seen examples of pride at its worst on Wall Street. Humility, on the other hand, is all about remaining teachable and humble, rather than arrogant and closed-minded.
Jim Collins, who wrote “Good to Great, Why Some Companies Make the Leap… And Others Don’t,” studied companies that went from good to great. The criteria for these companies were to achieve cumulative stock returns that beat the general stock market by an average of seven times in 15 years. The common denominator for these companies was that they had leaders who placed their company’s greatness before their own ego.
Collins points to David Packard, the co-founder of Hewlett-Packard, who epitomized humility when he said, “You shouldn’t gloat about anything you’ve done; you ought to keep going and find something better to do.”
So, as we emerge from the recession of 2009 and enter 2010, let’s take stock of the economic recovery and expansion. First, it is expected to be gradual and somewhat fragile. The financial crisis of late 2008 was severe, leading to a sharp rate of job losses in early 2009. Nonfarm payrolls fell by nearly 700,000 per month in the first quarter of last year, but the pace of job losses moderated considerably over the course of the year. There is some hope that job growth will return in early 2010, aided partly by government hiring for the 2010 census.
The Federal Reserve is expected to keep short-term interest rates at exceptionally low levels well into the second half of the year and possibly into 2011. The timing of the Fed’s decision to begin tightening monetary policy will depend on the unemployment rate (which must begin to fall significantly), inflation expectations (which have remained well anchored) and the underlying trend in inflation (which has stayed relatively low).
The Bush administration’s tax cuts are scheduled to sunset at the end of 2010. An increase in taxes would not be good for a fragile recovery. Uncertainty regarding which tax cuts might be extended and which might be allowed to expire will likely be a problem for investors and the economy.
Fiscal stimulus helped support the economy in 2009. However, this will ramp down in the second half of this year and into 2011, effectively acting as a drag on overall gross domestic product (GDP) growth. Hopefully, the private sector will pick up steam, offsetting the impact of reduced government demand.
So, what makes the difference between good and great, and how do you define good versus great? Is it the “rock star” celebrity, full of charisma, or the attentive and encouraging teacher who is most helpful along the path from good to great? One thing is certain – discipline and ethics enhance greatness in life and investing. Wishing you a prosperous, healthy and happy New Year.
Darcie Guerin, financial advisor and branch manager, Raymond James & Associates, Inc. 606 Bald Eagle Drive, Suite 401, Marco Island, FL 34145, provides this article. Gulfshore Life magazine named Guerin as one of the Best Personal Wealth Managers in the Southwest Florida area for 2009. If you have questions, e-mail her at Darcie.Guerin@RaymondJames.com or call 389-1041, toll free (866) 343-0882 or visit RaymondJames.com/Darcie. Past performance may not be indicative of future results.