Indeed, as Alan Greenspan likes to remind us,
spectacular meltdowns of the S&L ilk are less of a problem for the financial
system now than they were 15 years ago, due to advances in financial risk
management technology. The 9/11 attacks, the dot-com bubble’s bursting, the
Argentine debt default, the partial collapse of the energy trading markets after
Enron’s bankruptcy—all these events would have laid banks low had they occurred
two decades earlier. But now, despite their enormous human cost and their impact
on individuals’ investments, they left the financial system largely
unscathed.The problems that dog investors today are not the financial
Tunguskas favored by headline writers, but more mundane and exasperating issues.
Where can we find income when risk-adjusted returns on all asset classes are
meager? What assets are “safe” enough to park our low-risk capital in? How can
we make important financial decisions and time their execution when all the
moving parts—currencies, credit, rates, equities and commodities—are flopping
around like so many newly gaffed bluefish? When political and macroeconomic
trends—the wars on terror and in Iraq, the twin deficits, the disparities in the
costs of international capital and labor—add to the uncertainty? We posed
these questions to a panel of some of the financial services industry’s leading
lights, and published their insights, beginning on page 54. While they agree
that the current financial and economic climate is generous with its challenges,
they also point out that, apart perhaps from the upward slope of the 1990s
bubble, no period has been without problems. To deal with today’s, the key is to
think strategically, and act opportunistically. As David Darst, chief investment
strategist at Morgan Stanley put it, we need to become much more Machiavellian. Dwight Cass
Editor-in-Chief
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