Tom Ross: Nero fiddled, I prefer to nibble
February 20, 2012
Steamboat Springs — I finally re-balanced my 401K on Friday, and now I'm praying for Italian Prime Minister Mario Monti to save the world's economy and my retirement fund along with it.
Five years have passed since I first read Thomas Friedman's groundbreaking book about globalization, "The World is Flat." If anything, the world has become flatter than a Sicilian pizza during the interim. And so has my 401K.
Very briefly, Friedman's thesis, then and now, was that the stunning expansion of global communications technology has leveled the playing field and opened up the markets for skilled labor in developing nations. At the same time, the shrinking global supply chain helped to make corporations more profitable and more like nation-states.
And all that was before the U.S. and European economies tanked. Before the collapse, Friedman touted Ireland as a country that profited by investing in higher education to attract international companies to open large offices there. Since then, we've learned that Ireland's housing bubble was even more overblown than our own. However, I'm still buying most of Friedman's analysis.
We'll have to compete for every manufacturing job we can restore, and most of us will never fully recover from the economic hit we took the past few years.
An article in Time magazine on Monday called Monti the most important man in Europe and made it plain that America's fragile economic recovery depends heavily on Monti to impose fiscal discipline on his countrymen and work through its crushing debt on a generational level. Most Italians, like most Americans, will be retiring much later in life.
The European Union, which binds together the currencies of 25 countries, is just another example of how flat the world has become. And now, as Time pointed out last week, "Italy is too big to fail and too big to save."
Monti, a university economist who earned his Ph.D. at Yale, is going to have to get it done on his own.
If you're fortunate, as I am, to have access to a 401K savings plan through your employer, you probably watched it lose about 63 percent of its value during the past few years, even as you faithfully plugged more of your earnings into it.
I should have re-balanced my retirement fund into more conservative investments in June 2011. But I benefitted from a modest reprieve. The market came surging back in the final quarter of last year, and the first two months of 2012 have been so good to stocks that I've nearly been made whole again.
On the other hand, the past five years were so ugly that I pretty much stopped looking at my fund balance. I tried to reassure myself that I was finally buying "new shares" at discounted prices and shoring up the base of my pyramid for the next recovery.
Now that the Dow is flirting with 13,000 from week to week, I'm not going to repeat my mistake. My new fund is calculated to continue growing while gradually dialing down the risk during the next eight years. I still have half of my little nest egg in U.S. stocks, but I'm also invested in the United Kingdom and Japan, with tiny allocations to China, Brazil, Canada, France, Germany, Australia and Switzerland.
There's nothing in Spain, Greece or Italy.
Instead, I'm going to do my bit to help Monti save the European Union by indulging in fine Italian pecorino (sheep) cheese and deep red Barbera d'Alba wines from the Piedmont.
They say that Nero fiddled while Rome burned. At the very worst, I'll be able to say that Tom Ross nibbled during the fall of the eurozone.
To reach Tom Ross, call 970-871-4205 or email tross@SteamboatToday.com