By DAVID MOON, Moon Capital Management
football coach Pat Dye was criticized about a game-costing fourth-down decision
to kick a field goal rather than go for a touchdown. His explanation was that
hindsight is 50/50.
Fortunately, Coach Dye did not retire to become an
Of course, the rear window often is much clearer than the
windshield, but sometimes we simply fail to believe what we see in front of us.
The economy, for example.
Two years ago, I pointed out in this column that a
quarter of the prior three years' increase in the GDP was the result of
consumers' spending money they had taken as cash-outs from home refinancings.
With 50/50 hindsight, it's easy to understand how that sort of growth wasn't
People couldn't keep adding to their mortgages and use
the money to go out and eat. Eventually, they borrowed all of (or more than)
their equity. Never mind that it's stupid to pay for dinner or a big-screen TV
over 30 years.
Yet that's what consumers were doing. And that's the
engine that drove a significant portion of our economic growth for the early
Fuel needs to mix with oxygen to run an engine, and at
high altitudes oxygen becomes scarce. As we relied more on borrowed funds for
consumer purchases, the U.S. economy was running out of
Federal Reserve Chairman Ben Bernanke says that his
primary goal is fending off a possible recession. The Fed is likely going to
continue to work for lower interest rates, in an effort to relieve pressure on
the already debt-laden consumer. He wants lenders to consider reducing
loan-principal amounts, artificially creating home equity. Tax rebate checks
will start arriving soon, and with enough encouragement, perhaps Americans will
go out and spend that money and help the weakened economy, rather than do
something silly like pay off debt or stick the $600 windfalls into their savings
Wow. Does anyone else see a problem with that
Imagine that you've put on an unneeded 20 or 30 pounds.
Your clothes no longer fit, but that's the least of your problems. Your blood
pressure, heart rate and cholesterol are now all in a danger zone. You turn to
an expert, your doctor. After a thorough examination, he recommends a course of
action: buy bigger clothes.
Fortunately, unlike the Fed, he doesn't go in front of
Congress to deliver this silly advice.
Maybe you ought to drag your fat self to a gym. It seems
like a little sweat is called for. Perhaps you ought to try some 'push-backs.'
You don't have to have ice cream and mashed potatoes with every meal. Despite
what you see on late-night TV, there are no easy answers to your health
You are going to have to do some work. With a little
foresight, Ben Bernanke might decide to encourage
David Moon is president of Moon Capital Management, a
Knoxville-based investment management firm. This article
originally appeared in the News Sentinel (Knoxville, TN).