I was speaking with clients earlier this week and we discussed how the world we live in is changing. The term “resetting” came up. They said “everything is resetting”. People’s expectations are resetting, patterns are changing and being modified to reflect economic and societal change. And I can’t help but think, this is good. This is the way things should be. These are the “Seven lean years”. This is an extended recession for many people. Industries are evaporating (think the Printing business), and new one’s are slowly springing up. Deleveraging and austerity (as my office partners at Creekside Capital recently pointed out, “Austerity is the buzz word of the day”), and “we’ve come a long way from the Material girl and her world that died in ’08.

So since this is an investment column, what does this era of “resetting” mean for your retirement account? I think it means that its time to settle in for a period of extended low returns. In a period of low returns, there is not going to be a lot of “wealth creation”; certainly not in real (inflation-adjusted) terms. But these fallow times, can bear the seeds/swell of the future energy waves.

I do think that the next “good times” will be driven by the looming energy crisis. It will take a while for this crisis to materialize, but when it does, we are going to experience a giant build-out, required for the transformation from an oil-based energy infrastructure, to a more diversified energy economy.

And that more diversified energy economy isn’t as far away as we think. Today, we utilized electricity and a hybrid taxi, to make our way to SFO. We’re sitting here on BART going to the airport. It’s quite an easy, one hour ride to cover the 32 miles or so. The economics are okay. There are three of us, and the taxi to the Bart was $9, and the Bart tickets were $27, so we get to the Bart for $36, versus $91 for a taxi ride including the Bridge toll. More importantly, I think it is important that we model, to the best of our reasonable ability, alternatives to a 2-3 even vehicle households. Now don’t get me wrong, I enjoy my comfortable car and the independence it provides me as much as anyone, but alternatives to our car dependent lives do exist, (such as taxi-barting it to the airport), and when they do, I’d like to embrace them more often, so that my kids can see the other ways of doing things. The 5 years I spent in Munich without an automobile were among the best.

Resetting is seeing the same things, but differently. Did you happen to see Vantage Point? It was a movie showing an event for 6 different people’s perspectives. As we share, commiserate, bemoan today’s mandate of austerity, perhaps may we also rejoice in the promise that this change can bring forth in our collective future.

That promise of growth and change will in time with it bring unconscionable opportunities including investment opportunities. Asset values, which are scarcely compelling these days, will appear between now and then. As a father, and friend, I’m trying to actively observe the metamorphosis of our new-found austerity. But it’s hard to see. As an investment manager, I’m looking at asset values in stocks and bonds and commodities, and reminded of the sage maxim, “Don’t do anything, just sit there!”

If you’re wondering if you are sitting in the right place, just give me a call. I’d be happy to discuss that with you this Fall.

Barnes Capital is a Registered Investment Advisor located at in downtown Lafayette. With RB Capital Management, Barnes Capital develops custom tailored portfolios for its clients. Specialized in retirement income portfolios, financial planning in an integral part of our process. Call 925-284-3503.

This entry was posted on Sunday, August 1st, 2010 at 2:16 pm and is filed under Monthly Column. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.