As a manager of financial portfolios, rarely do I see a portfolio that has only one disastrous investment in it.  If there’s at least one terrible disaster, where someone has made an investment and seen most of the investment wiped out, it’s usually not alone in the portfolio.  Usually, there are several, sometimes entire portfolios of problems.  It’s kind of like roaches, or ants, or rodents – if you see one, there are probably more.  And the opposite is also true – when I see several good investments, it’s usually a tipoff that the entire portfolio will be soundly created and structured.
 
Several days ago, Paul Solman of the Jim Lehrer Newshour had a piece where he discussed the various estimates of the cost of the Iraq War.  Minimum estimates are half a trillion dollars.  Some observers, such as Joseph Stiglitz, the Nobel prize winning economist, put the costs, including medical care and opportunity costs much higher, around $2 trillion.  At some point in the piece Solman mentioned the fact that our economy is enormous, with some $14 trillion in Gross Domestic Product, and that the war, even at the higher estimates, therefore represents a small fraction of our country’s economic output.  And then I thought about my portfolio observation, that a terrible investment usually is not alone in a portfolio.
 
And so it is in our government and country.  The war in Iraq is merely one of many horrendous investments that our country has made, or in some cases, not made.  Investments that you don’t make, but should have made, are called opportunity costs, and they can be the biggest and most costly items of all.  Failing to invest adequately and properly in alternative energy, education, childhood development, environmental protection, healthcare, public transportation, conflict resolution, weapons disarmament, and much more has been enormously costly to this country.  Combine those opportunity costs with the investments that have been made: in wars of aggression, subsidized industries, environmental destruction, wasteful programs, and more, and we have a national portfolio that is a stinker.
 
When I take over management of a stinker portfolio, there’s much to do.  Getting rid of the dead wood, stopping the losses, adding new securities, diversifying and stabilizing the portfolio, these are all elements of fixing a portfolio.  Luckily, I see many signs that national portfolio fixing is beginning in earnest.  From an accelerating groundswell in favor of greener, more environmental policies, to renewed discussions about healthcare, to the turning of opinion about the war in Iraq, I believe that the country is finally beginning to accept that its portfolio is in bad shape, and needs cleaning up.  And it’s coming not a moment too soon.  A good portfolio manager can always clean up a bad portfolio – unless, that is, all the capital has already been destroyed, and there’s nothing left in the account.
 
I’m Leo Gold.  This is the New Capital Show.