This Month's Feature

From the April 2008 issue of Money Matters

Finding security when economic insecurity rules the headlines

By Chuck Bentley, CEO

“Economists have correctly predicted nine of the last five recessions.” I find a lot of truth in economist Paul Samuelson’s famous quote, and it keeps me humble regarding my opinion about where the economy is going. But during the past few weeks, the headlines have all included much about the U.S. and global economy. This has led to a flurry of questions being posed to Crown regarding our thoughts and advice.

First, economic downturns are not a cause for panic. With so much fear and uncertainty in the news, it is easy to believe that more bad news is on the way. But as Christians, we should avoid allowing current events of any kind to create fear-based decisions.

Years ago, the fluctuations in the Dow Jones Industrial Average were an accurate graph of my emotional condition. If the Dow was up, I was positive; if the Dow was down, my outlook was negative.

I have since learned not to become overly negative or enthusiastic with the swings in the economy, since only the Lord Himself knows the future. Notwithstanding what the Bible shares with us about future events, I cannot see one second through the veil of time. This limitation exists to allow us to exercise faith.

Second, our federal government is not on the brink of bankruptcy. Although the federal deficit has spiraled in real dollars to more than $9 trillion, the U.S. economy has grown substantially as well.

The U.S. national deficit stands at about 65 percent of our Gross Domestic Product (GDP). By the same measure, China is estimated to be about 16 percent, Israel is at 87 percent, and Japan is at 170 percent.

When considered in context to our national wealth, we are not at an all-time high deficit relative to our GDP. In 1945, our federal deficit reached 121 percent of our GDP (not shown on the graph).

This historic high occurred under the Truman administration during World War II, when the nation experienced high deficit spending combined with slower economic growth.

Don’t get me wrong—the U.S. debt needs to be reduced, but we are far from the disproportionate levels reached in 1945. Whether we are faced with recession, inflation, stagflation, or even a depression, it is far more important that we reduce our personal debt levels.

I advocate being totally debt free, which minimizes our dependency on how our government operates the federal budget and minimizes our vulnerability to economic fluctuations.

Finally, the economy serves to remind us of Hebrews 13:5, “Keep your lives free from the love of money and be content with what you have, because God has said, ‘Never will I leave you; never will I forsake you.’ ” (NIV).

Our ultimate preparedness is to avoid fear or panic, reduce our vulnerability created by debt, and remain dependent upon Christ, who is the never-changing constant in an ever-changing economy. He loves us, and He will always be there when the money is not.

So, what is the best financial plan during uncertain times? It depends upon your personal financial condition, so let me give you a few scenarios to choose from.

A strong defense

Will Rogers once said, “I’m more concerned about the return of my money than the return on my money.” If your primary concern is loss on your investments, then you are more likely looking at this picture from a defensive posture.

Here are two sound choices you could make to build a strong defense.

1. Analyze your investment portfolio and assess your overall asset allocation. Generally speaking, the greater the percentage you have in equities, the more risk you have in your portfolio. If you are not comfortable with the percentage that is in equities, then begin a process of reducing your exposure to the stock market. Reducing your percentage exposure to equities may reduce your potential long-term return, but it should also reduce your risk of loss in a market downturn.

2. Get expert advice on how to diversify. According to financial advisor George Hiller, the best advice is to be properly diversified. Different asset classes can help to dampen overall volatility in your portfolio while still allowing you to grow your portfolio at a reasonable rate over the long term. The market has historically made significant gains following a major downward correction, and none of us are capable of accurately timing when to get in or out.

A strong offense

Declining markets have typically been the greatest opportunity for investors. Sir John Templeton chose to invest in nations, industries, and companies when they were at “points of maximum pessimism.” A friend says it like this: “A few times every year, Wall Street has a big sale. The problem is that only a few fearless buyers seem to want to shop.”
When others are forced to sell, the best purchases will be available. Thus, if you want to “buy low,” you will need to get in when the majority may be getting out. Of course, you will need wise counsel, good research, and a strong financial position to weather the term in which the market may be down. Paul told Timothy that “God has not given us a spirit of fear, but of power and of love and of a sound mind” (2 Timothy 1:7 NKJV). Use that “sound mind” and look for opportunities in your investment strategy.

A fulfilled life

Suppose that the worst case happens and you lose all of your financial assets. Have you lost everything? No, you have not lost everything.

We should never use that language as Christians. As C. S. Lewis so beautifully stated in The Weight of Glory, “[H]e who has God and everything else has no more than he who has God only.”

Further, if you have not been dishonest or greedy, you probably will not lose the relationships with your friends and loved ones. And if you have been generous and kind to others, you will have most of what is fulfilling in life still intact. Loss of assets, jobs, or income cannot stop you from being kind and generous.

Money does not give us identity or fulfillment; it only serves to empower or prohibit the fulfillment of our life purpose. If we serve money, we will become entangled by it.

By trusting God and His ways, you will be anchored in the only true security and avoid the storms of the economy that batter those who have placed their purpose in the lifeless hands of money.

ChuckBentley@crown.org