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Giving Some Financial Thanks

It's Thanksgiving week, and it's traditional to reflect back on the things you're thankful for this year. Since I spend most of my time thinking about financial markets, here are a few of the things I'm thankful for when it comes to our national finances:

Not In A Depression. I'm thankful that we're not in a second great depression. I know you might think this is a little melodramatic, but it's not. Just two short years ago the entire global financial system was on the verge of collapse. I don't have the space to list all of the system failures that were occurring, but they were huge and out of control. Thankfully, the actions of our policy and political leaders at least kept us from tipping into the abyss. Regardless of how we got there, things had to be done during the panic to restore a basic faith in the stability of the financial system, and they did that. As tough as it has been the last two years, all of our financial lives could have been a lot worse. So, I'm thankful that didn't happen.

Deficits. I'm thankful that the American public seems to be waking up to the issue of deficits. Until recently, no one really paid much attention to it. Now, at least we're starting to have a conversation about the hard decisions we face. We spend too much as a government and we have to start reversing that trend.

Savings Rate. I'm thankful the savings rate is up for the average American household. It unfortunately took a major crisis to scare lots of people into spending less and saving more, but at least some people have gotten the message. We're at about 4%, and the savings rate needs to be closer to 12%, so that's a start.

Housing Sense. I'm thankful more people are thinking critically about the value and cost of housing. The crushing weight of mortgage debt has done enough damage. The more Americans are skeptical of the value of housing and the more they understand the true costs of ownership, the less they will be willing to pay for homes and the more affordable housing will be for all of us. Your home is basically a lifestyle expense, not an investment.

Bonds. I'm thankful more Americans are discovering the value of high quality bonds in their portfolios. Prior to 2007, most investors thought all they ever needed was a diversified portfolio of stocks to manage risks. Not so. For those who had the discipline to invest a meaningful amount of their portfolios in bonds the last 10 years, they manage the financial crisis pretty well. I hope the new bond buyers will have that same discipline going forward. Don't just be a "bandwagon" bond investor. Understand the value of defense in your portfolio, and stick with it. It makes retirement planning a lot easier.

Corporate America. I'm thankful that most of the companies we all invest in have taken steps over the last several years to improve their financial health. If they hadn't, I'd be really worried. But they did, and many are in better shape than they were 3 years ago. That gives us a source of national financial strength, and great potential for the future. Companies have shown they know how to manage through a major crisis, survive, and come out ready for growth on the other end.

OK, there you have it. Several things to be thankful for during this week. I hope you have a great holiday with your family and friends, and are thankful we live in such an amazing country.

Bottom line. We've made some progress.

Learn More: Want to learn about a simple way to manage your personal finances and prepare for retirement, investigate my new book Your Money Ratios: 8 Simple Tools For Financial Security, available in bookstores and at The Wall Street Journal called the book "one of the best finance books to cross our desks this year." WSJ 12/19/09.

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