Resiliency in an Uncertain World
Geopolitical risk is not something that anyone has really had to absorb in the last 40 years.
The last time external factors influenced the supply chain in a meaningful way was the mid-1970s. At that point in time, the production of energy was constrained, and the secondary effects were felt around the world.
We had a small taste of supply chain disruption during COVID, and the supply chain weakness was exposed, but commerce also stopped. Demand destruction and massive government stimulus insulated us from the problem. It was not a true test of independence.
The conflict in the Middle East has exposed weaknesses in energy infrastructure worldwide. That knowledge is now in the system, and the financial strength of countries is being tested.
We expect disruption to impact developing nations, but Forbes is predicting that California (the 5th largest economy in the world) has about 10 days of gasoline left.
Who knows if that is true, but if it is, the impact would be meaningful economically (link).
California is getting ready to test the resiliency of its energy supply chain.
Resiliency
In personal financial planning, resilience is tested in times of uncertainty.
It is not about predicting the next crisis. It is about continuing life when uncertainty hits. Resilient wealth has minimal friction when the need to convert paper wealth to cash to bridge the gap of uncertainty.
It is the true test of strength when you are indifferent to the macro. We test your financial resilience in two ways during our annual review – liquidity ratio and organic cash flow.
Liquidity
Liquidity is defined simply by a yes to the following question: “Can I convert this asset to cash in 24 hours?”
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