I recall that as a kid I had great sport occasionally kicking a rock down the road. There were often rocks to be found along whatever route I was traveling and kicking the rock was a fun and relaxing way to pass the time, although I don’t have any idea why I would have been tense as a child, but that’s another matter altogether. I don’t recall often having the ability to actually kick a can down the road because in all probability there just weren’t that many cans lying around the road to be kicked. It seems to me that nowadays hardly anyone kicks cans down the road, mostly because we are all driving cars now and if you are a kid you are probably playing a video game on some handheld device while walking to wherever your destination happens to be.
“Kicking the can down the road” is especially relevant today because it is the newest overused term in the investment business. Occasionally the investment world gets fixated on a description of current events that spreads like wildfire and you hear it so many times that you just can’t stand it anymore. The most recent is “kick the can down the road” and the one prior to that was “the new normal,” a term given to us by Paul McCulley at PIMCO to describe the slower pace of growth we can expect from the global economy going forward. The term “kick the can down the road” is used to describe governments that refuse to address fiscal imbalances that are presumed to cause financial and social chaos in the future. A recent research piece by Joe Kalish, Senior Macro Strategist for Ned Davis Research, titled “Where We Stand on the European Sovereign Debt Crisis” comments on the Greek debt situation by saying, “By not rescheduling or restructuring the Greek debt, the Europeans have bought some time and ‘kicked the can down the road.’”
I saw several clients last week with my planning associate David Kauffman, who reminded clients in three separate meetings that we are “kicking the can down the road.” And many analysts who look at the deferred funding for the recent healthcare legislation feel that we are kicking the can down the road. Current U.S. debt to GDP ratios also imply some serious can-kicking. In fact, governments around the world are engaged in can-kicking most everywhere you look. If you happen to be out walking and see a can, give it a good kick. It will remind you of the simpler days of your childhood, or it will depress you as you consider our collective inability to live within our means. I find myself wondering whether democratic political systems can resolve can-kicking dilemmas without a serious financial crisis. Voters need to vote for a serious reduction in their standard of living and politicians need to try to get elected by offering a serious standard of living reduction to the voters. I’m skeptical that this will happen, to say the least. Ultimately the financial markets will riot and drastic measures will be enacted as we are seeing in Greece today. Until then, I guess we will just “kick the can down the road.”
