The baby boomers are reaching the age where they need to decide between asset ownership and liquidity. A growing percentage of this group will use up their savings “between jobs” after age 50 and before retirement. They will go through the process of liquidating their assets at prices that are much lower than a few years ago in order to add to future monthly income.

With over 75 million baby boomers looking ahead at uncertainty, more job shortages for older people, and a largely unfunded Social Security and Medicare system (especially Medicare), they will begin to consider how to get liquidity from their hardest to liquidate assets – their houses. Social Security checks now average about $1100, and for a large percentage of these people this is what they will have to live on.

The dollar is first and foremost a political instrument. Part of its historic appeal has been its stability, and its link to so many elements of world trade and dollar contracts. While it is not gold-backed, the dollar can be used to purchase oil which allows people to look beyond our fiscal management (including both our growing current account deficit, and our GAAP deficit). It is a reason to hold dollar reserves.

In spite of the existing oil backing, there has been a steady movement for dollar holders to diversify away from the dollar, and since its formation in 1999, the Euro has moved from zero to nearly 27% of global reserves. There is an increasing global movement to hold a “basket of currencies” rather than just the dollar.

When Boone Pickens, the world famous oil investor, announces that he is investing in water rights, it is time to take note.

Clearly we have a rising global population, a declining supply of fresh water, agriculture (crops use about 80% of U.S. water) using an increasing portion of water and the dollar dropping increasing global grain prices.

It is probably wrong to lump all banks into a single category. Many smaller banks have none of the exposure that the larger banks have, but their P/E multiples have been beaten down anyway. At current levels, raising additional capital for these small banks is not a matter of goig to Dubai, but instead to local and regional investors. If at the same time, the rules of lending for them is changed a lot, it will impact their reports which will be needed in due dilgence and impair their growth and the growth of the overall economy.

As the U.S. moves from being a consumer driven economy to an export driven economy, these smaller banks will be the front line for working with small and intermediate size businesses to help them with their export financing. This will require investment, and it should be private investment. In the third quarter, as much as 40% of the growth in our GDP came from export related activities.