These are hard times… everything I thought I knew… or had planned seems to be unraveling. Investments for retirement and my daughter’s education, even my career path seems to be a mess. The economy has created challenges and has forced me to rethink assumptions and on some days it feels like a giant dark cloud parked just above me. But these are the days that will define me. These are the days that I need to move past fear and accept the landscape has changed- permanently.

A recession is by definition,  a contraction of the economy. A depression – is a recession on steroids. A reduction in consumption leads to reductions in employment and often in prices because no one has any money. But when you think of the overconsumption, especially in the U.S. over the last decade, it had to crash.

USA: Consumption nation. Skip across the television dial — The Biggest Loser, Celebrity Fit Club, Bulging Brides, Nip and Tuck… is this who we have become, a freak show of overconsumption? The evidence of this affliction is everywhere, not just on TV, but also on the roads with our massive vehicles, the supersized retailers with endless aisles of needless junk. The constant cry for more was answered by willing manufacturers from all over the globe. Our spending spree was lining the pockets of capitalists from the deserts of the Middle East to the Middle Kingdom of China. And they kept the party going by buying up dollars, essentially funding the spree. But the ride is over. The chapter ends like any binge session, with regret and some pain. But tomorrow is a new day. Americans don’t have to be who we were. We can be better. Contraction doesn’t have to be a dirty word. We celebrate getting fit and dropping the weight… why not celebrate slimming down as consumers. Why not put our American and our global ingenuity into creating products and services that rise above simple consumption. What each of us take away from this period in our history is up to us. But I chose to look at this as an opportunity—to fine tune myself, my mission and what I worry about and more importantly what I celebrate. – Mary Caraccioli

In his annual letter to shareholders Warren Buffet wrote, “The investment world has gone from underpricing risk to overpricing it.” This Buffet argues is leading to yet another bubble in a decade that has seen its share of them, tech, housing, oil, and now Buffet and others say U.S. Treasuries. While the other bubbles of the decade were fueled by rampant speculation and unsustainable returns on investment, the treasuries bubble is different.

It is fuel by what Buffet called the over-pricing of risk, commonly known as fear. It’s palpable. I hear people talking about their fear of the financial markets everywhere, from social situations, to the waiting room at the dentist office; to just about anywhere people are forced to make idle chat. Instead of the weather, the favorite gripe is how miserable everything has become, including how battered their investments. The consensus “I just don’t want to lose anymore money than I already have in the market.“ Others say, “Making money is for another day, a day when there is a little more clarity about corporate earnings and the economy.” And then there is this common complaint, “I have watched my retirement fund get cut in half, I just can’t make money in the market.” The result of all this negative sentiment and the over-pricing of risk and an indiscriminate sell off of every asset class. Until the dust settles, most investors believe only U.S. Treasuries will do.

When everyone is getting rich, it’s easy to think of your self as a maverick who embraces investment risk. But the reality is that most investors and most people are way more risk averse than they give themselves credit for being. Now, that once hidden aversion is causing the proverbial pendulum to make a big swing in the other direction. So, instead of recklessly using our homes as our piggy banks, we have found religion. But how do we use that wisdom to guide us away from the herd going forward? That is the question we have to ask ourselves. The old cliché is that it is darkest before the dawn. As the economy looms large over our every move these days, Buffet reminds us to embrace the darkness, “When investing, pessimism is your friend, euphoria the enemy.” The pessimism didn’t prevent him from buying, it helped him find the opportunities, he said ”In our insurance portfolios, we made three large investments on terms that would be unavailable in normal markets.” Embrace the fear, its healthy, but don’t forget to occasionally ask yourself “what opportunities are out there for me.” – Mary Caraccioli