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Yoshikami: Tighten the Purse Strings, Yes We Can!

President Obama spoke of many things in his Financial State of the Union. And I mean many things -- Healthcare, Education, Energy, even Cancer. A little something for everyone.

But the underlying tone was one steeped in one basic theme: accountability. For his administration, for you and me, and for the scoundrel corporate leaders everyone loves to hate nowadays. He said over and over again that the party is over, the fantasy dead. We have to be accountable for our actions.

What does this mean exactly, for you and me?

Well, it means you can't buy that wonderful $300 purse you can't really afford. That a $699 per month auto payment is not what matters, it's the cost of the car that's important. That the poor souls in the corporate world may have to fly (pause for dramatic effect) -- economy. Oh the pain. Or at least in a second hand private jet.

Yup, we all need to sacrifice. And if we dare to live within our means, we will at last, arrest this spiral we are in. That, and addressing those irritating challenges of falling home prices, no credit, financial statements you can't trust, and way too much leverage everywhere. But let's not quibble about the details.

But what does this recovery look like? The President said, "Now, if we're honest with ourselves, we'll admit that for too long, we have not always met these responsibilities - as a government or as a people ... the fact is, our economy did not fall into decline overnight."

See that last sentence? Important and here's why.

What he's really saying to us, is don't expect a recovery quickly. That this will be a significant struggle, even if initial steps have some near-term impact. The path towards undoing massive leverage will be a gradual process. No quick fix and no quick recovery.

It's important as investors that we hear this fact loud and clear. While we would like to have an instant recovery (I mean really, aren't we all irritated when our email takes more than 5 minutes to be delivered?), it simply isn't going to happen.

Any investment strategy should reflect this new reality. That companies that provide us things we need, rather than want, may have tailwinds. That returns will be lower. And that we cannot cling to a microwave, pie in the sky hope, that we can click our heels and go back to that which never really existed -- a net worth built on leverage.

So hope or gloom? Depends on your time horizon. If you are looking for an easy, quick out, well sorry, it's not in the cards. Challenges are here and with us for a while. Accept that and adjust your perspective accordingly. It ain't pretty but it's reality. And after decades of excess, it's time to live within our means.

Can the United States do it? Of course we can. We won't like it, but yes we can. In the President's words, "As we stand at this crossroads of history, the eyes of all people in all nations are once again upon us -- watching to see what we do with this moment, waiting for us to lead."

    • Read Full Text of Obama's Speech
    • Obama Raises Spirits, Defying Economic Gloom

It's a Kennedy like call to action. Except this time it means that we have to do without the $300 dollar purse.

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Michael A. Yoshikami, Ph.D., CFP®, is Founder, President, and Chief Investment Strategist of YCMNET Advisors, Inc., a registered investment advisory firm (www.ycmnet.com). Michael oversees all investment and research activities of YCMNET. He is a respected lecturer speaking frequently on market issues, tactical asset allocation, and investment strategy. He appears regularly on CNBC and CNBC Asia and can be reached directly at m@ycmnet.com.