Yoshikami: Building on the Mistakes of CEOs

In an interesting twist of events, the Wall Street Journal reported that General Motors is asking employees to lobby the U.S. Senate in hopes of keeping Chief Executive Rick Wagoner in his job amid increasing pressure on the automaker's leadership team.

Ron Gettelfinger, Alan Mullaly, Robert Nardelli, and Rick Wagoner
Ron Gettelfinger, Alan Mullaly, Robert Nardelli, and Rick Wagoner

Wagoner has been at GM's helm since 2000 (he's been a central player in Detroit's bid for federal assistance). It was specifically suggested by Senator Christopher J. Dodd, that Wagoner should step aside, triggering a fresh round of scrutiny on the 55-year-old CEO.

Wagoner, Chrysler's Robert Nardelli and before he stepped aside, Yahoo's Jerry Yang -- these are just a few CEOs that have spent 2008 under siege. As we watch CEOs stagger from the incredibly poor decision-making, it is easy to think that we are the unwitting victims who will endure losses because of their errors.

True, their missteps have caused damage to our portfolios. But this doesn't have to be the bitter pill. We can take advantage of lessons learnt from their missteps. And there are many lessons to gather and profit from.

These lessons will help you better manage your portfolio strategy and hopefully, help you make money from these corporate disasters.

First lesson ...

1. Don’t Think the Future Will Always Be Like the Past

Does anyone argue that Asia is not the same place it was a decade ago? Of course not! The world is changing and you need to adapt to that changing environment. Automakers in the United States did not learn that lesson. Is it so surprising that they are now saddled with products that no one wants?

The signs were clear that corporate leadership clung to the belief that everything would be okay if they just kept doing it like before. Wrong. It's just like a bridge blowing out during a typhoon. While it might have worked in the past, it no longer remains standing. You have to develop a different strategy.

Lesson number two ...

2. Long-Term Opportunities Don't Eliminate Short-Term Risks

Just because there are long-term opportunities, don't go around thinking there are no short-term risks. Let's take Asia for example.

Asia will continue to grow as an economic power. But understand this, China is going to suffer for a while and that's going to impact investment returns. It's like the mistake mortgage lenders made, thinking that new and exotic loans were without risk and that hot growth areas wouldn't suffer corrections.

The truth is they are and will.

In the U.S., Las Vegas was a fast-growing community with lots of opportunity. It's still a city destined for high growth, but excess optimism has caused the real estate market to crash with property prices dropping as much as 50 percent. Excess optimism can be a dangerous thing. Be careful and watch your entry point to reduce risk.

All this seems like common sense doesn't it? But these are the lessons to learn provided to us by executives with less than perfect vision. It will help you position your portfolio for the recovery that is coming in 2009.

Making the best of a bad situation is what great investors do. Don't repeat the same mistakes others made and you'll have much more profit in your portfolio.



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 the firm and has over 20 years investment and financial planning experience. Michael is a respected lecturer speaking frequently on tactical asset allocation theory and appears regularly on CNBC and CNBC Asia. Michael can be reached directly at m@ycmnet.com.