Today is a red-letter day, and not for good reasons.

First, today we saw the Dow fall below 7,000. Just think – 18 months ago, the Dow stood at 14,000. It certainly causes one to ponder the sheer enormity of this fall. A generation of investors are now faced with the cold reality that their investment accounts – or the investment accounts of their children – will not provide them the security they need.

Another big event today was the announcement that the Feds are pouring another $30 billion of taxpayer money AIG’s way. If AIG — or any number of major financial institutions — were allowed to fail, they would individually represent a new record for the world’s largest bankruptcy.

We offer two points, one in the rear view mirror and one moving straight ahead.

First, we are still in the “magic potion” phase of this attempted recovery, where the great minds believe that formulas can solve our dilemma. In this, by propping up the AIGs in the short-term, it will lead to a faster, broader recovery. We disagree. Lakeside firmly believes that the result of letting each of these institutions fail would not be much worse in the end.

Regardless of the path we take, we will see big job losses, and substantial equity loss.

But we don’t think the idea of letting the AIGs of the world fail is even under consideration. Why? Well, the big wheels holding CEO jobs at these organizations have big wheel friends, many of whom are the architects of these bailouts, and have all sorts of incentives to make these things happen. On the corporate side, if a company still has cash in the top drawer most chief executives will keep swinging for the fences until the cash is gone – they have nothing to lose.

Why shut the company down if you can get a paycheck for another year or two? That is the thinking they are following, and it is a shame that there isn’t a provision for this in the criminal code. We believe folks who run companies like this could benefit from a sabbatical at the Grey Bar Hotel.

Compounding our difficulty is an overabundance of MBAs who should have gone pro in something other than business.

Each week, Lakeside is fortunate to have many visitors to our offices who would like to partner with our firm, many with educational pedigrees from Stanford, Columbia, Harvard, London School of Economics, among others. While most of these people are phenomenally successful at raising money, few are successful at making money. Capital gains and big risk are their agendas.

We look at things differently. Lakeside prefers solid assets with growth potential and cash distributions while we wait out this economic maelstrom, something you can’t get when dividends are being slashed on yesterday’s blue chips. So when we meet with these potential partners, we often walk away from the meetings asking where has all the creativity gone? Where is the free-thinking advisor who questions conventional wisdom? Until we find those answers we will continue with our familiar mantra; invest in opportunities that offer the ability to grow your net worth even if the markets end the decade no higher than where they began, something we introduced way back in the ‘from our strategy’ paper from 2002.

On a side note, something upbeat:

Most of my friends own businesses, and most in areas other than finance. We’ve talked with some of our clients who say that in contrast to the broader economic conditions, many are having great years. How have they done it? They have accomplished this the old fashion way; by providing better products to buy and better service along the way. As a result, they are taking market share away from competitors. The wonderful success stories I am hearing everyday are across a vast array of fields; advertising, public relations, restaurants, art galleries. The total growth of their industries is not growing but their share of the market is. That is exactly the way capitalism is supposed to work.