Company in the Basement

I've got company in the basement, the market. I think that it's interesting that nearly everyone I know believed that passing the big bail-out was going to somehow make the economy better, or if not better, at least protect his or her job. I'd laugh if it wasn't so horrific.

Congress has been trying to sell that trickle-down crap since Reagan. Well, for sure I know that shit runs downhill, and that's about what you can count on with trickle-down economics.

We all got our stock statements a couple of days ago. I didn't even open mine. There's no point. I feel great about my portfolio though. It's strong, and I believe that it will all go up. If not, I'll always be able to make money, so in the grand scheme of things, I have my health, I have a great husband and if we all have to start over, so be it.

People are sheep when it comes to economics and the economy. They credit their savvy when the market is up, and they blame the economy when their investments tank. Here's a clue, if you know about it, and you're Joe Lunchbox you're already too late. There's a story that J.P. Morgan knew it was time to get out of the market in 1929 when his elevator operator was giving him stock tips.

About ten years ago I was with my folks visiting some friends in Phoenix and we were having lunch with a long-time friend of the family. The joke is that both the husband and the wife are medical professionals, one a doctor, the other a therapist and as much money as they've made, they've lost twice that to a cocaine addicted financial adviser, terrible investments and plain fraud. They wouldn't know a stock tip if it bit them on the ass. So we ladies are eating our goat cheese salads and Mrs. Professional starts telling me about what a great investment Enron is. I wasn't under a rock, I knew that lots of people were really excited by Enron and the growth of its stock and had jumped on the bandwagon. I had tried to understand what the company did, but the more I read, the less I understood and I gave it a miss. Turns out that the little voice in my head whispering "Emperor's New Clothes" was dead-on.

A high tide raises all boats. It's easy to look smart when you can't make a bad investment. People flipping houses in California in 2005 could do the dumbest things and still make money. They weren't smarter than the average bear. They were just in the right place at the right time.

I did something really stupid in 1999. I took a loan against my 401(k) to buy a house in Florida. Except the 401(k) was my MCI WorldCom stock and the house was $140,000 on a water lot. When I sold the house in 2002 I sold it for $260,000. The MCI stock was worth zero. Was I smart? No. I was lucky.

The same people who were worth $1 Million according to their MCI WorldCom stock holdings in 1997, were broke and unemployed in 2003. Only five years between smart and stupid.

Very few people are smart enough to beat the market. The rest of us should put the dough in an indexed stock fund, make the same investment every month with dollar cost averaging and hope to hell that the miracle of compounding interest will save our soft, white asses when we're ready to retire.