Thursday, January 24, 2008

Toad's wild ride

Legend has it that the great American investor and political godfather Bernard Baruch got out of the stock market prior to the crash in 1929 because he had gotten a stock tip from the young man who was shining his shoes. If shoe shine boys are in the market, Baruch is alleged to have reasoned, it is time to get out. A lot has changed in the last 75 years. A lot has changed in the last 20 years. Many shoe shimne boys are in the market, as well as waitresses, mechanics, barbers, retail workers, anyone who can cobble together an IRA or work with a company with a 401(K).

When I was young, the image os someone heavily in the market ran to guys who looked like that old fellow on the "Chance" and "Community Chest" cards in the game of Monopoly. You remember the guy, flying out of the bird cage with the "get out of jail free card". He looked like the ideal plutocrat, top hat and tie, side whiskers and cane. That's what we thought people in the market looked like.Actually, that's what Bernard Baruch looked like. But the guy in the market now looks like that bald, overweight 40 something guy you see walking toward the Thunder River ride at Six Flags, trying to balance his ice cream cone while keeping up with two kids.The guy in shorts and an ugly, ill fitting T-shirt. The stock investor now is "everyman" and, for political expediency "every woman".

What this means is that when the market is down, the whole country is down.This leads to mass nuerosis among the ill educated (like myself) who check the markets every couple of hours to confirm what they think they already know, that the sky is falling and they are going to end up as old men sleeping in the gutter and begging for spare change during their golden years. On the other hand, when the market is up, the same uneducated live way beyond their means, feeling that the good times will last forever and they will retire to a gold course in Florida or Arizona just as soon as they get bored with their world travels. For most of us, it is a bipolar existence.A wild, wild ride.

Maybe we were better off when only the likes of Baruch invested in the stock market. We all worked as long as we could because usually there were jobs to be had. Then when we got too infirm we moved in on the kids, who damn well owed us room and baoard after all we had suffered for them.It was a time of limited expectations, but virtually no fear of the ups and downs forced by the invisible hand of capitalism.

Much to my shock,with markets crashing right and left, I have made money this week in the market. Now the week is not over, and I still feel that it will not end well. I called my financial advisor who told me the same thing he tells me everytime we talk, that there are market corrections, and after the corrections, the market comes back. I just have to live with a certain amount of pain. That is all well and good if you live forever. If you have a finite life, as I think all of us do, what is a moment that is a "snap shot in time" from the historic perspective, still might be the month that you owe an ungodly amount of tuition to your daughter's college. The fact that every thing will balance out in three years will not help you then. You will be sleeping in a gutter and begging for spare change.

Then there is the possibility that, unlike previous market corrections, this one is not a correction at all, but a melt down which will leave the vast majority of us holding pounds and pounds of worthless paper. The fund that holds my retirement money is not insured by anyone.Worse, few will weep for a Baby Boom generation when it is down and out. We are already considered the worst generation in the history of the country, certainly the most self absorbed. We will be getting our "come uppance" the younger folks will think, and the younger folks might be right.

In the end, that would be one great practical joke on my generation. Like the last scene in "Treasure of Sierra Madre", where the two remaining gold miners can only laugh as they watch the wind blow all their gold away. "Better laugh Curtin" says thew old man, and Curtin throws back his head and laughs. The wild ride is over.

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