SBC Life Articles

Life’s Portfolio

It has finally happened. The world has gone crazy. As a psychologist I now have a job for life. News reporters are correct. They are always talking about breaking news, and now everything is breaking. We know that kids fresh out of business school and employed at Wall Street investment banks have been advising grown-ups on Main Street to buy nothing with nothing down. They can then leverage to pay themselves fees so that they can pay nothing for something else and collect more fees. Of course that's risky, so you have to involve an insurance company just in case nothing becomes something.

It seems like giving permission for someone to bet your money on a race horse that will never run a race. The horse will be sold so many times that by the time the race occurs, it will be impossible to determine who owns the horse. And if the horse wins the race, then everyone will have enough money to go to court. At any rate, the fees charged for selling the horse over and over added up to more than the horse is worth. The people who care for the horse, train the horse, and ride the horse are paid peanuts while the people who have never seen the horse live in a palace. We have created a world of smoke and mirrors where you get more (a lot more) for pretending to be a doctor on television than for being a real doctor.

Obviously this is an oversimplification of the Wall Street crisis. Some on Wall Street tell us that they were selling exotic derivatives. Let me ask you, have you always wanted an exotic derivative? I had never even heard of them, much less that we could buy them! I've also heard that they were selling credit default swaps. I now understand why it had to be based on leveraged money. I can't see the average guy saving for a down payment on a credit default swap. The only way to explain our current situation is that we lost our grip on greed and the world Ponzi scheme has squeezed the "cents" out of us.

We have leveraged ourselves to the hilt and are now in shock that the system has let us down. I think it hit home when the car executives flew in their corporate jets to Washington to ask for billions of dollars in free cash. I was thinking, "Didn't they make enough on that undercoating charge that has been added to every car I have ever purchased?" Actually, that meeting was somewhat encouraging to me because I realized that I (combined with the rest of the tax payers in this nation) made $38 billion more than GM. Actually, I (we) lost $38 billion less than GM, but I like to look at life in a positive way. I don't want to single out one industry because all of us know of con artists who peddle false prosperity (just surf some of the religious channels).

Most of us in America were born on third base. Unfortunately, we go through life thinking we hit a triple. It is easy to become obsessed with our presumed specialness and forget our ordinary humanity. This may be why USA Today chose as one of the best financial slogans of the year, "Chill out people. In the long run we are all dead."

Now some are pushing for more government bailouts. Wishful thinking is about as bad as wishful drinking. It is a sign of losing touch with reality. Remember that snow turns to slush, puppies turn into dogs, babies turn into teenagers, and candidates turn into elected officials. Public funds always make it into private pockets, and it's usually the wrong pair of pants. Now that I have convinced you that irrational exuberance is not a great financial plan and that the bull market was more bull than market, you probably think that your best financial position is somewhere between cash and fetal. Let's look at what we can learn and not who we can blame.

I think it all started with Starbucks. The essence of irrational exuberance is to pay $5 for a 50-cent cup of coffee. I believe the explanation is in the name. "I must be a star to pay big bucks for coffee." Guess what? Starbucks is now selling oatmeal. It is real food, old-fashioned, down-home oatmeal. I think oatmeal may be our tipping point. Maybe it's time to trade Hummers for humility; to realize the basics are the blessings; to invest in that other portfolio. Invest in the one that pays real dividends; the one that can't be leveraged or outsourced because only you can be the husband, the father, or the believer. I'm not saying it will be easy. The whole world is a Ponzi scheme. It is always promising more than it can deliver, always talking about the return but never the risk.

It's a science. Market researchers know that shoppers are more comfortable staying to their right. Research indicates shoppers moving counter-clockwise spend $2 more per trip than those moving in the opposite direction. The world even knows which way it wants you to turn. What advice do the consumer experts give to counteract the marketing experts? Have a list before you enter the store. Grab the smallest cart that will hold your items. The number one piece of advice is to never shop when you are hungry. This is not a bad strategy for life. Know what is important, have your list, decide the largest cart or house or car is not what you need, and the number one piece of advice is that you have the Bread of Life so you don't begin the day hungry.

    About the Author

  • Charles Lowery