Oh my god.
Have you seen the economy lately?
After our wedding, I registered on this great website which tracks our cash flow. For the first time, I'm having a look at my 401K account on a daily basis. And lately, it's been ugly. Fugly.
The stock market is in the toilet which is uncomfortable but with the inflationary pressures on energy and consumer goods, our discretionary dollars have shrunk. Dinner out is a luxury. A movie and dinner is out of the question.
Yesterday, as I witnessed another chunk of change vanish from my retirement savings, I had a momentary burst of panic where I thought that maybe, just maybe, I should move our funds into something relatively safe like bonds or gold. But that choice flies in the face of what I've believed to be true and I keep hoping that history will prove to be correct and that the market will recover.
Except that I have serious doubts. The demise of the investment bank and the subsequent 700 BILLION proposed government bail out is a not so different an animal from the bursting of the economic bubble that was seen with the Wall Street crash of 1929. Both share rampant speculation, questionable lending practices and credit-based booms. In 1929, big banks and big money families like the Rockefellers, bought huge chunks of stock in an effort to staunch the bleeding to no avail. I have to wonder if the bail out is a cure or merely a band aid on a gushing wound.
Last night we were out with friends and the stock market was a topic of conversation. One of the men at our table was quite critical of the government's response and thought that we ought to just let the banks fail. I am not an economist or even remotely knowledgeable enough to offer an opinion but for a second, I imagined what that might look like and felt my stomach clench involuntarily. One thing everyone agreed upon was that eventually, the taxpayer would bear the burden of this bailout.
And here's the rub. Besides the losses to my 401K, the collapse of mortgage underwriters and the investment banks is likely to cost my family around $10,000 at some point down the road. Like most other Americans, we are feeling the pinch as the cost of living has gone through the roof. To watch the senior executives of these companies exit their positions with golden parachutes and zero accountability really chaps my ass. Gee, sorry you had to sell your Lear Jet to make ends meet.
So, as I sit and contemplate the future of my 401K, I can't help but remember what Robert Kiyosaki discussed in one of his books. He basically said that those of us who put all of our retirement eggs into the stock market basket through mutual funds, IRA's, etc need to take a closer look at that strategy. Since the stock market is not insured and requires specialized knowledge to navigate well, he couldn't understand why so many of us cede control and risk our financial futures like that. What happens if one is nearing retirement age and "an event" happens that significantly devalues one's portfolio?
Think Enron.
Think Fannie Mae, Freddie Mac, Countrywide.
Think Lehman Bros.
I guess, like most things in life, achieving a balance is the key. Diversification. At this point, I'm going to sit back and try to wait out this latest crisis because Dallas and I are young, own some real estate and have the luxury of time. My heart goes out to the millions of people that don't.
1 comment:
I hear ya! I too, have watched our mutual funds, children's college funds, etc., go to hell in a hand basket. But also like you, I know the answer is not to pull it out after the run down the drain has already begun. We will wait it out, and hope that in the end, a few years from now, hopefully all we will have REALLY lost is the interest we would have made during this time had this crash not happened. Or something like that.
We look around us, seeing how EVERYTHING and EVERYONE is being so very affected by the economy right now. The train wreck is coming, we can all see it, and all we can do is sit and watch in horror.
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