A month ago, I was pretty pleased with the stock market and my various tiny little retirement investments. The Dow Jones was climbing back to pre-Bush levels, and I had gained back everything I had lost in the last five years plus $675 American dollars. I figured that it was time to get out while I was ahead, so I did. I did some research, and found a couple of investments that had 4 and 5 star ratings, I put a little in some high risk accounts, but the bulk of it, I kept safe. As I watched the Dow climb higher and higher, I had a tinge of regret that I hadn't stayed in the game a little longer, but my high risk investments were paying off just as well, while my safe money just stayed safe.
Until a couple of weeks ago when the markets began to go to shit.
I realize that speaking of the stock market may seem inconsequential compared to some of the other issues we discuss here at TBV. When we discuss some of the more urgent issues of the day such as war and the warming of the planet, my whining about the stock market seems silly. But I wonder how many Americans are as worried as I am about aging, retirement, and what sort of quality of life we will have after 65. If all of our savings accounts are tied to the market, and most of mine are, if the market continues to decline, or if it continues to crash and recover as it seems to do now, your comfort level at retirement could be determined by circumstances beyond your control, like a war, an oil crisis, or a devaluation of currency. We don't put money in a savings account like my parents generation did, maybe some of us don't even have savings accounts. I have one, but it's not for retirement, it's for things like a new roof, or repairs on the house, it's emergency money, just in case.
Our 401k's are all tied to the market, because the companies that we work for outsource the management of retirement funds to companies like Fidelity and T.Rowe Price. Unless you work for a company that actually still has pensions, these investment companies encourage you to invest a good portion of your savings in the market. Those of us who worked through the latter part of the 90's saw our investments double every couple of years, only to crash and burn in 2000. In 1998, I thought I was wealthy, I was planning retirement at 55, now I'm trying to figure out what sort of work I will do in my 70's.
I wonder if we would all be better off putting money away in a savings account like our parents did. But then there is always the fear that the dollar might just take a nose-dive since our spending is so out of control. What will we do if our creditors like China and Japan decide that they don't want to lend us anymore money, because we have become a risky investment? If that happens, it won't matter how much you have in the bank, the dollar won't buy you squat.
I was born into a working class family, and my parents were very frugal with a dollar. My father never bought a new car in his lifetime, he never made car payments. He never even had a credit card, which to me seems unimaginable. We were never the best dressed kids at school, but we had just enough. There were things I'm sure that we asked our parents for that they couldn't afford, but all seven of us survived into adulthood. It seems as if this generation of Americans has gone on to define success as more money, more stuff, bigger and better houses, larger SUV's, and all of the aspects of the American Dream that we can afford. It's not enough to have a house, we have to have a house in the proper zip code. It's not enough to have three bedrooms, we need to have a bathroom for every family member. And once you have that dream house, you then need a smaller house near the beach where you can vacation. It keeps us working, it keeps us borrowing, and it keeps us wanting. It's funny, that the most precious time in our lives, our two week vacations, are spent in a hotel room where space is at a minimum, and the beds are smaller. Sharing the same hotel room with my partner is often crowded, but we seem to manage just fine, and enjoy the close quarters that would be intolerable at home.
After the interest on the home equity loans, after paying off the credit card bills for the new stainless steel appliances, after we have a bathroom for every member of the family, after the hot tub, and our brand new SUV, are we happier? Would we be better off sharing a bathroom, taking the bus to work, and banking all of those interest payments in order to be able to retire at say 60? I can't imagine what sort of work I will be doing in my seventies, if my savings continue to devalue at the rate of the market, and if our world economy is tied to the American markets so closely, that no matter where you invest, if the American markets don't perform, our retirement, our children's college education are all maybe just a short term crap shoot.
Maybe we all need to get back to the days of putting money into a savings account with regular interest, real money, and forget about our over-valued stock prices and home values. Our ideas of wealth and the value of our homes have taken the place of our stock options of the 90's. Today, my home is valued at 4 times what I paid for it, and if I sold it to you today at that price, I would think you were an idiot for buying it. We all know deep down, that our homes haven't tripled in value in 10 years, just as we always knew that the Cisco stock we bought in 1998 wasn't worth $100 dollars a share. If I sell you my house today for $800,000, then I will have to find a place for $600,000 somewhere out in Bumfuck Virginia and commute for two hours every day to get to work. It's not worth it.
We all want to believe in that one good investment that is going to make us rich, we want that one good tip on some easy money that will get us set up and comfortable for life. But I'm going to tell you what I feel is a gut instinct, and I think it's something we all know to be true. As Ricki Lee Jones once said,
"There ain't no such thing as easy money."
Keep that phrase in mind when someone tells you that they want to lend you $200,000 because your house has now quadrupled in price. You never get the money unless you sell. Open an old fashioned savings account and put your hard earned money in an ordinary account at compounded interest. Like my father, you'll know that your money is real, the you'll know just how much you have to spend, in real time and real dollars.
