building wealth in an age of thieves

Sep 17, 2008

building wealth in an age of thieves

Hi! If you're new here, welcome - I'm Steve, the author of brip blap! Take a look at my about page and check out a few posts. If you like what you read (and I hope you do!), please sign up for my RSS feed or sign up to get posts by email by clicking here. Send me an email directly - I would love to hear from you. Thanks for visiting!

I’m sure that if you’re an investor in AIG this morning you aren’t too happy. Or maybe you are. You can call up your friends who invested in Lehman or Bear Stearns, I guess. There’s certainly a clear implication from the recent news - if you rely on being an employee or an investor in the stock market as a route to wealth you have some sneaky obstacles to overcome.

This age of thieves - stealing from individual investors in the name of “stability,” using money sucked from the pockets of taxpayers - makes me believe more and more that the only real hope for wealth building in this country will be through one of three paths: creating a business, creating creative content, and real estate (and that’s questionable). Investing in individual stocks has become a fool’s game until regulations reestablish the need for transparency. A market where the government has become a major institutional player is no free market anymore. Being an employee of one of these ridiculous companies is no sure bet, either.

Times are changing. Bubelah and I worry a lot that even though we’re relatively young we are inadequately diversified for the future. I remain in the market, and I continue to contribute to retirement plans, but I have yet to hear one satisfying argument why putting the rest of my savings into cash right now isn’t a good idea. Maybe that cash will go to a business idea, or a real estate purchase, or even just to peace of mind in the event of a financial services consulting drought. But it is clear to me that the old paradigm of “just invest in the market and ride the ups and downs” may not be applicable anymore. When bank regulators start buying insurance companies, anything becomes possible. Maybe HUD will buy Boeing next.

I will wait and watch like the rest of America as the system grows more and more perverted, and more and more individual shareholders are wiped out in favor of “system stability” and protection of corporate loans. The WPE cruises off and we remain to reap the whirlwind. Good times.

Yet at the same time, the basic principles remain: invest in index funds. Live below your means. Save until you have an adequate emergency fund. Make sure your insurance (!!) is adequate and up-to-date. Eat, drink and be happy.

photo credit: TheTruthAboutMortgage.com

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Viewing 12 Comments

Curmudgeon 09/17/2008 08:17 AM 1 point
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>>the old paradigm of “just invest in the market and ride the ups and downs” may not be applicable anymore . . .

Sadly, you may be right, Steve.

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plonkee 09/17/2008 08:17 AM 1 point
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You can't have it both ways. Index funds are invested in shares. It's either a good idea to do that, or it's not.

The problem with both real estate and a business is that they have a lot of risk attached - on a small scale, they aren't normally diversified.

In the long run, everything will be fine. I mean at least the US economy is relatively diverse, the British economy is strongly weighted towards financial services so we're scuppered.

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bripblap 09/17/2008 01:31 PM 1 point
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Plonkee, I guess I'd say that index funds at least broaden your risk across multiple industries and (in my case, investing in a lot of international index funds) across countries. Investing in an individual stock concentrates your risk dramatically.

I think everything SHOULD be fine long term but it's hardly assured. I can be sanguine since I'm still at least a few years away from retirement, but I feel bad for someone here in the US who has no pension and was counting on cashing in their IRA/401(k)s to retire in the next year or two. We'll see, I guess...

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plonkee 09/17/2008 06:07 PM 1 point
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If you're close to retirement, and have all your money invested shouldn't you have moved much of it over to safer investments by now?

Part of the thing here is that I'm so far away from retirement now, that other than the basics (move to safer investments) I'm not sure that I've actually got a feel for how you manage your move into retirement. Hopefully that'll be something for the personal finance community of the future to talk about.

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Emily 09/17/2008 09:31 AM 1 point
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That last paragraph sums it all up. At the end of the day, what more can you do?

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Chad @ Sentient Money 09/17/2008 10:49 AM 1 point
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Unfortunately, it is tantamunt to theivery. All these bailouts are prolonging this downturn.

@Emily
We can continually contact our congressmen and vote for slightly smarter people...just a little might be enough.

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Moneymonk 09/17/2008 01:07 PM 1 point
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The last statement will never change. Stick to it.

Stop chasing high returns

Be the Tortuise and not the hare

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CraigK 09/17/2008 03:05 PM 1 point
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Sadly it seems that there is little we can do. A lot of these stable institutions are losing money and taking because of it a lot of investing confidence is being taken away.

Craig
www.budgetpulse.com

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deepali 09/17/2008 03:21 PM 1 point
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I'm going for that last line. There is no stock market where I'm moving to. :)

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smartenup 09/18/2008 03:11 AM 1 point
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Surely, you must be crazy?

An insane person is someone who keeps doing the same thing (investing in the stock market) and expecting the same result (becoming wealthy) only it never works out that way. Yet, they keep right on doing it.

Wall Street is corrupt. Always was and always will be. No politician is going to change it. Not in 1987. Not in 2001 and not in 2008.

You'd be better off investing your money with drug dealers or art thieves.

Eventually one day, after you've lost your shirt, you'll get over it. Notice that the windows on the AIG building are mirrors?

Here's looking at you, kid.

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lisa 09/22/2008 10:10 PM 1 point
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the AIG building also looks like it was made of cards.not very steady or strong. Wish I'd noticed that before!

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fathersez 09/23/2008 11:38 AM 1 point
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The age of thieves! Well said. Now only if these guys were treated as thieves, then maybe the next generation may not be that susceptible to thievery.

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