A Rich Life

The Old Ideas on Saving & Investing Don't Work -- Here's What Does

Balance Junkie Column #3 — Liberals Came Closer Than Conservatives With Their Explanation of the Economic Crisis

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I’ve posted the third entry to my monthly column at the Balance Junkie site. It’s called Liberals Came Closer Than Conservatives With Their Explanation of the Economic Crisis.

Juicy Excerpt: The comedian John Stewart had a funny line re this aspect of the story. There was a debate in the early days that executives of firms in the financial sector should be denied bonuses because they would be out of work but for the bailouts they received from the U.S. taxpayers. One executive complained that, without bonuses, “we won’t be able to hold onto out best people!” Stewart observed (I’m paraphrasing) that: “You don’t seem to get it. That’s just the problem. You don’t have any best people! That’s why we’re in this mess!”

That hits close to the truth but not precisely in the way that Stewart meant the words. It’s true that Wall Street doesn’t have any “best people” today. It has plenty of smart and hardworking people, however. The problem is that smart, hardworking people learn what is in the textbooks very, very well, and we happen to be living in a time when most of what is written in the financial textbooks is outdated gibberish (Modern Portfolio Theory was discredited years ago but is still used in the analysis of financial transactions because there are so many powerful people who have made careers promoting it and who don’t want to acknowledge having made such fundamental and widely destructive mistakes).

ITNR #75 — Is Wall Street to Blame?

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I’ve posted Entry #75 to my weekly Investing: The New Rules column at the Death by 1,000 Papercuts site. It’s called Is Wall Street to Blame?

Juicy Excerpt: Say that these complex instruments are a very, very bad idea. Wouldn’t that just mean that the people who placed their confidence in the bad instruments would be busted but that someone else would come up winners? All the complexity in the world does not destroy wealth. And, unless large amounts of wealth have actually been destroyed, I don’t see why we haven’t been able to set things right again in the three years since the crisis hit.

It seems to me that we are suffering from a loss of wealth. Everybody is hurting. The poor are hurting. The middle-class are hurting. The rich are hurting. That’s the defining characteristic of this crisis. So I take that as an important clue.

I ask myself: What sort of phenomenon could cause huge losses of wealth to be experienced in every sector of the economy?

 

ITNR #43 — High Stock Prices Caused the Great Depression

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I’ve posted Entry #43 to my weekly Investing: The New Rules column at the Death by 1,000 Papercuts site. It’s called High Stock Prices Caused the Great Depression.

Juicy Excerpt: It’s not hard to imagine the next crash bringing on the Second Great Depression. And it’s not hard to imagine a second Great Depression changing the public mood enough so that proposals for a termination of the free market economy would be a warmly welcomed by a large percentage of the voting population looking for any sort of relief that might be made available. In times of desperation, people go along with all sorts of ideas that they would not give two minutes consideration to in times in which they possessed the presence of mind to think things through more carefully.

ITNR #25 — The First Sign of Spring in our Economic Winter

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I’ve posted Entry #25 to my weekly Investing: The New Rules column at the Death by 1,000 Papercuts site. It’s called The First Sign of Spring In Our Economic Winter.

Juicy Excerpt #1: They’ve been trying to scare people. They’ve been using bully tactics. They are not reporting the full story. Those who know what the numbers say knew all along that they were giving dangerous advice. Hoo boy! This one article is not by itself going to bring an end to the economic crisis. But it’s a big deal. To understand why, you need to know the history that is being changed by the filing of this frank and bold report.

Juicy Excerpt #2: The Wall Street Journal column is only a first step. We are going to need to see hundreds of columns of this nature to change the minds of the millions of middle-class investors who have been bullied into believing that Get Rich Quick (it’s Get RIch Quick thinking to believe that stocks can offer good long-term returns when they are selling at three times fair value) can work. Lots of people are feeling a lot of pain as they come to the realization that they fell for the oldest trick in the book and delayed their financial freedom dreams by many years by doing so. It’s by telling the truth that we begin a healing process.

Beyond Buy-&-Hold #1 — How We Ruined Our Economy (& How We Can Rebuild It)

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The Out of Your Rut site has posted the first entry in my new, weekly Beyond Buy-and-Hold column. It’s called How We Ruined Our Economy (and How We Can Rebuild It).

Juicy Excerpt: The reality is that we may end up someday looking back at this economic crisis as the best thing that ever happened to us. Many of us were not open to hearing the message for as long as Buy-and-Hold had not done too much damage, but now that we appear to be headed into the Second Great Depression, more and more people each day are opening their ears to talk of new investing ideas. That’s what we need! We need new ideas, better ideas, more enriching ideas, more life-affirming ideas!