Everything Is Backwards, But We Can Endure

The picture is of the little screen on the front of my wife's cell phone and the readout is backwards. I have no idea what caused it to read that way, and like any other gadget it fixed itself by turning it off, waiting a few minutes and turning it back on.

The timing of this is uncanny (I can't make this stuff up, folks). It is a pretty good anecdote for how backwards everything in the financial markets and for that matter the world is these days.

Before I get into what I had in mind for this post, here is something Barry Ritholtz came across about whether or not Rick Santelli's infamous Chicago Tea Party rant was spontaneous. In addition to reading what Barry excerpted, check out the comments too. I have no idea how true or not any of the story is, but the willingness (by MSM and the people reading Barry's site) to explore or accept the possibility of a conspiracy is striking. While the story is entertaining, I don't tend to gravitate to conspiracies (despite my living in a small cabin in the woods in the mountain time zone).

Some of the comments here on Random Roger this past week have relayed some pretty bad stories about some people who have had some real financial bad luck in the last (fill in whatever time period makes sense). A few days ago I mentioned that the psychological damage inflicted on a move down to SPX 600 would be worse than the financial damage, the implication being that point-wise most of the decline has already occurred but the the investing public's psyche is in a fragile state right now, very fragile. When you read about someone getting wiped out, foreclosed upon or losing their job, you might feel a moment of sadness for that person. The more stories you hear, the more time you spend being sad for a moment, and at some point there is a cumulative effect that could really weigh you down.

There is already a cumulative effect on all of us from the decline (the word decline doesn't really capture all the facets but it will suffice for now). Collectively we are less confident about what the stock market can do for us and less confident in our ability to navigate relative to the market. With all the failures, frauds and fixings, we are collectively rattled. This increases the chances we do something that ends up making the situation worse (e.g., someone will, after having ridden a fully invested portfolio all the way down, throw in the towel for good at the absolute bottom).

I believe I can tie some of my quirky posts about lifestyle and balance into this discussion. Anyone prone to emotion who fixates on the markets and economy is headed for trouble, if they are not already there. Even Roubini doesn't think it is the end of the world; he made a case for things starting to turn up in 2010. Are you amazed that this decade, the oughts, is almost over? Do you wonder how it went by so fast? Well then a bad 2008, 2009 and even 2010 will pass in a blink.

This can be much easier to endure if you have other interests and maintain a healthy balance. For me this includes exercise, a reasonably healthy diet (no soda!), volunteer work and a dog. In all likelihood this is not the end of the financial world, just a really bad decade or so for markets, bad enough to alter future expectations about what kind of lifestyle people should expect or what their portfolios can do for them when they retire. If you are truly worried about the capital markets funding your retirement then you need to proactively figure something as opposed to sitting back and just letting it (however you define it) happen to you.

Comments

[Larry House:]

Yes, if one watches every up and down--watches CNBC and tries to follow all the "expert advice," one will end up mentally ill AND broke. "Unto thine own self be true"--each investor has to find his/her own comfort zone (CDs, stocks, bonds, whatever) that is compatible with one's time horizon. One thing is for sure, the market will take us where IT wants to go; we can't make it go where WE want it to.

Mar 02 12:55 PM

[squark62:]

roger, i like your human touch in the face of adversity. expectations will have to adjusted and when we do, we'll find priorities have been adjusted as well. there's a time and season for everything.

Mar 02 01:03 PM

[akapital:]

"I don't tend to gravitate toward conspiracy theories"

So you're no Woodward or Bernstein then I guess....

But seriously, although most often the simplest explanation is true (Santelli forgot to take his medication that day) there are cases where these things are planned out by a group of people - by the way that's a nice way of saying conspiracy. But when more than one person plans something and it seems farfetched or marginal we just call it a conspiracy.

Thank goodness some people do speculate on these things (and not just markets)...

Mar 02 02:21 PM

[phaf:]

Glad I read this. Great perspective- there is much to the lives we lead; life is a gift. Maybe this downturn will lead people to rediscover that the simple things are often the most enjoyable.

Mar 02 02:26 PM

[Alphameister:]

Good article. My investments in stocks have been devastated, but my investments in optimizing my health, in earning the love of my family and others, in self-improvement, etc. have suffered no decline whatsoever this past year. And I'm hopeful that the companies in which I am invested have values greatly exceeding their current stock prices and the twain will meet sometime in the next five years.

Mar 02 04:00 PM

[utilitus:]

I'm sitting in front of my 37" monitor, reading Sα and generally appreciating the quality of discourse thereof, watching CNBC in a video window, shopping online for sub-tropical real estate (beware Ejido properties), all under the redwoods on the craggy northern California coast. Life should be approximately perfect, especially since I'm mainly in US cash, a modest lifetime supply, other assets mainly dollar hedges, getting creamed just now, but it's a net up day. Nobody's putting a gun to my head (that's INLAND Mendocino County) but my quality of life is endangered by the instability of the world capitalist order and the shabby incompetents who espouse it. How'd that hapen? (Just now, a six box of CNBC talking heads are cursing the government and the markets - better sharpen up the guillotine...)

Mar 02 04:17 PM

[Maximus:]

Rolex, go somewhere else.

Mar 02 04:47 PM

[mr freddo:]

My anxiety is at an all time high in terms of investing in the market. I so want to push the sell button, lick my wounds, and start over with something real like a vending machine route or a coin operated laundry.

Seriously, how is the market ever going to take care of 75 million retired baby boomers? The old logic was to save cash, invest in stocks, and later bonds, ride the ups and downs with a long term perspective, and retire happily while living off of a 7% income stream.

We are learning to cut spending to the bone right now. Turn the lights out, take cold showers, give cards instead of gifts, eat in, cut of our children's allowance, and forego the European vacations.

We must decide what is really important and skip just about everything else. Those of us who are living off of our investment earnings know that our only chance is to reduce our withdrawals to a trickle.

A good hike is inexpensive. A home cooked meal can be a festive affair an need not cost an arm and a leg. There are many things that can be had for free from the local community center or community college. You can learn new recipes, or try your hand at drawing.

I'm growing tomatoes, basil, chard, and carrots this year for the first time ever. Stocked up on some very inexpensive wines. Malbecs and Shirahs from Argentina, Australia, and Chile.

If we fast forward to two years from now, will the markets be higher or lower? I don't know. But I might as well, as the author suggests, get some good exercise, eat well, and enjoy my time on this planet because certainly 20 years from now this will all be a good story to tell the grandkids as I teach them the lesson of producing and saving versus consuming and spending.

Good luck out there.

Mar 02 09:00 PM

[You're Kidding:]

When you look at this planet and see the billions of people who are obsessed with just staying alive with some sense of comfort and dignity, and then see how few of this number actually are making the decisions which affect so many others' lives, and then become aware that nobody understands the complex interrelationships that exist between all the variables that determine the direction and consequences of how this whole mess moves...it is then you realize that this planet is most likely a DNA experiment of another, more advanced civilization, that has mistakenly over juiced the sexx and greed molecular aspects of the DNA, and is obviously busy somewhere else in the universe and isn't paying the proper attention to this experiment!

Its important that we set up large transmitters and try to contact our creators so they get off their coffee break and get back on the job, because we are going to helll in a hand basket and need their attention now! It is past the point of no return and we are sliding into a financial black hole, and my dividends, I just know, are going to be soon cut!

HHHHHHHEEEEEELLLLLLPPP !!!!!!

Mar 03 08:08 AM

[Chris B:]

If there is a silver lining to this debacle, it is that millions of previously spellbound people are no longer under the illusion that the stock market offers 10% YOY returns - free money - and that gaming the market is the most productive use of their time.

If you are staying up late at night trying to figure out how to recoup the money you lost, perhaps you should look away from the computer screen.

What would be the ROI if you invested new money in a college degree, or another degree?

What's the ROI of learning a new language?

What is the ROI of getting in shape or quitting a bad habit?

Perhaps you should consider buying and renting some of these foreclosed properties.

Perhaps you should start or buy a business, rather than depending on the financial marketers to provide you with security.

Perhaps you should look around your house and ask yourself, honestly, how much house/stuff/car do I really need to own (and finance) in order to be happy? What is the opportunity cost of a lifestyle that can only be sustained when markets go up and that causes pain and sleepless nights when markets go down?

Mar 03 02:20 PM