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Tom Au, CFA
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In the early 1990s, during the middle of a secular bull market, I began work on "A Modern Approach To Graham and Dodd Investing," that was not particularly suited for the decade of the 1990s, but was ideally suited for the following "Lost Decade" of the 2000s.
My book:
A Modern Approach to Graham and Dodd Investing
  • The (19th Century) Necklace: A Moral For the 21st Century 0 comments
    Jan 15, 2010 9:46 AM
    In his 19th century short story, "The Necklace," French author Guy de Maupassant warned about the dangers of too much "mortgage" debt, a lesson that American homeowners need to take to heart.

    Wanting "a night on the town," a young couple borrowed a necklace they admired from a friend. In a rainstorm, they lost the necklace (for reasons that will be revealed later). So they bought a replacement in pearls for 2,000 francs, five times the man's normal annual salary. Many Americans bought HOUSES at that salary ratio.

    Both man and wife worked 12 hour days for 20 years to earn the extra money they needed repay the crushing debt. At the end of that period, the woman's former friend ran into her and barely recognized her in her new, haggard, self. "How did you get to be like this," asked the friend sympathetically. "The woman answered, "I lost your necklace, bought a replacement, and spent the last twenty years paying it off!"

    The friend said, "My necklace was fake. It was made of paste, and cost a fraction of the real thing."

    Which is why it probably dissolved in the storm.

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