Thursday, December 18, 2008

Investment Advice for Dummies

Unlike many other commenters, I feel no urge to excoriate Alexandra Penney for having once been wealthy:

When I hung up with my friend, I turned on the TV and began to scour Google for news until the message became nauseatingly clear: Forty years of savings—the money I’d counted on to take me comfortably through the next 30 years—had likely evaporated in Madoff’s scheme.

THAT MOTHERFUCKER!! The soufflé fell.

I do wonder, however--what was she thinking, to invest forty years of savings with one motherfucker? Why would anyone do that?

Once you are making more than your basic expenses, you invest in highly diversified index mutual funds. Socially and environmentally responsible ones. That way, the only way you're entirely bankrupt is if Western Civilization permanently collapses. Which, at the moment, is a distinct possibility.

So you also invest in real estate (income property, not just Second Homes, or first ones), gold, and bonds. You have a chunk of money in a money market account. You have an emergency savings account in an unpretentious mom & pop savings bank. You have a couple of friends in foreign countries.

This is basic. But the failure to follow common-sense money managing principles seems to be part and parcel of what I've been ranting about all day--that too many people submit entirely to the Big Authority, instead of building a network of lateral connections. It seems that the only reason Alexandra Penney trusted Madoff was that he was 'exclusive' and well-known among the upper classes; she never met the man, never understood the nature of his business. And yet she handed him the power to wipe her out.





12 comments:

george said...

“I do wonder, however--what was she thinking, to invest forty years of savings with one motherfucker? Why would anyone do that?”

She was thinking the government (SEC ?) would watch out for her and she did it because no one is left who believes he’ll be responsible for bad judgment or stupid decisions.

Shea said...

That sucks. The New Depression is upon us. Maybe Obama can help

Pretty Lady said...

George, are you becoming a misanthrope, or were you one all along?

george said...

Pretty Lady, a misanthrope? You decide.

"I have ever hated all nations, professions, and communities, and all my love is toward individuals” - Jonathan Swift

My sentiments precisely. We are a nation of factions and ever more subsets. The Midwest Gay Asian-American Feminist Women Lawyers Association indeed! These alliances, once professional, have made inroads into the private sphere as well, just not as formally. The outcome is a stratified cliquish populace at each other’s pockets and throats. And I hate them all.

Where I to meet the woman in your article I could easily find myself liking her and commiserating with her circumstance (I am as capable of stupid as anyone). This feeling comes by way of getting to know someone not by quixotically professing love for “mankind”. You will have noticed by now – and if you haven’t, please take note – there’s no such word as philothrope.

Pretty Lady said...

No, George, the word is 'philAnthrope.' ;-)

I do see what you mean, and in general I concur; people become vicious when they run in packs. My partner calls them 'identity circles.' Drawing identity circles, then attacking those who fall outside of them, is the source of most of our problems, in his view.

george said...

Pretty Lady, you know better than that. Philanthrope is not an antonym for misanthrope. ;-)

Yes, identity circles running in packs.

Joe said...

Joe 'the partner' here. I cannot take credit for the identity circle phrase, I came to use that label a lot after reading Amartya Sen's "Identity and Violence: The illusion of Destiny".

Anonymous said...

Which reminds me, slightly off-topic, I have always hated the term "identity politics" when used to refer to the grouping of people by their ethnic group (or by sexual orientation or some other thing you are born into). It presupposes that one's identity is comprised of things that happened before you were born and have no control over. I like to think of identity as a self-created thing, or at least as something defined by what you think and do in your own life, rather than where your ancestors came from or some genetic factor.

An interesting experiment (it doesn't prove anything, but it's still interesting) is to ask someone who they are, starting with "I am a ..." going from the general to the specific. How many people start with I'm an American? I'm a female or I'm a human, I'm a Mormon? I'm a dog person? I'm a vegetarian? It's interesting to see how far back someone goes for the "general".

I'm so glad Joe the Plumber is over. Long live Joe the Partner!

O

Franklin said...

I didn't become actively irritated with the author until she wrote this, emphasis mine:

I suddenly had a lot of money. I was in my late 40s, and I felt that I was just too old to have it in a plain old bank account. But I was a creative person, not a savvy investor, so I asked around and talked to my smartest friends with Harvard and Wharton MBAs. There appeared to be a secret society of Madoff investors. A friend who was older, wealthier, and more established somehow got me in. I've always had good luck, and I thought it was another stroke of good fortune to be invested with the legendary Bernard Madoff.

In other words, I didn't deal with this like it was a math problem, which it is. I excused myself from doing so because I'm a "creative person." I assumed that that would turn out well because I think magically.

Pth.

Pretty Lady said...

I guess I've never had the luxury of magical thinking in that regard, never having had 'a lot of money' suddenly arrive in my life because of a creative endeavor. I was about twenty years too late in writing my sex tips.

But surely a Harvard MBA would know enough to encourage a stupid creative person to diversify? Or was that so obvious that they didn't feel the need to mention it?

Franklin said...

Or maybe they were hoping for gratitude in a form that one might associate with a sex manual author. Who knows? I'm led to understand that access to certain levels of society is a powerful motivator for some people. It sounds like she's one of them.

How to Give a Good Christian B10wjob has Bestseller written all over it, PL. You're sitting on a gold mine.

Chris Rywalt said...

She's sitting on one gold mine and using the other to eat.

Ha! Leetle joke.