Wednesday, March 4, 2009

Rooting for the Econopocalypse/ The Greedometer

I have to admit, I agree with this. Read it, it's short.

Now that you're done reading, let me add: A little over a year ago I got to "reorganize" my 401k investments. I moved all my mandatory installments over to low-risk investments, sold my way out of all my Euro funds, and put a lot of it into cash and CD's. I then lowered the amount I was investing to the minimum required to keep the account active, and my wife and I rebudgeted the extra income into pure debt reduction. We have reduced our total family debt by 35% in the last year.
Because of those (I'll admit I had no idea things would get this bad) fortuitous investment choices, my wife and I have been basically shielded from the market collapse. Our total investment is down a paltry 8%, as opposed to some here at work who are down 40-50%, some even more. Many of the people in my age group here at work, who consider retirement a far-off dream, tossed all their 401k money into the "Group 6" investment strategy at work, which is basically the most volatile, highest yield/highest loss category. In '05 and '06, Group 6 made about 18 percent a year. In '07 it broke even. In '08, I'm afraid, it was down 30%. It's heavily invested in Euro and emerging markets, which have dropped off significantly.

So as I watch the Dow drop, I think of all my peers that sneered at my conservative, low-yield investment strategy, and I admit I have to feel a tiny shred of glee. Oh man, I only lost $148 for 2008! My friends lost over $15k. (Disclaimer: if the stock market recovers they'll be fine unless they get stupid and sell). Now that economists are squabbling over who can prophesy the bottom the Dow will reach, I root for the bottom too.

Maybe that's terrible, I freely admit. I don't cheer for job losses, or for increased unemployment benefits spending, or for suffering and poverty in foreign nations. Those things make me sad. But I, along with a lot of people, became so jaded and distrusting of the Dow and the stock market, we delight in our being correct. To me, the DJIA is almost like this big "Greed Thermometer", or Greedometer, and watching the Dow fall is like watching a bully, who had previously controlled the playground with reckless aplomb, suddenly get caught and get a tongue-lashing and detention from the recess duty teacher. We all look on, watch the teacher scold him, and hope his detention is as long as possible. We hope he'll be so punished he learns his lesson and never tries to bully us again.

But that never happens, does it. The bully just gets meaner. And the sad reality for me is that this is temporary, and the DJIA is actually just a wandering mosquito, looking for the next investment blood bubble to swell it back up.


1 comment:

Benjamin Dueholm said...

I, too, often get the impression that stock prices are driven by the actions of hysterics with severe amnesia.