The Conical Glass: How to Lose $40,000 Without Really Trying

Friday, September 26, 2008

How to Lose $40,000 Without Really Trying

As soon as I got home from Albuquerque, Joe & I headed down to the Fillmore to see the first of Spoon's three-night stand. I'm always at book club on Tuesday, so I had the choice to buy a ticket for either Monday or Wednesday's show -- if I'd known I would be staying in New Mexico 'til Monday in order to catch Wendy Rule, I'm sure I would have bought tix for Wednesday instead, but who could know? Anyway, I am kicking myself after reading a blog post about Wednesday's show, because Spoon played two of my favorite songs ("Car Radio" and "The Way We Get By") as encores that night, and they didn't perform them on Monday! Argh! Oh well, I'll try to be content with the ones I did get to hear, including an outrageously good "Stay Don't Go" (with horn section!), "Jonathan Fisk" and "You Got Yr Cherry Bomb." They also covered the Rolling Stones' "Rocks Off" (what a popular cover!) and Paul Simon's "Peace like a River." Opening band the Heavenly States covered the Replacements' "I Will Dare," another excellent choice. Next time Spoon does a multi-night stand here, maybe I'll just have to go see all of the concerts.

I've written before about the New York Times' fawning reportage on the superrich -- remember that 2006 article about the cancer doc who opted to go into the field of health care investment banking (for Merrill Lynch) instead of research, so he could give lots of money to charity a la Bill Gates and Warren Buffett? That guy at least seemed to have good intentions, but for years, going into investment banking seemed to be the quickest route to a lifestyle of private jets, lavish vacation homes, round-the-clock nannies and fancy clubs (like the Core Club, "an oasis for investment bankers, hedge fund managers and private equity partners," who paid $100,000 to join). I keep searching the NYT for articles on what's going to happen to those Masters of the Universe now that the economy has collapsed, but so far I haven't found anything. Are investment bankers now shopping at Sam's Club and PayLess Shoes?

My fear is that somehow, the $700 billion bailout will just go to prop up their champagne & caviar lifestyles so they don't need to live like the rest of us. Plus, it's not like we the taxpayers have $700 billion; presumably we'll have to borrow it from China. I'm scared and I'm suspicious, and judging from the radio call-in shows I've listened to, so are many, many other Americans. On KQED's Forum, one of the guest financial experts simply suggested not looking at your brokerage or 401K statements for a while.

Every day, I can't help but wonder what my beloved grandmother would have thought of what's going on now. I think she would have been mighty freaked out by it. She was a savvy investor and over the years, she gave her children and grandchildren gifts of stock. I decided that I would hold the shares long-term, reinvest all the dividends, and down the road, use the proceeds for two purposes: ensure that I won't have to live on ramen noodles when I reach retirement age, and help put my friends' kids through college, which will probably cost about a million bucks a year by the time they are ready to enroll. The stock was all in good, solid American corporations; surely they would serve me well for the next 30-40 years, right?

One of the best performers in my portfolio was a company I had never heard of until I was given the stock; I had to do some research to find out what they did. It turns out it was an insurance and financial services company. The stock did really well year after year. It did go down a bit this year, but heck, everything else was going down too; I was a "buy and hold forever" kind of investor, just like Warren Buffett. Things would bounce back up eventually!

And then I got a New York Times news alert about "my" insurance company that said it was in grave danger of going under. The share price dropped down to around $2. Just like that, I had lost about $40,000. And it didn't look like it would be bouncing back anytime soon. In fact, if the company needs to be dismantled to pay back the Fed, my shares may be worth $0.

(Fun side note: $112 million of your taxpayer financed loan is going to pay for the company's sponsorship of the Manchester United football team! Hope you're not a Liverpool fan!)

The money was just on paper -- it didn't affect my day-to-day life in the slightest -- but it sucks nevertheless. In retrospect, maybe I have should have sold all of the individual stocks I was given and put everything into index funds (we do own those too, by the way). Maybe Enron should have taught me that it is too risky for small investors to own shares in individual companies. I called my accountant for advice, and he said not to panic and make any sudden money moves -- wait a couple weeks or a month and see what's going on then. In the meantime, I'll try to resist the urge to cash out everything and bury coffee cans full of bills in my backyard.

posted by 125records @ 1:23 PM

3 Comments:

At 3:44 PM, sfmusic said…

Hrm. Unless I was a lot drunker than I thought, I didn't hear any "I Will Dare" from the opener...
At 3:46 PM, 125records said…

It wasn't "I Will Dare" -- it was "Can't Hardly Wait." Sorry, Heavenly States, for mixing up your 'Mats covers.
At 7:15 PM, yellojkt said…

That's why I don't save any money. If you don't have it, you can't lose it.