Wednesday, October 8, 2008

Micro or Macro?

As the stock market continues to melt down, and the affairs of the 'middle class' seem to be thrown into disarray, I have begun to wonder about what strategy for financial survival is best, and why.

Since I do not feel personally threatened by the economic troubles of people wealthier and less risk-averse than I am and have been, I cannot say whether or not a change in strategy would have averted the 'crisis' that these people are experiencing, because, fundamentally, it's all a gamble, a big bet, and even knowing that the odds were longer at the time that they 'bought in' to this mess, I don't think they would have bet less or less often. These 'fools' would simply have told themselves exactly what they did: "It looks good to me. It'll be alright."

That's the micro-view.

The macro view, despite having the advantage during bad times like these, doesn't guarantee financial 'success' or 'security' or anything other than the relative safety of the absence of excessive risk. In other words, playing it safe may look good when everyone is losing their shirt, but how often does that happen and for how long? Who really is the 'fool'?

Lynda lived through the Great Depression and, of course, never let me forget it. In a very real way, she had no choice. The experience of living in a world when no one, not even the best and brightest or hardest working had any money convinced her that wealth was but an illusion; groceries mattered more. And so, though a glass darkly, I have for my whole life looked skeptically at wealth and the pursuit of it.

That sounds facile, now, because it also sounds like an excuse for financial failure, or at the least, a failure to cash in on the economic boom of the Clinton years. But it is the truth. I have never had the stomach for much risk, especially after I had a family to support. Sure, I have wasted a lot of money, no doubt, and it might be easier to acknowledge this fact if I had in fact made risky investments that failed, but in fact I simply frittered the hard-earned money away. This is a regret, to be sure, but not a serious one, since we always had food on the table; that grocery index' never found us wanting.

As an example of this practice, we never moved from the little cracker-box we call home for the very reasons I named above. In spite of a rising income, especially in the last seven or eight years, we never felt comfortable with the idea of selling our house and 'trading up' for a larger, more expensive house. In fact, we often drove by new neighborhoods where houses that cost two and three times what ours did stood cheek to jowl on tree-less streets and wondered, "Who is buying these houses? What do they do for a living and how can they afford it?"

Well, we're about to find out. Ironically, it seems likely that the risk we never took may actually pay off in the long run. But was it worth it? Goodness knows, Valery has endured a life harder and a house smaller than she deserved. Who knows, maybe we'll be the ones buying when all the 'For Sale' signs go up.

Not likely, though, as I continue to hold to the macro view.

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