Random Thoughts

It’s all in your mind…

I’m trying not to be obsessive about checking my investment portfolio online. After all, what’s it going to tell me that I don’t already know? The stock market is down. Again. The amount I have left in my portfolio is down. Again. I’ve reached six digits in losses, nearly 20% of my investments are gone.

I can’t quite wrap my mind around it. For me, it represents my late father’s lifetime of savings, the house I grew up in and then sold upon my parents’ deaths, the farm my grandparents lived on until their deaths which was sold only a few years ago.

All of those were real, tangible things, particularly the house in which dad and mom raised us, and the farmland upon which my grandfather raised cattle and soybeans. They had a solidity, a permanence, and a real value, which in my mind did not lessen upon converting them to investments in stocks and commodities.

Foolish mortal. I knew what economist Robert Schiller says, I just didn’t want to think about it that way.

The notion that you lose a pile of money whenever the stock market tanks is a “fallacy.” He says the price of a stock has never been the same thing as money — it’s simply the “best guess” of what the stock is worth.

“It’s in people’s minds,” Shiller explains. “We’re just recording a measure of what people think the stock market is worth. What the people who are willing to trade today — who are very, very few people — are actually trading at. So we’re just extrapolating that and thinking, well, maybe that’s what everyone thinks it’s worth.”

Shiller uses the example of an appraiser who values a house at $350,000, a week after saying it was worth $400,000.

“In a sense, $50,000 just disappeared when he said that,” he said. “But it’s all in the mind.”

Okay, I’m still reasonably young, I can learn from this. I can weather it and get through it. I’m not sure what exactly I will do differently in future, except not blindly trust the stock market nor the banks, and always remember that the value of any assets is a very subjective–and frighteningly unstable–thing. We’re still in the midst of this crisis, and it’s hard to know what final lessons there will be until we’ve fully gone through it.

But what about those who aren’t young, those who have no appreciable time left nor ability to recoup their losses? My son’s school principal, “Shirley,” spoke to me of her mother, a widow in her nineties. Her mother lived through the Great Depression, vividly remembers bank closures and bread lines. Shirley handles her mother’s money. She trusted IndyMac Bank with it, believing that it would be fully insured. She was told by two different bank officials that it was safe, that the entire amount–even though it exceeded $100,000–would be covered due to the nature of the Trust within which it was held.

$45,000 of that widow’s money is gone. Poof. Shirley waited for two hours in a line at her IndyMac branch, only to be told that there was nothing to be done. Either the bank officials had been ignorant or liars; she’d been told it was insured when it wasn’t fully covered at all. Nearly a third of her mother’s money is simply…gone. Upon contacting the FDIC about her loss, Shirley discovered,

You’ll get repaid a portion of that amount if the bank’s assets are sufficient to pay the cost of receivership and still have money left over. Full repayment is virtually unheard-of and any repayment of uninsured deposits is slow. Receivership certificates don’t normally pay off for several years after a bank failure, if at all.

Shirley can’t bear to tell her mother this. She knows it would send her elderly mom into a tailspin of panic and worry. And it’s taking all of her considerable ability to convince her mother that literally putting the rest of her money under her mattress isn’t a good idea. Shirley said, “I’m starting to think Mom is right though. At least the $45,000 would still be hers.”

Her story is echoed across our country. I’m not sure what the lesson is in it either, except that families are going to need to rethink the independence we’ve come to expect between generations. Maybe it’s time to make a shift back to the concept of several generations living with or near each other, caring for each other, and sharing resources. Maybe the real lessons we will come away with from this economic turmoil are human lessons, lessons in what truly has lasting value, ’cause it certainly isn’t the money.

Michelle Malkin has an open thread asking “How are you all dealing with the market roller coaster?” Worth reading.

Not so Cranky Gayle Miller takes a deep breath and reminds us all to calm down .

Pat Santy offers valuable  insight in coping with stress over the economic crisis:

How you view the crisis will have a lot to do with how well you adapt to and survive (or not) the devastation…The key point is: Don’t think of yourself as a victim.

The Anchoress is continuing to pray and fast over the election, which to my mind would be a Very Good Idea as well for those of us consumed with worry over finances.