Tuesday, November 1, 2011

The Aha! Moment.

Nobody protests when things appear to be going well.

On the radio this morning, a British chappy was interviewing some "occupy" protesters in the UK.  He asked one of them why they were protesting today, and not, say, back in 2007.  He replied, "Well, in 2007, we all had money in the bank, food on the table, and jobs.  Today we are in debt, being asked to cut back, losing our jobs, our houses, everything!"

And to me, that was an Aha! moment, as it crystallized what is wrong with all of us, to some extent, when it comes to finances.  When things appear to be going well, we don't complain.  But when we reap the woe of what we sow, we bitch and moan like nobody's business.

The problem is, and I think the interviewer was getting at this - we should have been protesting in 2007, when the things that ended up causing the problems we have today, were occurring.

Back then, we were all doing well, or so we thought.  So we all racked up debts - in credit cards, home equity loans, mortgages, etc.  And our governments did likewise.  Why not borrow?  Everything is going just, fine, thank you, and tomorrow will be a sunny day, where we can pay back our debts with the staggering gains on our stocks and real estate.

Of course, not everyone saw it that way - a lot of folks sounded the warning bells, but were shouted down soundly.  And I mean beaten down.  And today, no one looks to those folks and says, "Gee, they KNEW, didn't they?  We should have listened to them!"

Protesting today's economic conditions is akin to treating the symptoms of a disease without curing the underlying disease.  The "occupy" protesters are outraged - outraged I tells ya! - that bankers and fund managers are making billions while they are being foreclosed upon and losing their jobs.

Of course, those same Wall Street "Fat Cats" were making even more obscene amounts of money five years ago.  But back then, when you were seeing double-digit gains in your portfolio every year, you didn't bitch do much, didya?

Taking out a toxic ARM mortgage was a bad idea in 2005.  And it didn't go horribly wrong in 2007 because the payments were still low and the house was still increasing in value.   You congratulated yourself on being a genius.  Now, a few years later, it all goes horribly wrong and someone else has to be at fault

But such is not the case.  You took on a ticking time bomb, and it went off.  It just took a few years for it to go "blooie!" in your face is all.  The mistake was made when you signed the note, not today.

And the same is true for student loans - many "occupy" protesters want them forgiven and say what a rotten deal they are.  But a few years ago, when they were cashing those fat checks at Party U., they were silent on the issue.  Why the change in heart?

Oh yea, that whole messy, "you have to pay it back, now" deal.  That.

Some of us, on the other hand did see it coming. I sold out in 2005.  Cashed in, realizing that double-digit gains were not sustainable in the long run.  And you know, I didn't even cash out at the peak, either.  People said I was a fool for "selling too soon" - and they hung on, until they lost it all.  Who's the fool now?

And I never signed a toxic ARM loan.  I felt that these sorts of weirdo financial instruments were like juggling hand grenades - and a lot of people felt the same way.  I am supposed to feel sorry for the guy who said "Nyah Nyah! I just bought a huge min-mansion and I'm paying less per month that you are!" just a few years ago (and yea, jerks like that would say things like that).  I told them then, "you'll be sorry!" - and I'm to blame for being right?

It is like this gold thing.  We saw silver collapse.  Anyone with half a brain who has lived more than 30 years knows a bubble when they see one.  And yet the gold bugs are all smugly going, "Well, gold is still going up, up, up!  We're bloody geniuses for buying it at $1400 an ounce!"

When that bombs, will they protest Wall Street and demand compensation from Glenn Beck and the other odious sorts who sold them their gold?  Probably.  This is America, after all.  Land of the free and home of the whiny.

The time to pay attention to your finances is when things are going well.  Waiting for the shit to hit the fan before you wake up and realize you are in a pickle, is, well, too little, too late.

But that is exactly what a lot of people did, during the last 20 years.  They spent all their money on junk - not putting a penny into savings.  Our national savings rate went negative at one point.  People were literally spending more than they made.  And when it all blew up, they want to blame it on someone else.   Because nothing they did, during the good times, could have caused this.