August 04, 2004

It's the money, stupid.

For some reason, I remembered a conversation that I had with a couple of coworkers over a year ago. This was back when I was still doing "White Collar" work, and I was the only one there without a college education. There were three of us in the room, Larry, Scott, and I. Larry was a black guy who was working hard to support his family, and further his career. Scott was the quintessentail yuppie-type. Larry had decided that he wanted to learn a little about the stock market, so he asked me what it was all about. I told him my take on the subject. "The stock market is a body that arbitrarily places values on companies based on rumor and innuendo." After I stated this fact, Scott just wigged out, and started proclaiming that I didn't know what I was talking about. Of course he could not come up with any substantial reason why I was wrong. I hate that.

You see, there are a few basic things about money that I understand. Coinage was initially based on metals due to the fact that they were rare, durable, and yet malleable enough to easily create the coins. Another thing that made the metals in question (Gold and Silver primarily) valuable is that thier malleability made it easy for artisans to create beautiful objects. The ability to create pretty objects essentially equates to monetary value.

Skip to modern times, and we are now using paper money, and more increasingly "credit". I haven't bothered to do any research here, so I can't tell you when exactly the U.S. dollar could no longer be backed by actual gold. All I know is that it has been a very long time (decades at least) since you could take your paper dollar to a bank, and recieve the equivalent weight in gold, and vice versa. So what is money "backed" by? Well it's not "backed" by anything at this point. Money is an abstract. An idea.

Credit is even more a creation of this crazy mixed up society. Now we don't even have a piece of paper to hold on to. Our money, that is a replacement for the barter system, that we used to be able to get something that we could make pretty things out of, is now a piece of paper that represents an abstract idea, and we are consistently turning to a medium of currency that is based upon the paper cash, but doesn't have all that tedious fattenning of the wallet to bother us.

We work. We continue to strive to "make do" for ourselves and our families, and what we recieve is a representation of an idea of our worth. The value of this particular "idea" is determined by the stock market. The stock market is an entity that determines value by rumor and innuendo (ie: Company "X" decided arbitrarily that they would make eleventy billion dollars in the next quarter, but because some schmuck forgot to "Carry the four" when they were doing the initial estimate, they will miss thier projection by about a hundred bucks. The company's stock was at $57.12 previous to the declaration of thier mishap, suddenly dips to $12.57 because "customer confidence" has been decreased by the fact that the idiots running the Company can't predict the future.).

I wholeheartedly believe that our financial market is a complete creation of eggheads that have been able to dupe the "average citizen" into believing that they know better than the next guy. As far as I'm concerened, they can go Fuck Themselves. I'll take the money that I earn, and do with it what I will.

Can you tell that "Investing" is not in my future?

Posted by Johnny - Oh at August 4, 2004 11:28 PM


Posted by: kaygoe1 at August 5, 2004 09:19 AM

Nixon took us off the gold standard. Just thought I'd mention that :-)

Posted by: Teresa at August 5, 2004 12:22 PM

Although we're not technically on a gold standard anymore, you can still trade you dollar bills for gold, so there's a default "gold standard" of sorts.

As for stocks, well, I agree that trying to outdo the market by picking individual stocks and doing lots of short-term trading is the fooliest of fools' games. However buying and holding long term in a market index mutual fund is great way to invest for retirement.

[waves around Finance degree for added credibility]

Posted by: Harvey at August 5, 2004 02:14 PM

Kaygoe1: Thanks Dad. It's about time you left a comment. ;^)

Teresa: Thanks! I knew it was somewhere around that timeframe, but I was just too lazy to look it up.

Harvey: I've never actually looked into mutuals, but if you say they're allright, I'll believe you.

When I worked for an ISP, I wound up talking to a lot of "day traders" whenever we had an outage in South Florida. Every one of those people was "certifiable".

Posted by: Johnny - Oh at August 5, 2004 02:44 PM

Well, you can chalk finances up to another thing husband's are good for. I hate business stuff. I take care of all our bills and our budget, but when it comes to stock market etc, HE does that. When he talks stock market, bonds, mutual funds, my eyes glaze over and I hear 'blah blah blah, money, blah blah blah..'.

Posted by: boudicca at August 5, 2004 03:29 PM

OMG - day trading is for certifiable nuts!!! Harvey is absolutely right about the mutual funds - you invest a bit every month and let it ride... long term savings with better interest than a bank savings account. Most people with IRA's or 401K's have the money in mutual funds of some sort. You don't touch it until you're 65 then - unless you want huge penalties.

Over the years the market goes up and down, but basically it slowly goes up. That's how you make money - it's never fast and easy. (or only if you happen to be one of the happy people who win the big lottery)

Investing for your future is a good thing. You certainly don't want to be stuck depending on Social Security - it's worse than welfare, only enough to keep you just about starving to death for years...

Posted by: Teresa at August 5, 2004 09:07 PM

Since I'm tossing out free advice, and Teresa mentioned 401k's, the first place to invest is in your employer's retirement plan. Two reasons: First, they usually match your contributions. Even if they only match $1 for every $10 you contribute, that's still like getting an automatic 10% return.

After you max out your contributions there, then consider a mutual fund. I recommend index funds simply because, although you'll never beat the market with them, you also never do WORSE, either. And since the market has an average annual return of 10%+, it's a pretty good place to put a long-term investment.

Posted by: Harvey at August 6, 2004 11:56 AM
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