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Friday, November 20, 2009

Economic Forecast for the Apocalypse

Last night I told Michael that my new retirement strategy would be to invest in tangible items that I could sell or trade in a post-apocalyptic world. Things like HAZMAT suits, gas masks, roller-skates, toilet paper, a fleet of trained dogs, solar panels, steel-toed Doc Martens, nano-machines and craploads of water. It's probably a good idea for me to work on my pocket desalination filters now so they'll be available at any time. I should also get a better grip on nano-technology as I'm pretty sure nanomachines will be the new gold. I don't want to contribute to any sort of post-apocalyptic violence, so you'll have to find other vendors if you're interested in guns or weaponry.

It's not that I think civilization will end any time soon or that I'll even live to see a post-apocalyptic world, but apparently I've got to have some sort of investment plan and as a non-economist, investing in a post-apocalyptic future seems to be the least risky strategy I've got.

I don't like risk. I especially don't like risk when it comes to my money. I work to get paid and I pay others for their work. I get that. I don't understand the other 75% of how I'm told making money works. Making money by letting it sit confuses me. I'm told that if I buy this stock now, put my money in this account now, invest in that thing now, it will be worth ten times more in 10, 15, 20 years. Magical capital. I don't doubt that it actually happens, but I just don't get how it's sustainable. The growth has to be endless for investment to be deemed profitable, right? But is endless growth possible? Isn't that where a crash or a burst comes in to level things again? Your regular boom and bust economy? I'm supposed to put my money in something that I'm told won't go bust and be ok with the risk that it actually will have to do that at some point and that I might get less money back that I put in? I'm supposed to keep afloat by jumping ship right before the bust and hopping on the next boom before it booms? I don't know how I feel about that.

I know I'm being paranoid. They'll say, "that's what risk management is for." And who am I supposed to trust for that information? The "experts"? The nameless person managing my 401K? They can't even decide amongst themselves what to do - they're familiar with the theory so maybe they have an intellectual advantage, but the bottom line is that they're gambling just as much as I am, right? In order for me to win, someone else has to lose, right? I don't care if it's a 401K or penny stocks - at the heart of it all, it's just a gamble. I don't like gambling. The last time I went to Vegas I went in thinking I'd be ok to lose $200. I lost my first $5, got sad, then won $20 and decided that I'd rather have $215 to spend on dinner than on this emotional roller coaster and quit.

We purchased our home back in 2007 - right as the real estate bubble was gently pin pricked and the air was slowly being released. We thought we were buying at a good time - the research you'd do on the net in late 2006 would yield two very strong opinions - 1) the bubble would burst and real estate would collapse any day now so plan on renting for the next 15 years or 2) the bubble would slowly let some air but bounce back again - the price drop would be temporary and it would be a good time to buy. Reliable sources for both opinions thrived.

In either case, it didn't matter too much for us because we weren't looking at a place as an investment. Everyone (literally) we talked to about buying a place told us we wouldn't be living in the same place in 5 years but we didn't want to assume that and instead looked for a place we loved. We found that place (I still love it) and decided to buy.

I read every. single. document. Anything that I needed to sign, I read twice - once at home and once again in the Realtors office. Most of the people we dealt with were fine with it, but our loan guy was a massive douche bag although he didn't seem that way at first - he was an older guy with many years of experience in the field. He was very friendly, knowledgeable and he met with us as often as we needed to discuss our loan options. We weren't sub-prime applicants, but the loans he was showing us were on were definitely on the creative end of the loan spectrum. We had to request to see a normal fixed interest loan. He somehow calculated that based on our incomes we could apply for a loan that was about $200,000 higher than the max we had set for ourselves when we came in (thankfully we didn't buy into the bigger loan thing.)

During our closing there was a specific document that they asked us to sign that indicated that we knew our loan was a "balloon loan." Our loan was NOT a balloon loan. I looked at the escrow woman and told her this is not our loan. The loan guy was sitting in the room. He said, "that's just a standard form, everyone signs it." I asked, "do we have a balloon loan?" he responded, "no." I reread the document and looked at Michael and said "I'm not going to sign this. We don't have a balloon loan." The loan guy got angry! He looked at me and said "Do you want to lose the house? You have to sign that or you can't close escrow and you won't get the loan. It's not a big deal, you just sign it, it doesn't mean you have a balloon loan!" In my head I flashed back to the moment where I asked the loan guy if he would recommend the same type of loan we were getting for his own children (he had told us about his children and his new grand child) he said yes, without a doubt. I looked back at the escrow lady and told her I couldn't sign that document. The loan guy huffed, got up and left the room pissed. The escrow lady read the document herself and then hand wrote something on the document indicating that we did not have a balloon loan and had us sign the page under her handwriting and stamp. That worked, we closed, we owned our home. I decided the loan guy was a douche bag and I probably should not have trusted him at all.

As the real estate bubble continued to leak out air and eventually pop, more information on these predatory loans started coming to the surface. While we were doing ok with our purchase, I did feel sympathy for the people out there who were losing their homes when their out of control loans came due and the market was not turning a profit anymore. Having gone through the process, I know that they most likely trusted what the "expert" had told them. Internet people were calling them stupid for not knowing better and blamed the homeowners for the collapse of the market. I agree in part - they should have read and understood all the terms of their loans and the documents they signed, BUT I understand how intimidating it can be as a non-expert when you've got the pro telling you that this is the way to invest and that you're just being a paranoid idiot if you don't follow their advice. It can be kind of hard to tell the expert they're wrong.

I can do all the research I want on WebMD when I have a weird cramp. I can pull up all my symptoms and do what I think is a pretty effective self diagnosis, but when I go into my doctor and she tells me my cramp is not due to the Maple Syrup Urine Disease (it's real, look it up) I'm going to believe the expert. To me, it's pretty much the same thing. I think that when you're dealing with money instead of lives though, it's a little easier for the "experts" to dismiss the danger signs when they're going to make more money off a little risk with my investment.

So, thanks, but no thanks. Post-apocalyptic nanotechnology FTW. Uhhhmmm... anyone know how I can get my hands on some nano-machines? I pay a pretty penny... or will trade for magical capital.


  1. I'd check with Cheyenne Mountain, I'm pretty sure that O'Neill et al have run into nanites plenty, (Jack even had some in his brain) and replicators for that matter. They could be SUPER useful...until they start taking over the planet and everything. Then they're a big downer.

    ***OKAY every time I go to post a comment I LOVE the "words" it uses as the authenticator..just now it was kabloic, and I just had to say something about how awesome they've been! I can't wait to see what this one will be!

  2. ahhahah Kathleen - I'll have to shoot Cheyenne Mountain an e-mail... see what they can send over my way. I'm sure if I explain that I'm preparing for a post-apocalyptic economy they'll be totally chill.


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