Wishing You a New Year Without the Bubbly?


This is actually a hopeful New Year's post, but don't be deterred by the title of Paul Krugman's op-ed piece that I'm quoting from the New York Times: Life Without Bubbles, sounds so, well, flat. In these economic times at the downward end of the market's curves, flat might be kind of nice. Krugman traces the burst of several bubbles--housing, stocks, and warns that "it may take a lot longer than many people think before the U.S. economy is ready to live without bubbles," echoing an ironic headline from The Onion, "Recession-Plagued Nation Demands New Bubble to Invest In."

If this craving to be sustained by something by definition gossamer (a bubble) sounds kind of irrational, consider the article, also from the Times, by Paul Sullivan: It’s the New Economic Reality. Work With It. He quotes Robert Seaberg, head of the wealth planning group at Citi Global Wealth Management, on the way those who supposedly know how to ride the waves of the economy to their advantage have been affected by the crisis: "The rich were fixated in recent years on the great wealth-generating possibilities of concentrated stock positions; derivatives created from the very mortgages that, it turns out, others couldn’t pay; and hedge funds that locked up their money to take huge bets on the economy."

When all the bubbles burst at once, what Mr. Seaberg refers to as "A Flock of Black Swans,” it was a grim happenstance for which many advisers had not prepared their clients. While the prevailing attitude -- "opportunity — how do I not miss out" -- may have inevitably led investors to skate on thin ice, their advisers were not counseling them differently.

Mr. Sullivan goes on to say that simple concepts like "redefine a safe investment" and "consider tax consequences" are being revisited for the first time in awhile, perhaps because "The problem was that no one wanted to talk about something as boring as an umbrella insurance policy when they could fantasize about a hedge fund with 80 percent returns."

Is that the age that we're entering? That of the postponed and the boring come calling when we have neither the money nor the will to distract ourselves?  That sounds unpleasant, though maybe my apartment will be cleaner. Perhaps another way to look at things is that we are finally realizing that money, that ostensibly arithmetic-governed dollars and cents entity, is in fact, tied to our irrational instincts. "Money is emotional," a friend who is a financial advisor always says, and she's right. It was a "sense of abundance" or perhaps a tolerance for risk that fueled much investment activity. Without it, what will happen?

This is a hopeful post because I think trying to think outside the bubble is cause enough to break out the bubbly. If we're now seeing, to our dismay, how fragile our economic system is, then maybe that brings new possibilities for doing business differently, with our feet on the ground instead of banking on the tension between untenable yet collectively-held hopes.  Hearing that the ultra-rich are considering ways to play it safer investment-wise is like hearing the hardest of partiers acknowledge that they could use a night in.  We don't need risk to heighten the sensation of being a part of things. Things are plenty exciting as they are.

So whether you're coming out of a month-long sugar haze, a week of lassitude, or a single night's debauchery, consider how pleasant it is to just exist--in a non-holiday state of mind.  The everyday can be good, and tends to be even better when we--personally and collectively--don't exclusively value the highs.

Wishing you a happy (and not boring) post-holiday...

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