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This is a year for the record books.
As we stand gaping at the incredible losses in the last three months -- or just the month of October -- we search for comparative measures of loss. The period I remember most vividly is 1973-1974. Large common stocks lost 14.7 percent in 1973 and another 26.5 percent in 1974. At the time, it was the worst decline since the Great Depression.
It had tough results.
One of my neighbors on Cape Cod, an antique car collector who had provided the yellow Rolls-Royce used in Robert Redford's filming of "The Great Gatsby," went bankrupt. His summer house was foreclosed. His car collection was auctioned off. He quietly disappeared.
Have you dared to look at your 401(k) statement lately? If you have, you’re probably thinking unkind thoughts about the well-paid folks who are supposed to be managing your money.
I say it’s time to give ’em the boot---but let’s talk this through first.
Fidelity Magellan fund is a poster child for disappointing investment results. As October closed, the fund had lost 50.5 percent over the last year, according to Morningstar. That means the fund trailed the S&P 500 index by a whopping 12.2 percent over the last year. Similar disappointments prevail at other well-known funds such as Dodge & Cox Stock, American Funds Fundamental, and T. Rowe Price Growth Stock.
Mind you, this isn’t a universal event---
Our two political parties have done it again. By throwing accusations at each other, Democrats and Republicans have skillfully distracted us from a painful truth.
Both parties are utterly worthless.
Outraged over the additional bi-partisan billions in spending tacked onto the bailout bill, readers have suggested that the best possible action is to vote against every single incumbent, regardless of party. No doubt some readers will call this a childish response to the current mess.
But is it? Do you seriously think re-electing the current crew, regardless of party, will promote better change than a complete reboot?
Nearly five years ago MIT Press published “The Coming Generational Storm,” a book I co-authored with economist Laurence J. Kotlikoff. We shared a deep foreboding about the implicit debt of our government and the burden it put on the young. We thought tough times were coming.
And they have.
But there is a silver lining--- if we are daring enough. Listen to this recent interview with professor Kotlikoff.
Kotlikoff: Our fears have been confirmed. The country has entered a great depression. Fortunately, the depression is mental, not economic.
It's ugly out there. Millions of people have lost a major part of their financial assets. Millions more have seen the value of their home decline.
So let's talk about what's left: human capital.
Human capital is the forgotten part of personal finance. One reason is that the financial services industry is so entirely focused on the products it sells — financial assets. Another reason is that human capital is difficult to talk about.
But human capital is important because it is the primary asset we all have.
Skeptics should consider a simple example —
