August 28, 2009

Are you an investor?

Investing involves small segments of society: businesses, individual farms,  buildings, and entrepreneurs. Only recently, with the advent of index funds,  has investing concerned the whole of a large market: the stock market.  Index funds are mutual funds that buy shares in every stock in a given  segment of the market. Buying index funds, you can buy a piece of the  whole stock market. Still, the stock market is only one segment of society,  though currently a large segment.

The investor trusts the investee. When this trust is broken, strong emotions  are unleashed. Utility stockholders are furious when a utility cuts or
eliminates its dividend. When a tenant defaults on a lease and forces a  property into foreclosure, the property owner has a wide range of emotions  triggered by the breach of trust. Some vow never to own real estate again.

Sometimes the investment exceeds expectations. Wal-Mart investors  saw their small regional chain become the largest retailer in the world.  Berkshire Hathaway went from a shell company to one of the world’s  largest corporations. Success triggers grandiosity in some, frivolity in others.

Many successful investors are disoriented and unhappy.  However, faith is also a part of investing. The borrower, tenant, or  business owner believes the application of science and technology to business  practices will produce more than the sum of capital and labor, thus  enabling him to pay the rent, interest, dividends, or capital appreciation plus  enough for his own savings. Productivity, technology, and efficiency are the  creed of investors.

August 4, 2009

A dysfunctional relationship between a person and an inanimate object?

Investment relationships are not identical to romantic, family, and social relationships solely among people. Though people, often with conflicting interests, are involved in investment relationships, the primary relationship is between the individual and an inanimate object: money. At first, it may seem odd that a relationship between a person and an inanimate object could be dysfunctional. In fact, our society is saturated with such dysfunctional relationships.

It is estimated that 10 percent to 15 percent of the U.S. population is alcoholic; essentially more than 30 million Americans have a life threatening dysfunctional relationship to an inanimate object: alcohol. One out of every three adult Americans are obese, based on their dysfunctional relationship to food. Sixty million American families have larger credit card debt than they can afford. Their relationship to material goods is dysfunctional.

In fact, consumerism dysfunction has reached new heights. Compulsive shopping is portrayed in the media as fun, not as an illness. Yet in the booming economy with a roaring stock market of the late 1990s, the number of personal bankruptcies had never been higher: 331,000 filed for bankruptcy in 1980; 413,000 in 1985; 783,000 in 1990; 927,000 in 1995; and more than 1,300,000 filed in 2000. In recent years, Americans as a whole have spent 1 percent more than they earn.