Remember when bubbles were innocent

like this warm spring day a couple of years ago?

In the still of our house, while the kids are away at school, the R and I work away on our little laptops, plink, plink, plink. Sometimes he issues profanities when the market turns in a way that is unexpected and crazy. Let's just say the dollar jar for charity is overflowing and I don't really think we can afford a donation that large. He needs to chill.

In the background CNBC is running. I may be busy trying to get pictures just so on a web page or designing a form to be used at school, but I can hear it. And.It.Drives.Me.Crazy. I know...I need to chill out myself, but ... CNBC? It is the epitome of all that is wrong with our world. Hearing financial people using terms like half-time and scorecard to describe the stock market to make themselves more accessible to us, the Joe the Plumbers of the world, makes me want to yell at the TV. Which I have been known to do.

For the past several days I can hear yammering of people analyzing how the new administration has caused a huge drop in the stock market with the plans that have been recently unveiled. Like a month ago we were all doing so much better. Yeah...I think I want Wall Street to determine how our economic system should be run. Because the free market should manage itself, right? RIGHT?! Sorry...I don't mean to yell at you.

Really, I'm all for the free markets. Logically it makes sense that the market should determine the price of goods. If it was all about supply and demand like in Economics 101 it would work just dandy. Once we get out of college however we realize how staged all of our textbooks are. Nothing is "all other things being equal". There are always many complicating factors. People with masters degrees in Finance don't have a clue about what will or won't work. How are we and Joe the Plumber supposed to figure it out.

My rant mainly is with all of the institutions in our lives that have directed us to be so intimately involved with the stock market. Our generation and the one coming up behind us were taught it's just crazy to NOT invest in the market over the long term because it goes up like 15% a year, right? RIGHT?! Uh oh...I'm doing it again. Sorry.

My investment advisor has told me for many years that you have to ride these ebbs and flows. That over time the market goes up. You shouldn't get out of the market because you miss out on the upswings. Well yeah...you don't want to miss out on those upswings. But wouldn't it be nicer to not lose thousands of dollars then have to take years to build it back to where it was before actually making more? Sure over the long term the market tends to go up. But that is over the long, long term. Not the next 3 to 5 years. Every time I would pull money out of the market he would strongly advise against it. He's fired.

My problem is that people have been convinced to put their retirement income, their savings into the stock market. It was the way that average Americans could also rake in the dough from this booming market. When I was young my parents didn't invest a lot of money in the stock market. You only invested what you could afford to lose. People at that time actually knew they could lose their investments. Now how do you save for retirement? Why put it into a 401K of course. And because you are now so good at saving for your retirement your company doesn't need to worry about providing you with that old pension. You're doing it all yourself. And about 8 years ago at this time people were trying to convince us to put our Social Security insurance into that same cool and booming market. Because shouldn't every day Joes have the opportunity to score big too?

Of course who benefits from that? Oh yeah, investment management companies and your company who no longer needs to provide you with that secured pension. Now I get it.

Now a lot of us don't have our MBAs from an Ivy league school, so we may not realize that so much of what companies are investing in is actually vapor. Economics 101 used things like guns and butter to describe resources and their management. Things you could touch. Things that if they were laying on the floor in the room you could find it. But we're much to sophisticated for that. No...we don't want to actually have our securities backed with something that has a known or quantifiable value. That's too easy. No instead let's invest it in something like...oh I don't know...oh YES! Mortgages!

Awesome. Because it just so happens that now mortgage companies have created these cool new mortgages that people can get without having any money down AND their payments are artificially low because they don't have to account for changes in interest rates over a period of 30 years using those well thought out and understood amortization formulas we used to always use. No! Now we can get people to buy the biggest house they can afford right now without even thinking about what will happen when interest rates go up and we have to charge them more for their mortgage. Well...it is written in their contract. Hopefully they read that part. And if they didn't that's their problem. Oh yeah...and the rest of America's, too. Oh well.

Not too long ago I wrote about the complexity of humanity and human thought. A lot of times when I look at what we humans do I chuckle. When I commuted to work in Silicon Valley and watched so many others like me going to do some weird job that society created a need for I used to laugh. It used to be that work was more tangible and you could actually see the results of what you did. A field plowed. A road built. A car coming off of the assembly line. Those jobs still exist, but what seems much more prevalent are jobs that used to be called paper pushing jobs, which now are more pushing bytes around. And worse, building bubbles. The chain that pushes a single paper, called a mortgage, around skimming fees for every fingertip touching it. It was a false economy. Not real. A pyramid scheme that fell apart when just a few people stopped sending their $ to the people listed at the top. It's not unusual for things to expand and contract too much. That is normal adjustments. But when things are built on a fake foundation it cannot help but completely fall.

Band aids don't fix broken bubbles. You have to let those go. Band aids are great at fixing surface level problems. Broken bones need to be reset and put into a cast for quite a while. Sometimes we have to suffer the bone being re broken so it will reset correctly. We need to have more tools than a few Superman band aids this time around. I worry though that we don't know how to do it. Because for so long the short term has been the goal. I truly believe that the short term thinking is part of what led to the huge amount of sheer greed that we've seen. But as with all crises huge opportunity exists. We can see that we've gone too far away from the fundamentals. But not so far away that we don't know what they are.