Investing, was Living Below Your Means

From: altamira (
Date: Wed Jun 07 2000 - 08:50:00 MDT

When I was a kid my father gave me this advice, which I've remembered ever
since: Concentrate on collecting knowledge and wisdom rather than material
things. Material things can always be stolen or destroyed or lost some
other way, but your mind is always your own [I remember thinking at the
time: yeah, except if somebody gives you weird drugs and brainwashes
you--I'd recently seen *The Manchurian Candidate*]. With a well-developed
mind you can always get the material stuff when you need it.

I used to believe strongly in saving and investing. At one point in my life
I had a pretty impressive net worth. Then in the late 80's two things
happened to depress the Texas economy: there was legislation which
radically altered the federal tax treatment of real estate, which caused
real estate prices to plummet; and around the same time, the price of oil
fell dramatically, which also had a depressing effect on the Texas economy.
Suddenly, people who'd been good risks (financially) couldn't pay their
bills. Even if you'd made secured loans, your collateral would often be
tied up in bankruptcy estates. My business went belly-up, and many of my
investments lost half or more of their value.

The situation in Texas in the late 80's was just a minor glitch, but living
through it has helped me to extend my imagination to visualize more
extensive economic depressions. Saving money for a particular expenditure,
such as starting or expanding a business, buying a house, etc. makes quite a
lot of sense to me. But investing just for the sake of investing doesn't,
unless you appraoch it like playing a game, for the fun of it. (An exception
to this would be if you have inside information about a company or companies
you're investing in.)

If your goal is to have money to live on when you retire or to self-insure
for medical expenses, the best investment over the long term is probably to
hold relatively short-term low-risk bonds until they mature. When they
mature, use the proceeds to purchase more of the same. Because the bonds
are low risk, they'll also carry low interest rates, but there's a high
probability that the money will be there when you need it. Because they're
short term, you can hold them to maturity without suffering damage from

My opinion is that the net economic effect of the stock market is
destructive for some of the same reasons socialist economies don't work
well. I'm waiting for permission from a friend to quote a piece she wrote
about the stock market.


-----Original Message-----
[]On Behalf Of Anders Sandberg
Sent: Wednesday, June 07, 2000 7:57 AM

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