You know, I’ve spent a lot of time this past year darn near speechless at what’s been happening in this country. I don’t know whether you’ve realized it or not, but we’ve blown right through whatever tipping point there was, and we are going down where we’ll stay for some time. In fact, the next time this country feels anything like what I’ve seen over the last 30 years could very well be after I’m gone… and I just turned 49 years old.
All the stupid talk about “double dips” was starting to get to me anyway. Does anyone actually buy any of that garbage? Like the recession ended sometime this past year, but I’m just not able to tell, is that what I’m supposed to believe Professor Bernanke? Yeah, it’s weird because I had no trouble discerning when it started. You guys inside the Beltway may be so insulated that you need to check with your mega-computer to figure out such things, but me… no problem. So in case of a power failure, feel free. I’m here for you.
The thing is, I’ve had some time to really think about this meltdown and I’ve got to say… this one has made me a lot smarter. All I learned from the last bubble popping was not to buy a stock with a 400 P/E whose business model involves shipping 50 pounds of kibble across the country overnight for free. Not all that handy for anything I’ve seen since, so it’s not exactly knowledge I expect to put to work anytime soon.
And the bubble before that? I believe the key learning there involved not banking at an S&L owned by Charlie Keating. Oh, and something about Michael Milken, but he’s like eating eggs every morning for breakfast… I can never remember for sure whether he’s good or bad for me.
Ah, but this bubble, my friends… this bubble’s an educational marvel. And, just like emotional baggage, it’s the gift that keeps on giving. I’ve always thought that there were only two things in life that led to real learning: age and pain. Everything else is forgotten a week after you take the test. But, this meltdown… it’s one of the true wonders of the world… this one has it all.
It’s a credit crisis, a global financial crisis, a foreclosure crisis, an economic catastrophe, the total destruction of the secondary mortgage market, the end of pension plan investing and Wall Street’s investment banks, and an ongoing example of why derivatives should be regulated until they’re no fun to play with anymore.
This bubble’s got its own lexicon… like tranches… something that should be served at brunch; did you try the tranches, get the sauce. And the bottom tranche, called the “mez,” which sounds so much more valuable once you re-securitize it into yet another triple A rated bond. Then there’s CDOs and CDOs squared, CDSs, and counter-parties where there is no counter, and the only person thinking ‘party’ is the banker after picking up his check from Treasury when the music stopped. This bubble’s got securitized trusts, that were supposed to taste great with mortgages inside, but instead are less filling without. And let’s not forget the certificate holders that basically are the investors that get blamed when Chase doesn’t feel like modifying a loan.
Yep, this deepening recession is a teaching machine, let me tell you. And, want to know what I learned more than anything else though?
That I’m an idiot, that’s what, and I have been for something like the last 30 years.
I was thinking about the 1970s the other day. A kinder and gentler time. Union strikes, dirty politicians, inflation, stagflation, 18% interest rates, the gas crisis, disco music, the hostage crisis… you know… the good old days. I was remembering my family, growing up, when we used to go on vacation. Before leaving town, my Dad would go to the bank and buy traveler’s checks. Then every day or so, when he needed cash, he’d cash a traveler’s check.
I remember our family car back then too. Dad would buy one and drive it until it needed to be towed away from the front of our house… then he’d buy another. I remember one year he was debating whether to get our new car with an AM and FM radio, or whether AM alone was really enough. Hey, it was important, every option cost money. And then there was filling up with gas at Esso. He’d pay for it with his Esso card, a charge card whose bill you paid at the end of every month.
We had some wonderful family vacations in the 70s, back before our family took all the fun out of dysfunction, as families so often do. The thing is, there’s one thing I don’t recall being in the mix… credit cards, car loans, or stupid frivolous spending on absolutely nothing.
Since then, however, look what the guys on Wall Street have got going on. It’s not bad enough that they’ve run non-stop ads my entire adult life to convince me that I should be investing with Paine, Merrill, Smith or Barney. It wasn’t enough to sweep up my portfolio’s losses every seven years like locusts. No, they also had to come at me with a more hypnotic message: Debt is good, my boy. No, it’s better than good… it’s the coolest thing going. You want as much debt as we’ll give you.
Debt is how you let the world know you’ve arrived. Debt comes in precious gems and shiny metals. Hi, I’m a gold debtor… no look at me, I’m a platinum debtor. How’d you like to be a sapphire debtor? Just think how good you’ll look and feel when you show the world you’re a sapphire debtor.
Yes, Wall Street’s finest hired the guys from the television show, Mad Men, and worked us over pretty good. They actually convinced me that these plastic cards of gold and platinum were status symbols. Pulled out my American Express Platinum card, because membership had its privileges. I paid $300 a year to carry that stupid grey colored piece of plastic around, and I think the only privilege I ever got was a late check-out from a hotel on Sunday that I’m sure could have been had by anyone who asked.
Wall Street has been selling us on how cool and good looking being a debtor really was, because they were making a fortune on that debt, securitizing it, and packing it up to be shipped to investors all over the world. And they sure got me; I think for a while there in my early thirties, I can remember having to buy a new wallet just so I could sit atop an entire deck of VISA and MasterCard playing cards, and I’ve got the back problems to prove it.
What’s the difference between those ads that make debtors look so successful, and cigarette ads that showing beautiful people smoking their way to the beauty of lung cancer and heart disease? We got rid of those ads pretty darn quick, didn’t we? I wonder which actually kills more Americans each year: smoking cigarettes or the mountains of debt under which they told us we should bury ourselves.
And I remember now, that look on my father’s face. He must have been wondering why in the world his son would choose to walk around showing the world what a debtor he really was, when in his day, that was something of which people were ashamed. Yeah, that must have looked pretty darn weird all right.
Yes, this recession is going to be around for quite a while. You know why, right? Because we’re not going to borrow our way to feeling prosperous again. We’ve fallen for three bubbles in my lifetime and I for one am not going down for a fourth. Next time I’m asking about the price of the car I’m buying and before I go on vacation, I’ll be stopping to pick up some traveler’s checks… or using my debit card, I suppose. Unless those fees get too high too, in which case I’ll just carry cash.
I know what you’re thinking… carrying cash is dangerous… you might get robbed. Really? I’ve never been robbed of my cash by a street thug, but I’ve sure been robbed every day of my life carrying around those credit cards that were supposed to make me so much safer. That’s what happens when our government encourages Wall Street to run ads 24/7 everywhere we turn telling us how wonderful life as a debtor can be. As long as you don’t smoke, of course.
Yes, this time around there’s been a whole lot of learning going on over here. I’ve learned what a jackass I’ve been all these years… and that you were right Dad.
I guess what they say is true… it costs money to go to school.
Martin Andelman is a staff writer for The Niche Report. He also writes an almost daily column on ML-Implode called Mandelman Matters. He also publishes a Monthly Museletter and you can follow “Mandelman” on Twitter. Send your responses to Martin@TheNicheReport.com