The stock market is tanking.
If I understand it correctly, the initial reason stems from China having devalued its currency. For most of the day yesterday, it looked as if there might be a “correction to the correction.” Or more aptly put from all I’ve read about the Chinese economy, “a correction to the corruption.” Alas, a recovery was not meant to be. The Dow and broader indexes all collapsed, mine and everyone else’s 401(k) holdings along with them. I’m bracing myself for another bear market.
I’ve conditioned myself over the years not to look at my retirement savings very often. In fact, I try to pretend and compare it to distant relatives with whom I have the most casual of relationships. A glance every six weeks or so at the numbers, and an end-of-year effort at rebalancing the differing funds is usually enough for me. Actually sleeping at night rather than thinking about how the next jobs report will impact everything is far healthier.
Still, it’s hard to read screaming headlines and not wonder how calamitous news can manage to impact my life. A few years ago when exposés alerted us to bed bugs being rampant in motels, I had convinced myself for several nights running that somehow I had brought one home from a recent trip. A hair on my leg that deigned to rub up against, oh, say, a sheet or blanket at 2:00 am would convince me that something was crawling on my skin. I would quickly turn on the light to carefully scan my legs, the sheets, and the floor, certain that I would find an unwelcome visitor picked up at that pretty sea-side inn during the previous weekend. Somewhere up in heaven my mother smiled and proudly exclaimed, “That’s my boy.”
It’s better to have a calm perspective about financial issues when it’s all out of our control anyway. You have to settle down and relax because otherwise you just end up affecting your mental health. Take a Paxil or an Ativan. Better yet, maybe just a hot cup of chamomile or valerian tea. Relax because unless you’re either a CEO or a fund manager who actually knows something, you’re not going be able to control events on the stock exchange trading floor. For the sake of sanity, you have to let matters take their own course. Don’t panic. Stay on the plan you already have — the market does eventually swing back.
One of my favorite examples of someone assuming the correct mindset in the face of utter disaster is former Philippine first lady Imelda Marcos, during the period after she and her husband were run out of Manila. The Marcos’ had been accused of looting their country’s assets in what some said were shrewd, complex, and incredibly deceptive financial transactions in order to keep funds hidden. There were rumors of foreign bank accounts, high-priced paintings, jewelry, and even a ruby and diamond tiara all secretly stowed away in far away and exotic places. I personally loved how the U.S. Customs Service found cash, jewels, etc. hidden in the boxes of Pampers diapers upon their arrival to Hawaii after their tumultuous exile. Pampers! Thankfully no one actually looked in Ferdinand’s carton of Tucks wipes. Customs agents apparently had a personal line they just weren’t willing to cross.
A year after her husband died, Imelda was put on trial in federal court in New York City to answer charges that she and the late president had indeed hid assets owned by the Philippine government. However, aided by a very skilled defense lawyer, plus a jury that seemed to question whether or not the court even had proper jurisdiction to hear the case, she was found not guilty. Asked later to comment on her good fortune, she said none of it mattered so long as there was enough rice for the children in her family.¹ I remember watching it all transpire on the news and looking over at my former wife to comment on how brilliant I thought Imelda was. Never mind the allegations of fraud and racketeering, it’s about the children! For years thereafter, whenever one of us would spend cash frivolously, we would alway justify the action with a hearty “Rice For The Children” defense.
“I need this new laptop. As long as there’s still rice for the children, we’ll be okay.”
I have therefore learned to develop patience about money and investing from dear, sweet Imelda. My retirement nest egg is down considerably in the last three business days, but fortunately it’s all paper losses and not actual ones. One doesn’t actually lose money unless you sell or transfer a devalued security to something less volatile. I am fortunate to have a time horizon that allows me to wait out the market upheaval.
Imelda, I assume, has always known precisely where all of the money is. I know where all of mine is too. We’re both just being patient. The Philippine government continues to watch her like a hawk, and the IRS watches me like one too. The only difference between us is that my only penalty will be taxes from deferred profits, whereas hers has always been the threat of something more ominous. Yet, after all these years of court trials and investigations no one has been able to prove much against her that has stuck. Even the infamous shoe collection was a mere 1000+ pairs instead of the outrageously inflated figure of 3,000. She’s got more teflon than John Gotti and Ronald Reagan combined.
Not everyone is fortunate enough to just sit calmly on the sidelines during a market scare. Those who live on fixed incomes and drawing from retirement savings are in fact monitoring the events with concern and perhaps even fear. To those in that position, I acknowledge your situation and hope along with you that this current downturn is short-lived. And, I also recognize that in approximately ten years or so I will begin to be in the same place as you are. What goes around comes around.
Keep drinking the calm tea. And stay away from the financial news networks at least until the closing bell is rung. By then you can switch to wine.
¹ In spite of searching high and low, I was not able to find her actual quote. I am grateful for the efforts of alert readers who might be able to locate it.