Holiday party investing strategies… cash is king
Today's Financial News - Posted December 29, 2008
Investors are desperate. Holiday-party chatter is filled with conversations about cashing in 401(k)s, getting out of the market and burying cash in the backyard. Do not fall for such irrational tactics.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore—(TFN): Over the past seven days, it seems as though all I did was follow my wife from one holiday gathering to the next. We saw my family, her family, my coworkers, her coworkers, our neighbors, our neighbor’s families and just about every other person remotely related to our lives.
Like every holiday gathering, we chatted about the usual subjects: politics, sports, weather and of course, the economy. I could go on for pages ranting about Aunt Hilda’s thoughts on the GOP and Uncle Bob’s ramblings on the Ravens’ playoff hopes, but I am doing my best to permanently repress memories of those conversations.
Instead, there was one subject in particular that was a common theme everywhere I traveled over past few days… where is the best place for your money?
Why are you holding a shovel?
I heard all sorts of “great” ideas from to investing in fine art to burying your life savings in strategic locations scattered across various properties (an old-school form of diversification, I guess). It seemed the older the relative, the deeper they liked to bury their cash.
After learning the investing “secrets” of my older friends and family, it was no surprise to read an article over breakfast this morning detailing how one older lady from Lake Forest, California recently lost her life savings.
Not trusting the nation’s banking system, she cashed her savings and decided it was safer at home. She put a stash of $100 bills into an envelope and stuffed it into a cracker box.
Nobody steals crackers, right?
No, but apparently old ladies return them to the store fairly often.
That is what happened to this frugal saver. Instead of returning a cash-free box of crackers to a local Whole Foods Market (NASDAQ:WFMI), she exchanged the Cheddar Bunny cracker box filled with ten grand in cash.
With no inclination of the box’s value, store employees threw the box back on the shelf and the next cracker-hungry shopper got more than they bargained for.
Fortunately, when the new owners of the crackers found the loot, the holiday spirit overpowered them and they returned the money to the store and eventually its rightful owner. Hopefully, the lady uses some of the cash to invest in a safe this time.
Crackerjack investing?
Obviously, this story is an extreme case, but it is a good example of the sort of skewed investing rationale this country has fallen upon. Instead of trusting traditional, time-proven techniques, Americans are making irrational, and frankly, dangerous moves.
Just look at the nation’s retail industry. After a lackluster holiday-sales season, a national group of retailers is calling on the Federal government to mandate up to 30 tax-free days over the next year. They say it will save Americans over $20 billion.
Since sales tax falls under an individual state’s function, Washington would have to reimburse each state for the revenue losses they would incur. It sounds like a disaster in the making.
My question is if sales that equated to up to 70% off a product’s usual price did not motivate shoppers before Christmas, how does any retailer expect a few percentage points to save their hides?
Just like the auto industry, government aid is not going to help the nation’s retailers… or the average American.
Get with it
Just as any economic textbooks describes in its first five pages, the economy is a cyclical beast. It grows and grows until it collapses under its own weight. When its busts, the fat gets destroyed and only the strong survive.
Over the past few months, we have heard story after story of investors losing huge sums of money due to speculation and bad judgment. They were the fat. Over the next year or so, we will hear even more horror stories.
If you want to survive and avoid joining their ranks, stay away from the unproven, dangerous investment schemes.
Madoff investors learned their lesson. Over-leveraged traders learned theirs. And now the old lady from California learned hers.
We all know in the long term today’s prices will look unbelievably cheap. Invest wisely and do not make irrational decisions.
If you need to bury something, bury last month’s 401(k) statement.
Next Article: Best Toy of the Season: Hasbro’s Nerf N-Strike Vulcan EBF-25
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