Monday, January 23, 2006

Another Boring Finance Post

I know y'all hate it when I post these stock rants... after all.... how many times do you need to hear "the sky is falling!" Yeah well... take the good with the bad... it's my blog... dammit.

So lately I've had this post floating around in my head. I've been trying to figure out a clear way to explain what's wrong with the American stock market. Well... this mornin'... I was sittin' there watchin' Sportcenter... eatin' a dognut... and I had what alcoholics call a moment of clarity.

Think of your family as a publicly traded company. Think of your financial decisions the way a CEO does. Think of your family's stock prices. In todays market... what decisions would you make to make your stock price go up? Would those decisions actually benefit your family's financial health?

The answer is of course no. Quite the opposite actually. CEO's are largely judged by stock performance, but stock performance rarely has anything to do with profit. It's about hype.

If you wanted to increase your family's stock price for example... you'd need to get folks excited. You'd go out and borrow a ton of money and of course you'd finesse the reports to make it look like income. You'd buy fancy cars and a huge house... you'd wear all kinds of jewelry. You'd strut around in fancy clothes.

Folks would see your reports... see the money going out... and they'd get excited to. You'd have some buzz. Your stock would go up. This however, is exactly the opposite of what you should be doing to secure a long term financial future for your family.


Look at Ford. They borrowed and stole for a decade... aquiring Volvo and Jaguar... strutting out race car replicas that look great on a stage but turn blood red on a balance sheet... And where are they now?

They're right where your family would be if you had bought that million dollar house and the Hum-vee.

Broke... in the name of Hype.

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