Bringing Up the Rear: Me, Martin Andelman
Bringing Up the Rear: Starring This Monthās Rear… Me, Martin Andelman
You know, Iāve spent a lot of time this past year darn near speechless at whatās been happening in this country.Ā I donāt know whether youāve realized it or not, but weāve blown right through whatever tipping point there was, and we are going down where weāll stay for some time.Ā In fact, the next time this country feels anything like what Iāve seen over the last 30 years could very well be after Iām goneā¦ and I just turned 49 years old.
All the stupid talk about ādouble dipsā was starting to get to me anyway.Ā Does anyone actually buy any of that garbage?Ā Like the recession ended sometime this past year, but Iām just not able to tell, is that what Iām supposed to believe Professor Bernanke?Ā Yeah, itās weird because I had no trouble discerning when it started.Ā You guys inside the Beltway may be so insulated that you need to check with your mega-computer to figure out such things, but meā¦ no problem.Ā So in case of a power failure, feel free.Ā Iām here for you.
The thing is, Iāve had some time to really think about this meltdown and Iāve got to sayā¦ this one has made me a lot smarter.Ā 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.Ā Not all that handy for anything Iāve seen since, so itās not exactly knowledge I expect to put to work anytime soon.
And the bubble before that?Ā I believe the key learning there involved not banking at an S&L owned by Charlie Keating.Ā Oh, and something about Michael Milken, but heās sort of like eating eggs every morning for breakfastā¦ I can never remember for sure whether heās good or bad for me.
Ah, but this bubble, my friendsā¦ this bubbleās an educational marvel.Ā And, just like emotional baggage, itās the gift that keeps on giving.Ā Iāve always thought that there were only two things in life that led to real learning: age and pain.Ā Everything else is forgotten a week after you take the test.Ā But, this meltdownā¦ itās one of the true wonders of the worldā¦ this one has it all.
Itās 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 Streetās investment banks, and an ongoing example of why derivatives should be regulated until theyāre no fun to play with anymore.
This bubbleās got its own lexiconā¦ like tranchesā¦ something that should be served at brunch; ādid you get the tranches, try the sauce.āĀ And the bottom tranche, called the āmez,ā which sounds so much more valuable once you re-securitize it into yet another triple A rated bond.Ā Then thereās CDOs and CDOs squared, CDSs, and counter-parties where there’s no counter, and the only person thinking āpartyā is the banker picking up his check from Treasury when the music stopped.
This bubbleās got securitized trusts that were supposed to taste great with mortgages inside, but instead are much less filling without.Ā And letās not forget the certificate holders that basically are the āinvestorsā that get blamed when Chase doesnāt feel like modifying a loan.
Yep, this deepening recession is a teaching machine, let me tell you.Ā And, do you want to know what I learned more than anything else?
That I’m a real idiot, thatās what.
And that I have been one for something like the last 30 years.
I was thinking about the 1970s the other day.Ā A kinder and gentler time.Ā Union strikes, dirty politicians, inflation, stagflation, 18% interest rates, the gas crisis, disco music, the hostage crisisā¦ you knowā¦ the good old days.Ā I was remembering my family, while I was growing up, when we used to go on vacation.Ā Before leaving town, my father would walk down to the bank to buy travelerās checks.Ā Then every day or two on our vacation, when he needed cash, heād cash a travelerās check.
I remember our family car back then too.Ā Dad would read Consumer Reports for maybe a yearā¦ finally buy one and then drive it until it had rusted out and needed to be towed away from the front of our houseā¦ then heād repeat the process and buy another.Ā 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.Ā Hey, it was important, every option cost money.Ā And then there was filling up with gas at Esso.Ā Heād pay for it with his Esso card, a ācharge cardā with a 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.Ā The thing is, thereās one component I donāt recall being in the mixā¦ Gold Visa Cards, car payments, or stupid frivolous spending on absolutely nothing.
Since then, however, look what the guys on Wall Street have done to improve our lives.Ā Itās not bad enough that theyāve run non-stop ads my entire adult life to convince me that I should be investing with Paine, Merrill, Smith or Barney.Ā It wasnāt enough to sweep up my portfolioās losses every seven years like locusts.Ā No, they also had to come at me with a more subtle, even hypnotic message: Debt is good, my boy.Ā No, itās better than goodā¦ itās the coolest thing going.Ā You want as much debt as weāll give you.
Debt is how you let the world know youāve arrived.Ā Debt comes in precious gems and shiny metals.Ā Hi, Iām a gold debtorā¦ no look at meā¦ Iām a platinum debtor.Ā Maybe youād like to be a sapphire debtor?Ā Just think how good youāll look and feel when you show the world that youāre a sapphire debtor.
Yes, Wall Streetās finest hired the guys from Mad Men, and worked us over pretty good.Ā They actually convinced me that these plastic cards of gold and platinum were status symbols.Ā Pulled out my American Express Platinum card, because membership had its privileges.Ā 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 Iām 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.Ā And they sure got me; I think for a while there in my early thirties, I can remember charging a new wallet just so I could sit atop an entire deck of VISA and MasterCard playing cards, and Iāve got the back problems to prove it.
Whatās the difference between those ads that make debtors look so successful, and cigarette ads that show beautiful people smoking their way to the beauty of lung cancer and heart disease?Ā We got rid of those ads pretty darn quick, didnāt we?Ā I wonder which actually kills more Americans each year: smoking cigarettes or the mountains of debt under which weāre constantly told we should bury ourselves.
And I remember now, that look on my fatherās face.Ā 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.Ā Yeah, that must have looked pretty darn weird all right.
Yes, thereās no question that this recession is going to be around for quite a while.Ā But you know why, right?Ā Because weāre not going to borrow our way to feeling prosperous again.
Weāve fallen for three bubbles in my lifetime and I for one am not going down for a fourth.Ā Next time Iām going to be asking about the price of the car Iām buying because Iāll be paying cash, and before I go on vacation, Iāll be stopping to pick up some travelerās checksā¦ or using my debit card, I suppose.Ā Unless fees for those get too high as well, in which case Iāll just carry cash, thank you very much.
I know what youāre thinkingā¦ carrying cash is dangerousā¦ you might get robbed.Ā Really?Ā Well, at 49 years old, Iāve never been robbed of my cash by a street thug, but Iāve sure as heck been robbed every single day that Iāve carried around those credit cards that were supposed to keep me so much safer.
Thatās 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.Ā As long as you donāt smoke, of course.
Yes, no question about itā¦ this time around thereās been a whole lot of learning going on over here in Mandelman-land.Ā Iāve learned what a jackass Iāve been all these yearsā¦ and that you were right, Dad.
I guess what they say is trueā¦ it costs money to go to school.