Friday, January 2, 2009

21% Poorer


I spent New Year's Day 2009 figuring out that I am 21% poorer than I was on New Year's Day in 2008.

This depressing fact is actually better than focusing on the magnitude of my 401k decrease, 42%.

It is nice that my house only went down 17% in value. Ironically it is keeping the value of my portfolio up. :-(

I find little comfort from commentators like William Bernstein that I have just as much stock as I did before. If I don't sell, it what difference does it make what the value of it is? That is not the point. I could have done better. Eeek! what if next year is as bad as this one?

I still think that a well diversified portfolio is the way to go, coupled with rebalancing. Right now rebalancing says to perversely sell bonds to buy stock -- especially foreign stock. That is hard to do, but that is where the gains will be on the rebound.

And I am expecting, or is that just hoping, for a rebound.

It is nice to see that the January 2 market results are up. We can always hope for better in 2009. There does not seem to be any news driving it, but what Adam Smith called the "Animal Spirits" of the investors ( and/or savers, speculators and ponzi scheme operators.)