I Was Wrong

Okay, NOW I'll admit that I was wrong a couple of weeks ago when I predicted that the nomination of Sarah Palin would be the turning point of the Presidential race.

I was wrong. Very wrong.

It doesn't matter if Sarah Palin makes some MAJOR screw-up in her first press conference, or if it comes out that she once had an affair with a grizzly bear she had been hunting. Palin's nomination isn't going to be the turning point.

The financial meltdown of the last two weeks IS going to be the turning point. I think McCain is going to begin a long fade in the polls, and by election day it will be clear that Obama is going to win--I think he'll have a double digit lead. Only a colossal screw up by Obama will prevent it.

And it's sad, too, 'cause like I've said many times before, I have a lot of respect for John McCain, but he took a major gamble this week when he tried to call off the debate and then tried--by the sheer force of his presence--to broker a deal on the financial crisis. He lost that gamble and it's going to be almost impossible for him to recover.

Speaking of the financial crisis, it's scary as heck out there. I'm not an expert on finance, but I've always been interested in it. Okay, not always. About 13 years ago I got very interested in it and in about 9 months read 8 books on the subject, starting with Money for Dummies and then Investing for Dummies and then Bonds for Dummies and then I got off of the dummy books and started reading more technical stuff. I'm no expert, like I said, but I found the world of finance MUCH more interesting than I ever thought I would, mostly because of the theoretical stuff about how economies work.

Because of that interest in the theory of economics, I've found the last few weeks and months very interesting. Two Mondays ago, after the (almost) hurricane blew through our fine town, I called Lisa from work. Of course, she was worried about the power being out, and I was worried about the damage that had been caused at work, but I also told her, "We may be missing the bigger story here, though. I just read that Lehman Brothers AND Merrill Lynch both tanked this morning. In a week the storm is going to be gone, but this financial thing is a big, BIG story, maybe the biggest story of the year!"

Thirteen years ago when I first started investing and first started reading about investing, the stock market was returning 30 and 40 percent a year, and there were bozos writing books which predicted that this rate would continue forever!

When I received my quarterly newsletters from Vanguard, though, they were always filled with warnings. About the year 2000, I remember one of the newsletters beginning with "Things are getting scary out there." And the point of the newsletter was that historically stocks earned 10% a year, and that theoretically they pretty much always would. If stocks earned 15% a year for five years, you could expect them to earn only 5% a year the next five years. It's not a perfect science, any more than predicting the weather, but over the long haul it always worked out. And with stocks earning 40% year after year after year, a tsunami of trouble was heading over the horizon!

I never bought into the Dow 36,000 prophets. I believed the doomsday people.

Again, though, I'm not an expert on the economy. I foolishly believed that the period from September 11, 2001 until 2006 or so was that down period I was waiting for. It didn't matter that it wasn't as steep as I was expecting and hadn't lasted as long as the rise had lasted. I thought that was the end of the problems and we'd be in for a period of growth now.

Again, as with my Sarah Palin prediction, I was wrong.

Very wrong.

And here's the really sad thing about the economy: This is pretty much EXACTLY what happened to Japan in the 1990's. We've been marching down the same path just a decade and a half behind, and we've been powerless to stop it.

Again, like I said (and like Vanguard said before me), it's getting scary out there. I'm SERIOUSLY considering taking a couple hundred dollars out of the bank and keeping it at home. If the whole system quickly collapses then my debit card might stop working, and I'd like to be able to get some groceries.

I don't think it will get that far, and I'm only CONSIDERING doing that, but I am considering it.

Of course, that doesn't mean that you should do the same. I've been wrong about all that other stuff.