Holidays bring out the insanity in everyone

Here’s a video that’s been circulating showing the mass hysteria that normally civilized people succumb to when there are deals to be had.  Black Friday is that symbolic day when holiday shopping season starts, and retailers hope that the sales fueled by all the insanity will bring them back in black (profitability) for the year.  What a great example of herd mentality and bandwagon effect.

For me, it’s also a day that symbolizes the never changing attitude of the American public in drowning themselves in insurmountable debt.  In a way, it really parallels the debt driven anomaly that caused the massive housing bubble and over-leveraging of America.  Countless people will buy gifts on credit and finance purchases that they can barely afford.  They’ll buy things they don’t really need, or don’t really want to buy because it’s in the holiday spirit to give and receive.  There was a quote in an article on CNN Money about a guy who went into debt last year from holiday purchases.  How do you let that happen to yourself?  My parents always taught me to never carry a balance on a card or finance purchases of luxury items like flat screen TVs.  People will always submit to irrational behavior when they see everyone else doing the same thing, so it must be ok.  The behavior of spending now and worrying later doesn’t seem to have disappeared.  Bubbles never really disappear, they inevitably come back in one form or another.  People don’t know what to do but repeat the insanity until the next one.  That’s a topic I’d like to expound on, but it’s beyond the scope of this post, so I’ll save it for another time.

I’m on the last leg of my studying for Level 1 of the CFA.  It is brutal.  At this point, it’s all about doing as many practice problems as you can in a day without going mad, which for me is about 500 questions in a few hours.  It was around this time last year that I was doing a similar amount of studying for the Series 7 and Series 63.  There were times when I wondered if life was really worth living if all there was to do was bury my head in books all day.  I have to say, I’m really no different than anyone else.  Although my insanity is relegated to relentless studying rather than mass market hysteria, it’s still insane to live this way.

Money is of paramount importance to happiness

Most people in the financial industry have elevated self absorption to an art form.  A civilian observing them and seeing their narcissistic behavior and the damage they have done as they make mountains of money would probably classify them as evil.  When I worked on a trading floor, the lead analyst would say at 9am in the morning every week, “Thank goodness it’s Monday.”  It means a fresh week to make profits and bilk clients out of their money.  I don’t blame them, as that’s the nature of the sell side on Wall Street.  Success on Wall Street requires a certain kind of ruthlessness and relentlessness or else you will get stepped on and climbed over.  They are warriors and believe in the us or them mentality.  Many have let money define them, but I only want it to guide me to where I want to be as a means to an end.

Money versus Happiness

Being from a family with parents that had to earn their way into the upper middle class*** and fight for that American Dream, I know how important money is for a stable life.  The relatives on my father’s side of the family came from overseas and never had the opportunity for the Ivy League education or even a state university education.  They don’t speak much English and they have no motivation to do so because they have deemed it unimportant to the lives they currently lead.  They don’t have the means for extravagant vacations, toys, or lifestyle; and they can scarcely envision that kind of life.  They have missed the bigger picture and the ladders of success that the more privileged of America see and fight for.  My father through dedication, hard work, and perseverance have helped them financially move from essentially poverty to lower middle class, and helped them settle in Queens, New York City, New York.  Trust me, they’re a lot happier now than they were.  They live comfortable and simple lives in a quiet suburb now, sure, but there’s so much of the world that they will never experience because they don’t have the wealth.  They might not have a problem with that, but I do.  Everything I want to experience will cost a very sizable chunk of change.  I want to go yachting but it will cost money.  A Ferrari will cost money.  A hobby in my passion for motorsports will cost money.  A beautiful apartment or single family home will cost money.  A vacation to Bora Bora in Tahiti will cost money.  A private flight to experience outer space for 5 minutes (yes these are becoming a reality thanks to Virgin Airlines) will cost money.  http://www.virgingalactic.com/

*** – well I guess the government would classify us as upper middle class.  4 cars in the family (parents, my two sisters, me), and 4 properties in the US, 1 overseas, and a 1/3 stake in a 6th in NY.  Not much in the way of liquid assets though.  It’s all relative.  Being surrounded by wealthier peers significantly degrades social ranking.

Virgin Galactic space flights. Smells like money.

Thomas Jefferson once said, “It is neither wealth nor splendor, but tranquillity and occupation, which give happiness.”  Guess what?  Thomas Jefferson doesn’t know what he’s talking about (except in the Declaration of Independence).  Researchers at Gallup World Poll have concluded that rich countries are happier.  The Freakonomics blog has data indicating rich people are more likely to be happy than poor people.  Psychology Today indicates that income has a positive relationship with happiness.  The Washington Post concludes that money can buy a form of happiness.  “Some researchers argue that because wealth allows people to experience the best that life has to offer, it ultimately undermines their ability to savor life’s little pleasures.  Life satisfaction and enjoyment of life are two components of happiness.  Life satisfaction is more closely associated with income, while positive feelings also depend on other factors, such as feeling respected and connected to others.”  Well, I’ve already savored my lot of little pleasures, so I guess that argument only applies to people born with silver spoons.

In the “Pursuit of Happyness”, based on the true life story of Chris Gardner, a man who fought from poverty to wealth, Will Smith says in the movie –

“It was right then that I started thinking about Thomas Jefferson on the Declaration of Independence and the part about our right to life, liberty, and the pursuit of happiness. And I remember thinking how did he know to put the pursuit part in there?  That maybe happiness is something that we can only pursue and maybe we can actually never have it.  No matter what.  How did he know that?”

What’s the #1 reason for divorce in America? It’s money.  Financially unsound relationships will not work.  When you’re buried under a mountain of debt, can’t get a loan to save your life, struggling to pay bills, and wondering how you can live a comfortable life in a capitalist society, it will probably lead to relationship problems.

When I was a broker, the Director of Business Development said this to all the trainees –

“I’ve fought with every woman I’ve ever been with.  I’m just not there for them when they want me to be, but I made a choice.  I’m here from 7:30am until this place closes, but I still get some every weekend.  When you’re here, you have to want this badly, this has to become your life.  If you don’t want to make money, you can go somewhere else.  It’s not for everyone, but see how many people you know who have $30 million in the bank by the time they’re 30.  I guess I’ll retire when I’m 45 and start a family, but it’s not going to be now.”

I recently had an argument with my mother about whether money will buy happiness.  She perceives rich people as being materially happy but not truly happy.  She believes that when you’re wealthy, the people around you only want to be friends with you for your money.  I couldn’t disagree more.  Yes, you could be surrounded by fake people who want you for your wealth, but only if you’re dumb enough to be friends with them in the first place.  Even if you are surrounded by these leeches, you have to remember that you’re in the position of power in the friendships.  They can’t take from you what you won’t give them.

I believe that if you are wealthy, a majority of your friends will be just as wealthy if not wealthier than you are.  Successful people invariably are surrounded by successful people.  Therefore, I don’t see a problem with envious toolbags who only want your friendship for your money.  If anything, you might be the one who is envious when you’ve become wealthy, because you’ll have realized that the top gets higher the more that you climb.  CNN Money claimed that experts peg that you need at least $2-12 million to feel wealthy which seems like a completely arbitrary range but those were the results.  Fidelity believes it’s $23 million.  There isn’t just a huge disparity of wealth between the middle class and the upper class in America, there’s a HUGE disparity of wealth between the “haves” and “have MORES” or the merely wealthy versus the truly wealthy.

http://articles.moneycentral.msn.com/RetirementandWills/EscapeTheRatRace/JustHowRichIsRichReally.aspx

Case in point:  Laurel Touby, the founder of MediaBistro, a popular networking site for media professionals, sold her business for approximately $23 million and received about $10 million after taxes.  She claims that after her windfall, she is still unable to buy a quality apartment in Manhattan better than her walkup in Brooklyn.  It used to be that the penthouses in Manhattan were owned by the millionaires, but now the billionaires have staked claim to those properties.  Once she entered the world of the rich and got acquainted with the social circuit, she met people who were truly wealthy with hundreds of millions of dollars and she admitted she felt truly humbled.

It’s a race out there.  The rich will continue to get richer and the wealth disparity will continue to grow larger.  If you’re not in, then you’re out.

In any case, I believe in sharing the wealth.  If you’ve had the good fortune of becoming successful and wealthy, it’s almost an obligation to give back and to share a bit of your wealth with people that for whatever reason, have not made it to where you are.

“Anybody who tells you that money is the root of all evil, doesn’t fucking have any.  They say money can’t buy happiness.  Look at the fucking smile on my face!  Ear to ear baby!” – Ben Affleck in Boiler Room