A Personal Reflection on the Last Six Months

Hi All,

The world is a big place but, I wanted to take a moment to personally reflect on some events of the past few months.

First, the meltdown in the financial markets has left an impression on me. Watching major financial institutions like Bear Sterns, Washington Mutual and AIG implode and witnessing the value of my stock portfolio drop from $82,000 to $29,000 are hard to forget.

Second, Barack Obama was elected president. He’s the first black man to do so. This flies in the face of nearly 100 years of sociological thought. Right, theories of stratification typically place African Americans at the bottom of the social ladder and argue that racial preference and differential disadvantage effectively prevent wide scale upward mobility among African Americans. Having a masters in Sociology, I believed that.

According to traditional financial and political models, a depression and the election of an African American were not supposed to happen. But they did – and both at the same time. This suggests to me that improbable events are far more probable than one might first assume.

So, far I’ve had two reactions to this.

First, I’ve wanted to take significantly less risk with my personal finance. I’ve been putting my money into savings bonds and bond funds. I’ve bought some stocks – mostly positions in companies we’ve owned in the past. But, most of my retirement cash is going to bond funds.

Second, there has been more focus on investing in things I’ve got direct control over. For example, I put $10,000 in a friend’s call recording software start up. The start up is the sort of situation in which I could directly help out to make the company profitable if needed. In other words, there is more autonomy involved. In contrast, holding a small number of shares of common stock, means you’ve generally got fewer options for creating change in companies you partly own. It’s much easier, in my opinion, to build your wealth when you are the one controlling it.

So, for me the bottom line has been to reduce my risk and increase the amount of autonomy I’ve got over my finances. Seeing my brokerage balances implode and having the scope of US politics change drastically in the course of a couple of months has left a lasting impression on me.

Hope you all don’t mind the personal reflection.

Thanks,

James