Inventory market classes my son taught me
Three generations of Dan Mangans
Courtesy: And eat
Joseph Kennedy Sr. had his shoe shine. I have my 13 year old son – and my father.
92 years ago, Kennedy – father of a US president and two other children who became senators – reportedly sold his extensive portfolio on the glowing stock market after a boy who was cleaning his shoes offered him some stock market tips.
The story goes that Kennedy thought that was a signal to sell – anything.
He argued that when boys shoeshiners touted stocks as safe things, there was a lot of stupid money in the market propping up prices that were sure to fall.
Kennedy’s move saved his fortune.
But others who believed the hype was all gone when Wall Street crashed in the fall of 1929.
On Thursday I thought I saw this shoe shiner standing in front of me and waved a $ 10 bill.
My 13 year old son excitedly asked permission to buy a cryptocurrency – Dogecoin – which he yelled would explode in price by the end of the night, quintupling his investment in hours or more.
“Elon Musk guarantees it!” my son said.
“What?” was my first question.
My second was, “Did you read that in ‘WallStreetBets?’ “”
He immediately confirmed that he, unknown to me, had read the Reddit group r / WallStreetBets.
The same group sparked the insane escalation of GameStop’s stock price last week, costing hedge funds nearly $ 30 billion short of short sales.
It has also sparked a spate of commentary on stock market morale, speculation and short selling, and saber rattling by lawmakers from across the political spectrum, from progressive MP Alexandria Ocasio-Cortez, DN.Y., to Conservative Texas GOP senator Ted Cruz.
Some r / WallStreetBets users have also touted the benefits of buying Dogecoin in hopes of seeing a similarly large wave of price increases.
I laughed at my son.
But he kept pushing me to let him buy Dogecoin. And kept mentioning Elon Musk.
I had him look at a chart of cryptocurrency prices since 2013 that showed upset stomach that followed bubbles in this investment sector.
“It’s only $ 10,” he insisted.
I slipped a book into his hand, Blue Chip Kids, a basic but excellent explanation of how markets and financial instruments work. The book’s author, David Bianchi, wrote it after trying to teach his own 13-year-old son about money.
My own son quickly put the book on the couch.
I then showed him another book, Extraordinary Popular Delusions and the Madness of the Masses.
Since its publication in 1841, Charles Mackay’s report on the Mississippi Program, the South Seas Bubble, and the Dutch tulip craze has been the gold standard for understanding why financial bubbles occur and how they always end very, very, very badly for investors when they burst.
My son didn’t even pretend to read the summary on the back of the book.
I am not suprised.
Children and adults – especially adults – are hard to think about when excited about the idea of a quick, easy financial return or some other mania.
I was a kid – well, in my early twenties – the last time I fell victim to this kind of excitement. In the past few years I have certainly missed the chance to win big money. But I also avoided destroying losses.
It’s probably because of my father.
When I was a child, my father used to give lectures to me and my sisters – and our mother – about money and investing.
He also told us how his own grandfather, who was a wealthy veterinarian, had lost a ton of money in the same 1929 crash that Joe Kennedy had ducked.
And he repeated a mantra that comes to mind today: buy and hold mutual funds, don’t buy or sell hype, invest as much as possible in deferred vehicles, and don’t spend money on frivolous things.
My father was a police officer who went out because of a disability because of an injury he sustained after years of work. His compensation dropped to half his full-time cop pay.
You wouldn’t believe how low that amount was, and how it has never increased a penny in more than three decades. Even so, he and my mother managed to send three children to private colleges to find out what they had been up to.
He paid close attention to money and investment management and read financial and tax publications for hours.
My father’s attention to funding probably came from his own father’s example. My grandfather lived a humble life after his own father was hammered in the 1929 crash. But my grandfather also managed to invest well and leave his son, my father, a decent amount of money to grow.
For a long time I haven’t heard or even tried to hear my father’s mantra about investing.
I made my first ever stock purchase in the late 1980s at a local bank where I opened my first savings account.
I spent $ 500 for 100 shares in that bank.
The bank, like apparently every other small Connecticut lender, expanded its home loan business dramatically and sought to establish itself as an attractive takeover candidate for what was expected to be widespread bank consolidation in the region.
Insiders at these banks, their friends, and people like me bought their stocks in the hope – and with the expectation – that if they were bought out it would pay off.
That didn’t happen.
Instead, the price continued to decline in the months after the stock was bought. Once it was $ 1 a share I’d seen enough and sold my stock for an 80% loss.
Soon after, that bank went bust in the first big wave of bank failures in the nation since the Great Depression.
As a young reporter, I handled many of these mistakes. Since then, I have been deeply skeptical of any banker’s predictions.
My father told me years later that losing my shirt at this bank was the best thing that ever happened to me because it cured me of the idea that I had talent for stock picking.
My father told me years later that the best thing that had ever happened to me was losing my shirt at this bank because it cured me of the idea that I had talent for stock picking.
With the exception of one more small share purchase in my 20s, I have never bought shares in any single company again.
Instead, I followed my father’s advice and effectively put my investments on autopilot: regular and consistent purchases of mutual fund shares – which I don’t sell – kept management fees extremely low and maximized the use of tax-deferred vehicles such as the 401ks and IRAs.
And I never buy anything that is hyped.
When my father died, I spoke at his funeral and described how for years as a teenager and young man I “did my best to close his sermons” on money and investing “before one night I had a revelation he had was correct. “
“And then I started scolding my friends about their money management when I heard his words come off my lips,” I added.
As I sat down to write this article this morning, I heard my son scream from his bedroom.
Dogecoin’s price had skyrocketed. He had missed converting his $ 10 into more than $ 30 quickly because I refused to let him buy it.
Then he stomped over to my desk to beat me up for it.
I have a lot of work to do with him.