27 July 2007

Cheshire Cats and Dreams



Gray at Big Pink, on the interface of night and day. Maybe rain, maybe not. Humid again.

I entered the day twice. I had taken the Harry Potter book to bed early, intending to read, but did not. Instead, the dreams came and they were unusually vivid.

In the first, I was in a squad in Iraq. There was a long shoot-out sequence with insurgents. I shot two men who were trying to kill me; it was messy and embarrassing and I should have died but did not.

Survival was luck alone, no skill, just random chance, fumbling with the slide on the shot-gun, snick-snick

Later, I was seated on a sandbagged bunker, about to take a sip of a tall cool beverage, and a pal reminded me of General Order One, no drinking. I had to pour it out on the blasted sand. Then the shapes in the night sky came, hundreds of small shapes, wheeling majestically; a hallucination, we said, looking up from the bunker, and then one of then came down, growing in size remarkably until it was as large as a city block, black and geometric, and a flight surface dug into the dry dirt. The reverberation made us suddenly know it was real and immediate and very dangerous.

Then it was the capture dream, never seeing an alien, but marching briskly in line into captivity, emptying pockets, saying good-bye to watch and wallet and keys, word in the line was that someone would not live without their medication and then the word came down that it did not matter, we would all soon be gone.

Then awake, 3:30, feeling uneasy, looking up. No saucers. No insurgents.

Sleep would not return. I wound up in the office, aimless. I checked the bank to see if my life had been stolen and then checked the 401k plan. I try to ignore it, but I get a little nervous when the market sets records, which it did this week. Records meet profit taking, in my limited experience, and I just wanted to see what the total amount was on a banner day, since I assume it will be going down in short order.

I logged onto the site and was pleasantly surprised to see the free cash that had accumulated with the upward pressure. If only it was real, I sighed, and if only the housing market wasn't about to drag everything down.

I had flirted with the idea of converting the fund from the Phone Company over into some other vehicle, and probably should have. A broker had suggested an annuity, which in my imperfect understanding is an agreement that in exchange for an upfront brokers cost and a huge down-payment, there would be a regular disbursement of funds across the future years.

It seemed like a swell idea; then I could figure out how much money I could count on and build a profile that would tell me when I could retire, which having done once already, is not nearly as much fun, or relaxing as one would think.

I must still have been partly in the dream, since from the darkness I could hear my squad-mate talking. “You would have to be an idiot to invest in a non-inflation indexed annuity. What happens when they devalue the currency, and your annuity shrinks in buying power to the equivalent of a few cans of dog-food. It would be like Weimar Germany, wheelbarrows full of worthless dollars. Are you ready to buy into that?”

“Well, no,” I said to the darkness. “But how are we supposed to plan for the future when you don't know what it is?”

I could see nothing but a Cheshire Cat smile. “Have you ever made any money on the stock market?”

I had to shuffle my feet under the desk in embarrassment. “No, well, not anything I actually thought about. I invested in a firm that claimed to have perfected a vaccine that counteracted the effects of radiation exposure. I thought that would be a growth market for a while, but they tanked. All the stock options I was offered in the private sector at a nice discount were selling below that when I had the chance to cash them out. That is what I recall of my Dad's company, too.”

“So what is your position?” said the darkness.

“Thirds. I changed to a portfolio divided equally between index funds on the US and overseas market, and the last piece of the pie in municipal bonds. I figured with the government pension, I could take the payout in a few years and average the amount to bridge to social security. It seemed like a good plan, though I did not really believe it would work. That is why I chased the real estate thing.”

“Doesn't seem so smart now, does it?”

“I should have seen it coming. I remember when the conventional wisdom was that all the Baby Boomers were going to retire and want to downsize all at the same time. Then the bubble started, and I did pretty well on a little condo and chased something bigger. I couldn't sell it for anything like what I paid today.”

“Sounds like a lot of folks. They went to the limit and beyond to get the house they couldn't afford and now they are stuck with a loan that is more than the place is worth. Sometimes a lot more, with a second note, too. That is happening even to people with good credit, not the sub-primes. Those suckers are going belly-up in droves, and that is what is starting the panic. The lenders were soooo eager to get the money out the door, and the low interest rates were what fueled it.”

“Well,” I said defensively, “I did have to be creative to get the money together. But I cleaned that up and got a fixed thirty-year note on both places, so that if inflation kicks back in, the banks will take the hit, not me.”

“Trust me, Vic, the banks are not the only ones who are going to pay. You said you were thinking about going onto a fixed income for your Golden Years, bridging to a Social Security fund that is already in deep trouble, and counting on the government to protect the pension.”

“Oh, shit, you're right. That isn't going to work. Why don't we recognize this stuff when it starts? Why does it always have to get to be a crisis?”

“It doesn't. People like Paul Krugman have been saying it for two years. Yesterday was not a real panic, or a run on the bank. Ten-year government bonds fell steeply, but even so, they are not any lower than they were earlier this year. So the recession is not starting yet, even if the Asian markets have not had a chance to digest what is happening. There will be a ripple for sure today.”

“So the market is finally waking up to the housing collapse and realizing that oil is never going to come down?”

“Precisely.”

“So what are we supposed to do?” I said dubiously to the darkness. There was no answer. I looked at the clock, and the sky beginning to go gray with dawn. A hint of rain in the air.

There was a conference call at 8:30, and I wracked my brain on something to talk about that would justify my salary. I could talk about what is going on in my government sector, but really would have preferred to brief the dreams.

Copyright 2007 Vic Socotra
www.vicsocotra.com

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