Repo Ahoy, Matey!

There are some jobs that must be tough on the old self-image.

Lately, I’ve had a hard time with the army of meter maids spreading joy on every street corner in New York.
Its an alternative congestion pricing plan. There are other more objectionable
lines of work, of course. There’s always the bails bondmen, ropin’ em up, and
bringin’ em. But now, more prevalent than ever, is the repo man.

These days its not only the family car that we’re seeing
hauled away in the wee hours, for non-payment. Its another casualty of the
free-wheeling lending spirit that is now a faded memory. Its our “Jersey Girl”,
or “Aquaholic”, or “A Wave from it All”.
Aye, captain. It’s the family boat.

The refinancing craze drove the recreational boating
industry, and we saw a 40% rise in luxury cruisers, miniyachts and sailboats
from 2000 – 2006. The average loan tripled to $141,000. Now, these “Chickens of the Sea” have come home to roost. Home equity has
fallen off a cliff, boat sales with it. Gas prices pour fuel on the fire. Boats
make Hummers look energy efficient.

And so these are the salad days for the repo men. Economic
downturns always are, but this one especially. The leverage was unlike anything
ever seen. Repo operators have expanded,
some have grown to double or triple in size. I can’t wait until the boat
foreclosure ads start hitting late night TV.

The stories offer tragic human interest, riveting reality TV
content for those of us who relate. Misery loves company, ya know. Some of the
fools among us learn the hard way. Some repo men have actually repossessed the same
boat, from the same owner, 3-4 times.

We were so encouraged in 2007. Al Gore was the 2007 Nobel Peace Prize winner, we had the momentum generated by a new awareness.

There was the recognition that this is a war over resources, an energy war, that has quickly become a water war, a food war. The explanation by the Nobel Committee regarding this award was simple, and perhaps flew under the radar. Paraphrasing, the Nobel Committee stated, correctly, that global warming will lead to shortages of resources, and those shortages will lead to migration of peoples, and also to conflicts over resources. War. Access to resources, brings power and control over money.

We have seen the enemy, and it is us.

Last week, in close proximity, three distinctly separate news stories broke.

Check out Marc Sussman's Money Message every Saturday on Air America

There’s a great amount of research being done on the emotional and psychological impact that money has in our lives. Any day now, Barnes & Noble will announce their “Money & Happiness” section. We’ll see the different ways that we are affected, but first let’s get some basic facts out of the way.

Investor psychology

Psychology affects investor returns, more than any other factor. Studies have shown that losing a dollar bothers us 2.5 times as much as making a dollar.

It’s the reason that during a five - year run, when the market averaged 12.5%, the average investor earned only 2.5%. Why? Buying high (comfort) vs. selling low (fear).

Brain Damage study

A recent study evaluated individuals with a certain kind of brain damage. Affected was the portion of their brain that experienced fear. This study determined that these individuals made far better investors than those without this damage. They didn’t make decisions based on fear, or comfort…their feelings were effectively taken out of the equation.

But there are things that we don’t see about value and money. Here’s a cross-section of scenarios.

Quote: “We
can’t solve problems with the same kind of thinking that
created them.” Albert Einstein

Maybe it’s
time to shake the cobwebs out, order another espresso (make it a
double), and get to work. Historic changes are occurring right before
our eyes.

Last week,
the Federal Reserve Bank in an unprecedented move, offered JP Morgan
a $30 billion credit line, to allow the investment banking firm to
take over Bear Stearns, which had become insolvent almost overnight.
The precedent established is something few of us can fully
appreciate.

But in
connection with this situation is a development with even more
serious implications. The Fed “discount window” which
previously provided liquidity only under extraordinary circumstances,
and only to commercial banks, would now be made available to
investment banks.

Q. How scared should I
be?

I’m not sure scared is the right
term. Concerned, yes. Aware, yes. Taking precautionary measures, yes. Scared,
well no.

Our economy, our financial system, is
certainly in disarray. We have a falling dollar, and a slowing economy… but
we’ve had these before.

The recent actions of the Federal
Reserve Board may have been necessary to restore equilibrium to the financial
system. Hopefully, this is not a precedent, but a learning experience.

Instead of reacting in fear, realize
that there are things that you do control. These are the actions that
will change your outlook completely.

Go back to the drawing board.

Here are eight steps to take
back control.