Three generations of Dan Mangans
Courtesy: I Eat
Joseph Kennedy Sr. he had his shoe boy. I have my 13 year old son and my father.
About 92 years ago, Kennedy, the father of a U.S. president and two other children who became senators, is said to have sold his large portfolio on the hot stock market after a boy who was cleaning his shoes offered some advice on actions.
The story goes that Kennedy thought it was a signal to sell, everything.
He reasoned that when shoe shoemaker boys promoted stocks as safe things, there was a lot of stupid money in the market, supporting prices that were sure to fall.
Kennedy’s move saved his fortune.
But others who believed the hype lost it all in the crash of Wall Street in the fall of 1929.
On Thursday I thought I saw that shoemaker boy standing in front of me, waving a $ 10 bill.
My 13-year-old son was asking permission to buy a cryptocurrency, the dogecoin, which, he shouted, would blow up the price at the end of the night, quintupling or more his investment in hours.
“Elon Musk guarantees it!” said my son.
“What?” it was my first question.
My second was, “Did you read this on WallStreetBets?” “”
He immediately confirmed that he had been, unknown to me, reading the Reddit group r / WallStreetBets.
That same group, last week, ignited the insane escalation in the price of GameStop shares, which cost hedge funds nearly $ 30 billion in short selling securities.
It has also led to a flood of comments about stock market morality, speculation and short-term selling, as well as the noise of lawmakers across the political spectrum, from progressive representative Alexandria Ocasio-Cortez, DN .Y., To Texas Republican Conservative Sen. Ted Cruz.
And some users of r / WallStreetBets also promoted the virtues of buying dogecoin, hoping to mount a similar wave of price increases.
I laughed at my son.
But he kept pushing me to let him buy me some dogecoin. And he kept mentioning Elon Musk.
I took a look at a graph of cryptocurrency price history since 2013, which showed stomach upsets following the bubbles in this investment sector.
“It’s only $ 10,” he insisted.
I put a book in his hand, “Blue Chip Kids,” a basic but excellent explanation of how markets and financial instruments work. The author of the book, David Bianchi, wrote it after he started showing the money to his own 13-year-old son.
My own son quickly left that book on the couch.
Then I showed him another book, “Extraordinary Popular Delusions and the Madness of the Crowds.”
Since its publication in 1841, Charles Mackay’s account of the Mississippi Scheme, the South Sea Bubble, and the Dutch madness of tulips has been the gold standard for understanding why financial bubbles happen and how they invariably end very, very, very bad for investors when they show up. .
My son didn’t even pretend to read the summary on the back cover of the book.
It doesn’t surprise me.
Children and adults (especially adults) are hard to reason when they feel embarrassed by the idea of an easy and quick economic return or some other craze.
I was a kid (well, in my early twenties), the last time I was taken in by that kind of emotion. In the intervening years, I have certainly missed the opportunity to make big monetary gains. But I also avoided the crushing losses.
Probably due to my father.
When I was little, my father often gave lectures about me and my sisters and our mother about money and investments.
He also told us how his own grandfather, who had been a wealthy veterinarian, lost a lot of money in the same 1929 crash that Joe Kennedy had managed to dodge.
And he repeated a mantra that resonates in my head today: buy and hold mutual funds, don’t buy or sell with hype, invest in tax-deferred vehicles as much as you can, and don’t spend money on frivolous things.
My father was a police officer who suffered a disability due to an injury he suffered after years at work. His compensation dropped to half of what he had paid full time when he was a police officer.
You wouldn’t believe the low amount of that amount and how it never increased a penny for more than three decades. Still, he and my mother managed to send three children to private universities about what they did.
He did so by paying close attention to money and investment management, spending hours reading financial and tax publications.
My father’s attention to finance probably arose from his own father’s example. My grandfather lived a modest 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 didn’t listen to, or even try to listen to, my father’s mantra about investments.
In the late 1980s, I made my first share purchase: at a local bank where I had opened my first savings account.
I spent $ 500 on 100 shares of this bank.
The bank, like apparently all other small Connecticut lenders, was drastically expanding its real estate lending business and trying to establish itself as an attractive candidate for the acquisition of what was expected to be a broad consolidation of banks in the region.
The insiders of these banks, their friends and people like me bought their shares in the hope – and in the hope – that there would be a big reward when they were bought.
This did not happen.
In contrast, in the months following the purchase of the shares, their price dropped more and more. Once I got to $ 1 per share, I had seen enough and sold my shares for a loss of 80%.
Shortly afterwards, that bank exploded what was the first major wave of banking failures in the nation since the Great Depression.
I covered many of these failures as a young journalist. Since then, I have had a deeply skeptical eye when looking at any banker’s predictions.
My dad told me years later that losing my shirt on that bench was the best thing that happened to me because it cured me of the idea that I had talent for stock selection.
My father told me years later that the best thing that happened to me was to lose my shirt on that bench, because it cured me of the idea that I had talent for stock selection.
Except for another small stock purchase in my twenties, I did not repurchase shares from a sole proprietorship.
Instead, I followed my father’s advice and effectively put my investments into autopilot: regular, constant purchases of mutual fund shares (which I don’t sell), keeping management rates ultra low, and maximizing the use of tax-deferred vehicles such as 401ks and IRAs.
And never, ever, do I buy anything that gets noticed.
When my father died, I spoke at his funeral and explained that for years, young and old, I did my best to close my ears to his preaching “about money and investing,” before having a epiphany one night I was right. “
“And then I started informing my friends about his money management, feeling his words come out of my lips,” I added.
This morning, as I sat down to write this article, I heard my son screaming from his bedroom.
The price of Dogecoin had risen. It had been lost to quickly turn his $ 10 into over $ 30 because I had refused to let him buy it.
Then it came out on my desk to blow me up for it.
I have a lot of work to do with him.