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Jewish World Review April 11, 2012/ 19 Nissan, 5772 'How Much Risk Can You Stomach? By Roger Simon
I mean risky like trying to make and save a dollar. These days, you have to have the guts of a burglar and a cast-iron stomach to do that. Making that dollar is not so easy. Even if you have a job, you are probably worried about losing that job. Your company may "downsize." It may shift jobs "offshore." There may be a "reduction in force" to make the company stock look better to Wall Street and make investors — though not you — happy. But let's say you hang onto your job. You may have noticed that your life is still risky. And that's because your wages are stagnant. The median income in America is now $52,000 a year, which is about where it was in 1997. Fifteen years pass, and the median income stays about the same? What is up with that? Palms not sweaty yet? Try this: If you are an average American, most of your wealth is tied up in your house. But, to quote the Sunday New York Times, your home equity (the current market value of your home minus what you owe on the mortgage) "has been devastated by the housing bust." "Since house prices peaked in 2006," the Times said, "the loss of home equity per homeowner comes to $122,000. Most of the loss — $85,000 — is due to falling home prices. "And the average home equity per homeowner, adjusted to today's dollars, has fallen to a level not seen since 1968." Total loss to all homeowners since 2006: $7.4 trillion. (Pretty soon, we're going to be talking about real money.) But let's say you are among the lucky. I don't mean the real lucky who were born rich or became Wall Street brokers and bankers. I mean the lucky who have some equity in their homes, have a little savings and just want to make a few bucks for retirement. Good luck with that. If you want a safe investment, one guaranteed by the federal government, you can put your money in a federally insured savings account and make next to nothing in interest. In fact, even if you put your money in a low-risk money market account that is not insured by the federal government, you will make next to nothing. (Vanguard's Prime Money Market account, which is very popular, currently has a year-to-date return, adjusted for fees, of 0.01 percent.) Don't spend it all in one place. There are thousands of other investments, of course: mutual funds, bonds, stocks, gold, silver, platinum, currencies, commodities, art, antiques, baseball cards and columnist autographs. (I made that last one up, but I am sure we could make a deal.) All those investments involve risk. All investments that pay decent returns are risky. The higher the return, the higher the risk. So how much risk do you have the stomach for? Maybe very little. But if you are in your 60s, you can get collect Social Security, either partial or full. How much is this windfall? "On average," Robert J. Samuelson wrote in The Washington Post Monday, "retired workers and spouses receive $1,839 a month" from Social Security. That is not peanuts, but it ain't caviar, either. Your golden years may be more like your brass years. So the question for million of Americans right now is: What, if anything, is the next president going to do for me? The two candidates — President Obama and the almost-certain GOP nominee Mitt Romney — offered differing views recently about what they were willing to promise and how much risk you can expect as part of your daily life. Speaking Tuesday at the American Society of News Editors, Obama said: "We've sought to ensure that every citizen can count on some basic measure of security. ... No matter how responsibly we live our lives, any one of us, at any moment, might face hard times, might face bad luck, might face a crippling illness or a layoff." The president promised a social safety net that would protect all Americans. He did not mention the word "risk" a single time. The next day, speaking before the same group, Romney offered a different vision. Near the very beginning of his speech, he said, "The promise of America has always been that if you worked hard, and took some risks, that there was the opportunity to build a better life for your family and for the next generation." Some risk, Romney said, was essential. We cannot live a life of government safety nets. "Instead of growing the federal government," he said, "I will shrink it." By Thursday, the day after Romney spoke, the White House decided to fine-tune things a little. And Obama said in a Rose Garden speech: "One of the great things about America is that we are a nation of doers — not just talkers, but doers. We think big. We take risks." Aha! The president finally used the "r-word." "Ours is a legacy of Edisons and Graham Bells, Fords and Boeings, of Googles and of Twitters," Obama said. "This is a country that's always been on the cutting edge. And the reason is that America has always had the most daring entrepreneurs in the world." So be daring. If you can afford to risk everything and lose everything. For the rest of us, there is the prayer I first heard in Las Vegas: "Please, G0d, let me break even. I need the money."
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