Why do addicts insist they’re right, when clearly they’re wrong?

            I’ve got some new cubicle buddies.  One of them is quitting smoking and is doing quite well with it.  This person has cut way back and is almost down to no smoking.  Unfortunately this person is going through a divorce and has a kid in prison, not jail, for drug issues.  My point in bringing this up is that clearly either this person has extremely horrendously bad luck, or they’ve got issues themselves as they play a part in their own life and their effect on others around them that is not healthy/correct at least on some level (who doesn’t???).  Now this of course does in no way at all preclude the other half of the divorce from responsibility or the kid in prison from their decisions that led them there either.  The point is that this person probably has some warped thinking/behaviors and you’d think that they may realize that and that perhaps when they came across what I’m about to share that they may think it is possible that I’m right and they’re wrong. 

The other day we were talking about 401k’s and I said I don’t invest in one and that it is a bad idea to do so, to which this coworker responded saying that I definitely should and that that is a really bad idea that I don’t.  I proceeded to explain purchasing power and inflation with simple numbers.  This all came up by the way cause we were talking about the DOW hitting its record high.

            I explained that if before the 2007 financial crisis someone put 100k into the DOW stocks and then held it through the crisis in which the DOW lost around half its value and all the way till now when it regained that lost value and then surpassed its 2007 high that they’d have 100k still.  However…how much would that 100k buy in 2013 vs 2007? 

Oct 1 2007 is when the DOW originally hit its 14k record.  Gas on that day was $2.78.  The DOW hit its record again on March 5^th 2013.  Gas on that day was $3.69.  Conveniently that represents exactly a 33% increase nationwide in the cost of gas between the two dates.  This is a perfect example of purchasing power at work. 

Though the DOW investor still had face value of 100k in their account…if they had tried to purchase the same amount of gas as they had on March 5th 2013 as they had on October 1^st 2007 they would’ve been sorely disappointed that they bought 33% less than they had before.

Now for the example and reason I tried to explain to my coworker why I don’t invest in my 401k option at my job.  I’m going to follow the exact same dates for this example so don’t get lost.  If I bought 100k of gold in the form of one ounce coins on oct 1^st 2007 and held it till march 5^th 2013, which again is the same exact the DOW went from 14k to 14k, my gold on march 5^th would be worth $209,073.83.  That is a 109% increase in value, or more realistically, how much purchasing power the dollar bill lost when measured in shares of the DOW. 

By the way if you don’t know…the DOW is the index or compilation of the TOP 30 companies in the United States.  Not exactly small ma and pop businesses.  These are our most progressive, hugenormongous, recognized, and robust companies in America and really the world and they got their a$$es handed to them by gold.  Like how I made the censored cuss word letters out of dollar bill signs?!?!  Silver one ounce coins maintained their value in dollar terms by a 99% increase, i.e. 100k over the same time resulted in $199,373.70.

So there we go.  If you want to “invest” maybe you just preserve your purchasing power and don’t invest in your 401k and don’t think you know everything.  Be…not…an addict and think you know everything when everything else in your life is telling and clearly showing you that you don’t know everything.  When a new idea comes to you via someone don’t dismiss it cause you think you know everything.  That is a bad idea…ignoring new ideas.  Don’t do it.

Quack!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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