Taking a Pulse American Style

July 27, 2010

Since last August, when I last visited the San Francisco Bay Area, I’ve had flashes of wondering what it’s like out there in “America� relative to the local economy. It doesn’t take much research to see how hard our local economy has been hit, with the construction industry pretty much on its face for the past two years.

Many economists and stock market analysts are now debating the likelihood of a “double dip� recession. What a difference a year makes. The Boston Consulting Group recently released findings from their study of money managed in 2009 by 114 banks in 62 countries. The value of the managed assets grew by 4.6 trillion, or 15% last year.

But the surge in purchase of U.S. Treasury bonds—which have government guarantees of principal—shows that people are not as willing to take risks with their investment money as they were before the banking crisis. People are willing to accept the interest rate the government will pay to borrow your money for 10 years—now only 2.9%.

Worse for their financial health is the money—over 11 trillion dollars nationwide—that people have sitting on the sidelines in money market funds earning less than one-quarter of one percent interest. Gold, a traditional safe haven, has gone up to over $1,200 an ounce. These numbers speak of the fear and uncertainty Americans are currently feeling. How about the feelings of local people already retired or close to it?

Recently, I hosted a discussion group here in Taos. Every one of the 16 participants was over 50, college educated and all had moved here within the past 10 years from another state. The topic was money. I asked how people felt about their own financial security. I didn’t want numbers; I was looking for attitudes and perceptions.

“I don’t worry about money. I never have. It’s just not that important to me,� was the first response, from a retired math teacher. I know her well enough to accept she was telling the truth, though I believe she’s unusual in her disregard for the trappings of prosperity. Even out here, in what I sometimes call “the frontier,� I’ve seen people (usually newcomers) trying to impress others with their trappings—with what they’ve “got.�

“I think the days of American prosperity are over,� said a retired CPA from D.C. “I don’t believe our children are going to have as much as we have. What we called ‘upward mobility’ is over.�

“I don’t think that’s necessarily a bad thing,� said a retired Nike executive. “Maybe people will increase their focus on quality of life—spending time with family and friends, saving the environment—as the obsession with material things decreases.�
Others agreed. “Whoever said that we have to live in homes three or four times the size of the homes we grew up in?�
When I got more specific in my questions, answers got more specific.

“Me personally? I feel fairly safe invested in my stock and bond mutual funds. I understand they go through cycles that rise and fall. I’ve been taught to hang in there because over time they always have.� I knew this woman, a retired college dean from California, had her retirement money invested in TIAA-Creff, a low-cost mutual fund family commonly offered in the retirement plans of teachers and other public employees across the country. I was struck once again by what a good job the brokerage industry has done of pushing their buy-and-hold-forever mantra on the investing public.

Another man, a retired executive from San Antonio, said he thought our grandchildren were not going to have things as good as our kids did. “All my kids are pretty successful,� he said, “but none of their kids seem interested in following in a typical success track. They seem more interested in doing something good to promote various social causes.�

An attractive widow in her early sixties said she had recently moved to Taos to “get away from the competitive world out there.� She said that between the life insurance her husband left her and a guaranteed annuity, she didn’t worry about her own financial future at all.
“I know what I’m going to get for the rest of my life. I feel very lucky I don’t have to care about the stock market or the low, low interest rates the banks are paying on CDs. But I have friends who aren’t so lucky and really got slammed over the last couple years. I think they’re too old to be in mutual funds, but I can’t really tell them that.�

Couldn’t have said it better myself, I thought.

So were these people typical Americans? I think not. Retired people who move to Taos are generally people who have provided for their retirement and want to enjoy a simpler way of life in a beautiful mountain setting. If I interviewed a group of local working people, I think I would hear a different tone. Their responses would likely be more like those of the people out there in America.

Jill Wasden, M.A., is the President of Wasden Wealth Planning, a Registered Investment Advisor. She teaches and gives talks regionally and in northern California. She can be reached with questions and comments at 575-737-9391.