Relax, investors, help is on the way!
President Bush is going to make the markets safe for you by holding corporate America accountable.
And he’ll do this in his spare time – when he’s not busy ridding the world of evil-doers.
Unfortunately, he doesn’t have much of a track record for keeping promises or promoting honesty.
For example, in his Tuesday speech he said, “I’m asking Congress to join me to promote free trade.” But he only recently laid down his pen after OKing a 40 percent tariff on foreign steel.
He also said, “I will insist on, and if need be enforce, discipline in federal spending so we can meet our national priorities without undermining our economy.” This after he’s been promoting increased government spending for foreign aid, education, health care, farm subsidies and virtually every segment of the budget.
On Tuesday, he said he wants a “stronger SEC” with 100 new enforcement officers and a $100 million more money to spend. It was only a few months ago he said the Securities and Exchange Commission budget should be frozen.
And the president’s explanations for his own insider trading with Harken Energy (“I still haven’t figured it out completely”) don’t inspire much confidence that the current scandal du jour is anything but a political issue.
Meanwhile, on Capitol Hill, congressmen were having fun brow-beating corporate executives. If Sen. Joe McCarthy had used the same tactics on communists, the press would have screamed bloody murder. But it’s OK to intimidate, interrupt and condemn men who have been found guilty of no crimes as yet.
What’s wrong with this picture?
Why should we be skeptical that the government will make your investments safer?
First, President Bush and the politicians are the same folks who are peddling fraudulent information about the federal budget. They say the government had budget surpluses from 1998 through 2001 – even though the federal debt rose to $5.9 trillion from $5.4 trillion during those years.
They used “creative accounting” – stealing money from Social Security reserves – even as they pledged to keep Social Security safe.
So how can they condemn the accounting practices of corporate executives?
Second, the people who promise to make everything OK are politically motivated. That’s why the Justice Department indicted Arthur Andersen, but not Enron.
Third, their investigations will lead to more laws and regulations over the investment markets. But we already have thousands of federal securities laws – and a Securities and Exchange Commission that spends a half-billion dollars every year “protecting” us from investment fraud. Why would new laws provide any more protection than the old ones?
And that brings me to the point.
The government can’t protect your investments any more than it can win a War on Drugs or a War on Poverty. Government doesn’t deliver on any promise, and you should never rely on it to protect you.
Too many investors have the entitlement mentality of welfare recipients.
- “I have a right to a ‘level playing field’ when I invest.”
- “I have a right to know that insiders don’t get to the market ahead of me.”
- “I have a right to be protected from misleading financial statements and overly optimistic earnings estimates.”
In truth, you have no more right to these things than you have a right to earn $200,000 a year – or a right to be loved, or a right to live at the expense of anyone else.
We live in an uncertain world. If you’re going to invest or speculate, you face numerous risks. No one can eliminate those risks, either by superior knowledge or by using the force of government.
No one owes you anything.
If you lose money – for whatever reason – that’s your problem. Don’t go whining to the government when the risks cause problems.
You can wish that government would make you safe, but the truth is that it won’t.
If you want to protect what you have, first accept that you live in an uncertain world.
No one can dispel uncertainty for you. No one can tell you reliably whether the market will go up or down tomorrow – or next week or next year.
No one can guarantee you safety, honesty or any kind of return.
Although you can’t overcome uncertainty, you can deal with it – just as you deal with it in your working and personal lives. You can function, you can make decisions, you can succeed – without predicting the future or relying on the government.
If your goal is to safeguard what you’ve earned, you can set up a portfolio that’s sufficiently diversified – beyond just the stock market – to protect you no matter what comes.
Then you can relax and turn your attention to the things you do best and enjoy – knowing that no event (such as dishonesty or a market crash) will be disastrous for you.