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Good and bad things come to an end

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By Jim Flynn

In the early years after World War II, most folks were occupied with getting a job, buying a car, getting married, buying a second car, making babies, getting a bigger car, buying a house, mowing grass, and dreaming about a bigger house – with two bathrooms.

In those simple times there was little talk about stocks, money purchase plans, defined benefit plans, and defined contribution plans. IRAs, 401Ks, and 403Bs were yet to come. Thoughts about far distant retirement assumed that some day Uncle Sam would send a Social Security check every month, and employers would provide the pension they promised in those little booklets they gave to every new employee.

Folks starting out on their adult journey soon acquired an insurance agent. Wealthier folks tended to have insurance brokers and stockbrokers. Those on the lower rungs of corporate ladders imagined a day they too could chum around at the water cooler and casually mention getting advice from their stockbrokers.

We recall our first and only stockbroker as if it were yesterday. Tom was a social friend who suggested in a low pressure and subtle way that we ought to take a look at the wonderful world of investments. At the time our attention was focused on musical instruments, sports equipment, sneakers and getting that second bathroom.

We finally took a flyer on a hot tip Tom offered up. We bought some stock in Chuck-E-Cheese restaurants. In short order the stock jumped. We sold Chuckie and made a tidy little nest egg.

Not too long after, Chuck-E-Cheese went down again. We can’t remember why. It isn’t important. Stock markets go up and down for obscure reasons and for no reason at all. We bought Chuck-E-Cheese again.

Whoa! Chuckie went up again. Tom was right. We sold Chuckie, again. About that time we came to our senses and realized buying and selling pieces of paper isn’t investing. It’s gambling – an unlikely way to get a second bathroom.

Tom continued to be a social friend. His reward for guessing right about Chuckie-E-Cheese was compensated. Whether Chuckie went up or down, Tom always got a commission.

In this time of the big debacle on Wall Street and in the banking community, some history is worth re-examining. Brokers started out in the 14th century as wine cask tappers. They would buy wine cheaply in large quantities and sell it by the cup at a tidy profit, or sell a cask to a tavern keeper at slightly less profit.

Thus a broker was someone who bought goods to sell to others, acting as a middleman or agent. Being a middleman was unbiblical. Making money with money instead of by hard work was considered immoral.

Things got worse. Pimps, procurers, and madams were sometimes referred to as brokers, because they acted as the go-betweens in financial transactions for social activities. It was not respectable to be called a broker.

By the 19th- and 20th centuries investment brokers had been rehabilitated in the eyes of the public – suits, ties, and shiny shoes. Pitchmen calling themselves brokers often called at dinnertime to offer their services.

Brokers aren’t to blame for our current financial mess. Our recently deflated financial bubble was designed at a much higher level. Brokers merely carried the message, and investors became true believers in the market magic of inflation.

It would be blasphemy, as well as bad salesmanship, for a stockbroker to point out that depressions followed the South Sea Bubble in 1720, the London Stock Market crash in 1772, the London crash in 1825, the worldwide crash of 1873, the New York crash of 1929, and the Tokyo crash of 1990.

Commenting on money markets following the election of 1900, Harvard professor and writer Henry Adams observed that “The New York Stock Exchange goes on a complete drunk every day and runs up prices without mercy.” Adams predicted that within 25 years the newly created paper bubble would collapse. He was off by four years.

When the 1929 crash happened, Bernard Baruch, one of America’s most successful stock market players said “Anyone taken as an individual is tolerably sensible and reasonable. As a member of a crowd, he at once becomes a blockhead.”

Baruch had pulled out of the stock market just weeks before the 1929 crash. So had other prominent players, such as Joseph P. Kennedy and Roger Babson.

A number of stockbrokers with no more foresight than their customers bailed out of high-rise windows without parachutes. Many of their customers ended up selling apples on street corners for the next 10 years.

Jim Flynn was formerly a corporate counsel, served in military intelligence during the Korean War, and once aspired to be a newspaper columnist.