When we last heard about Lenny Dykstra, he was trying to start an investment fund for baseball players. He lost a lot of money in the dot-com crash, and decided to learn about investing and take control of his own finances. He seemed to be creating a new career for himself in investing.
How did it all go so wrong? It sounds like his life is a mess, and his finances are worse.
Is he just irresponsible with money? It's hard to believe he could have been as successful as he was if that was the case. (He made a lot of money in business, after his baseball career was over.) I suspect the financial crisis has something to do with it. The real estate he expected to profit from flipping is likely underwater now. Credit is tightening, investments are taking. He hasn't adjusted to the new reality.
I am not a financial adviser. Everyone's situation is different, the following should not be taken as investment advice, etc. But...I think the economic world is changing. The stock market is no longer a sure thing, even over the long term. Buy and hold no longer works. Traders can still make money, but ordinary people are being fleeced.
More and more people seem inclined to put their money in the Bank of Serta. Or if not under the mattress, at least in safe, liquid investments like savings accounts. The idea is to avoid risk, and to keep the money under your control as much as possible. Some people have found themselves unable to withdraw their money. Their fund managers, reluctant to sell low, won't allow anyone to cash out. Which means people don't have access to their own money. There's also been some talk of the government "borrowing" from IRAs and 401(k)s, and while that's a long shot now, in the future, our cash-strapped politicians may not be able to resist.
And cash may not be a bad place to be. Inflation may not be a problem, despite Bernanke running the printing presses full-bore. As Japan found out, you can print all the money you want, but if people don't spend it, it might as well not exist. IOW...increasing the money supply isn't going to increase prices unless wages increase. And I don't see wages increasing any time soon.
If we get deflation - another Great Depression scenario - then cash will be king. It's not glamorous, and is probably way too boring to interest high rollers like Lenny Dykstra. But it's the place to be for those who like to sleep at night.
Labels: Lenny Dykstra, The Greater Depression
