It’s hard to believe that the stock market is about as low as it was when I first graduated college, over 11 years ago.  Taking inflation into account, it’s even lower than that.  I’m not sure it can go much lower, but in truth it can go all the way to zero.  While I’m certainly poorer for it, I’m young and have a lifetime of earnings ahead of me.

In the end however, I hope for the nation that this collapse is not a momentary dip before the next meteoric rise.    Like the last turn of a century, this recent speculative bubble across all asset classes has been fed by unrealistic greed.    As a nation we’ve forgotten that real wealth comes from real work.    Some believe that real work only produces real tangible things, i.e. manufacturing.   I don’t subscribe to this limited view.  Music and film have little worth if measured solely in physical terms, but have enormous value in real terms.   Making scientific discoveries even if they have no practical value increases our understanding of the universe.   I don’t believe knowledge is worthless.

What true wealth is not - is the act of buying something for $10, and turning around and selling it in month $20 more.   This is not to say there isn’t room for wheelers and dealers, speculators and their ilk (I could be counted amongst these people).    There is real value when someone recognizes what is truly undervalued, and is able to buy at a discount.   Such individuals facilitate the process of price discovery which benefits everyone involved.  Sellers get a fairer market price, and buyers learn of something that they might want.  There is also value creation when financiers allocate capital between different business opportunities.  I do not discount the value that financiers, and financial institutions provide the economy.  A solid banking system is critical to well functioning economy.

What I do discount is rampant unabashed speculation of the last quarter century.   We’ve become a nation of get rich schemers at every level.  From the house flipper in Florida, to the hedge fund mogul in Connecticut.   As a nation we’ve decided the way to riches is to sell higher rather than to add value.   The greater financial mess in some ways mirrors the truly egregious financial scams that have already to come to light.   The wealth of nation when built on rampant speculation is not much different from Madoff’s Ponzi scheme.

It’s my hope that we as individuals and as nation learn some valuable lessons in these difficult economic times.   Get rich quick schemes are built on castles made of sand, sustained wealth only comes from true work and real sacrifice.  Is it any surprise that the “Greatest Generation” rose from the ashes of the Great Depression?  That was generation that learned the value of saving over transient paper profits.  I hope my generation can be such a generation.

I don’t say any of this imply that there isn’t a place for investing.  There is, but people should neither expect or desire to quickly double their money.   Investors in companies that add real value to society will continue to be rewarded.  The illusory profits tha puffed up the “earnings” of many of the financial istutions have been revealed to be what they always were - smoke and mirrors.   Banks should have spent more time worrying about who they lent money to instead of selling the next mortgage backed security.