Yesterday, I thought of an old fable, The Grasshopper and the Ant, and its relevance to today's economic problems. Aesop's story has become a cliche but in times of uncertainty, it helps to go back to basics and think in simple, understandable terms.
The Grasshopper and the Ant
The Grasshopper, so blithe and so gay,
Sang the summer time away.
Pinched and poor the spendthrift grew,
When the sour north-easter blew.
In her larder not a scrap,
Bread to taste, nor drink to lap.
To the Ant, her neighbor, she
Went to moan her penury,
Praying for a loan of wheat,
Just to make a loaf to eat,
Till the sunshine came again.
"All I say is fair and plain,
I will pay you every grain,
Principal and interest too,
Before harvest, I tell you,
On my honer - every pound.
Ere a single sheaf is bound."
The Ant's a very prudent friend,
Never much disposed to lend;
Virtues great and failings small,
this her failing least of all,
Quoth she, "How spent you the summer?"
"Night and day to each new comer
I sang gaily, by your leave;
Singing, singing, morn and eve."
"You sang? I see it at a glance.
Well, then, now's the time to dance."
We can debate whether or not the grasshopper should be helped. It is compassionate to offer a helping hand to the grasshopper. However, if you provide help with no consequences, what incentive is there to change. This story is analogous to so many situations right now: government spending, individual spending, corporate spending, corporations asking the government for money, individuals asking the government for money, the government TAKING more money.
Learn from these times.
- Create a "rainy day fund" with at least 6 months of cash/Certificates of Deposit.
- Buy more stocks NOW. If you bought the S&P 500 at the end of 1932 during the Great Depression, 5 years later you gained 86%; in 10 years 120%; in 20 years 926%.*
- With prices of goods expected to continue falling, the money you save now will buy more next year.
- Stop asking and expecting the government to help you.
- If you ask the government for anything ask them to lower your taxes.
- But only if you actually pay taxes.
You will be so much happier when you rely on yourself and control your own path.
*Data from WSJ article by James B. Stewart October 29th, 2008
