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One Man's Credit Crunch

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So, think you might have to dip into your savings to take that weekend vacation? 401ks and other retirement plans have lost large chunks of their value. But if you need some tips on smart investing, we can help. It might sound like Chicago writer Ron Litke is a little confused when it comes to the financial markets, but stay with us; he's got a certain skill.

I've been in a credit crunch for as long as I can remember, so I'm particularly dismayed by the downturn in the economy -- even if I don't really understand it. What I do understand is that if banks are having a hard time getting money then it really must be bad. Even though I don't have a clue about what I'm reading, I look at business stories with great interest now. Let's face it; I wouldn't know a derivative if it was swapped in front of my face.

A friend in the investment business tells me the stock market has lost 40 percent of its value. “Looked at your statement recently?” she asks with some concern. “Don't sell now.” She knows that when I look at my statement – which is rarely – I can't understand it unless there's the little bar graph with the line that goes up or down. Otherwise it may as well be written in cuneiform. I always hand it to my wife.

I think my lack of understanding of finance and economics is the result of a decision I made early in college to cut an entire lecture series on fundamental economics when I learned it would be taught by a fellow who worked for President Richard Nixon. I didn't remember signing up for the class and I surely wouldn't support Nixonomics – so I boycotted and thus flunked the series. My counselor reminded me it was neither an effective political statement nor a brilliant academic achievement. But it was an early indicator.

Only weeks before 9/11 I was one in a wave of layoffs from a high-profile but ultimately short-lived dot-com company that had multimillion-dollar investors. Included were the junk-bond king Michael Milken, who had three Nobel Prize-winning economists on his board of directors. One of those guys, Myron Scholes, is half of the pair that in 1973 invented an equation that enabled people to calculate the value of derivatives.

Going through the layoff process brought me into the human resources offices for the final paperwork. The woman working with me smiled and said I was among only three out of three hundred employees who had made money from our 401k. I thought -- how could that be? I acutely remember being confused by the entry forms instructing me to choose which funds would administer my account. And I just checked the box next to those that sounded like old money.

I also wondered how I was so lucky, considering we were building an online graduate business school with folks from the business schools at Stanford, Chicago, Columbia, Carnegie Mellon, and the London School of Economics.

“You didn't fill out the form properly,” she said, “so you were automatically placed in the money market account.” Aha!

So, given the current situation and my contrary approach to the market, I'm considering a job in investment banking. Odds are I won't do any worse than the big shots and, as an incentive, I won't take a bonus -- even if I lose your money. Call me.

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