Revisiting Merril Lynch
A year ago, I wrote this:
If you have accounts with Merrill Lynch, now would be a really good time to close them out. You don’t refuse to make a full accounting like that.
Let’s revisit that. Your retirement accounts are your own business, and I meant the post as advice to get your money out of an unstable bank. If it hadn’t been for B of A your account would be in the care of Packim, Sendim, & Hope now. But what of the stock?
Suppose you had 100 shares of MER. If you had sold on the day of my post, you would have lost out on the 52-week high on Dec. 10th (a difference of $1.93 per share if you sold at the high of the day). You would have $6118 in cash.
Open, High, Low, Close
2007Nov14: 58.64, 61.18, 57.01, 57.98
2007Dec10: 62.00, 63.11, 61.53, 62.20
(images are clickable, do so if you want to see the whole thing)
You would have also missed out on 4 dividends, each at 35¢ per share ($140 in payments on 100 shares). Today’s OHLC at 11:34 Eastern:
2008Nov14: $13.39, 14.30, 13.20, 13.41
If you had not taken my advice, you would have $1430 in value plus $140 in dividends, $1570 total.
Merril Lynch is a dealer in paper money – that is, perceived value, and not actual value. Their stock price is beginning to reflect that, as trust in paper money drops. So what of a company that creates actual money, actual value? Such as Hecla Mining?
You would have done possibly worse, depending on when you came to your senses and got out. The mining industry has been pummeled almost worse than the banking industry, despite the fact that they actually produce tangible things.
My point is this: if you’re going to invest, invest in something tangible, not something intangible. Hecla, despite producing something you can hold, has lost perceived value over the past year. Their product, however, has not lost nearly as much: Gold is down 8% from a year ago, Silver down 34%, Lead down 66% and Zinc down 58%. All those drops are better than the 86% drop Hecla has seen in the past year and the 74% drop Merril Lynch has seen.
And what of cash, that intangible paper we assign value because the government forces us to? If you sold and kept the cash, using the inflation numbers the government used before Clinton came to town, you’re looking at a loss of value of 8% or more. If, however, you think the government gooses the inflation numbers to keep from paying out more Social Security payments (and why wouldn’t they), you are looking at a loss of value of 14%.
Kill your debts, even your mortgage. Spend less than you earn. Live frugally. Don’t invest in depreciating assets, including paper dollars. Trade value for value. This is all it takes to become rich over time.