Transactions: July 6, 2009

Oh, Swami, speak the truth. Should I refinance my hut or stiff my mortgage lender, who owes me more as a taxpayer than I owe him as a debtor? Should I remain overexposed to stocks as the rally flags? Should I rebalance, index, amortize, depreciate, liquefy, globalize? Should I buy or lease an internal combustion vehicle, wait for hydrogen, or bike? Should I claim poverty to my credit card providers, just to see what happens? Should I beg, borrow or steal to get the sums required to shove my progeny through college? What, oh wise guy, is the net present value of eschewing lattes every morning? Should I try an HMO, a PPO, a health savings account or load up on death benefits and prayers? What are the odds of Obamacare saving my sorry debt-ridden ass? Should I play convertible options or plant a lettuce garden and graze off the land? Should I find a politician to run off with my profligate wife? Should I try the triple play? Buy gold? Misplace my taxes?

Decisions, decisions. None of them easy. Two kids or three? Marriage, cohabitation, divorce? Midlife crisis or early retirement? The alternative minimum tax! Risk and reward, Swami. Cost-benefit analysis. You need a finance degree to survive all this, but finance degree holders almost killed us. Besides, they're expensive. Current exigencies demand an accountant, an investment adviser, a college counselor, leaving you with no cash to do anything but see a shrink. If you don't invest like Warren Buffett, you end up at the Home. If you do invest like Warren Buffett, you have no life. All that, and the efficient market is reputedly dead, which is a total bummer, rendering those capital asset pricing model calculations on the three brats totally whacked. But wait, Swamarami. As part of regulatory reform, we're getting a consumer products regulator, who promises to make everything clear and simple. Yes, clear and simple is good. But what does clear and simple mean in 2009? Is clear and simple a fixed-rate mortgage in deflationary times? Or an ARM in inflation? How clear and simple is retirement? Does using your home as a bank count? Does healthcare come in plain vanilla? The first thing this agency should tackle, by the way, is the AMT, which is as simple as a nightmare. Ever wrestled with Fafsa forms?

Here's the problem, which has been building since, say, 1981: On one hand, most Americans lack the time or (let's be frank) the brains to become financiers. On the other hand, they are faced by (a) a hundred financial challenges that have no obvious answers and (b) markets that promise infinite riches. Most of the time, though not today, (b) looms larger. For decades, markets had two classes: sophisticated investors, mostly institutions, that got more freedom to play complicated games but less protection; and the rest of us slobs who bought stocks, mutual funds, a house, a car but were discouraged from speculating in options, investing in hedge funds or day-trading 401(k)s. Regular Americans chafed at not being able to invest with George Soros and agitated for entrée into VIP rooms; this was fueled by the belief that the combo of computer and E*Trade leveled playing fields. Alas, when the velvet ropes did fall, folks scarfed up dot-coms (bubble) and crazy-ass mortgages (double bubble), encouraged by banks, Wall Street and cable personalities (Jim Cramer, Carleton Sheets) who recognized sheep as they crossed the road.

And so we return to the age-old conflict between the state's responsibility to protect consumers and consumers' freedom to sheepishly pig out on risk. In America, this split is deep, which explains the pendulum swinging from everybody-needs-to-play-IPOs to the current age of Elizabeth Warren, doyenne of clear and simple. The trouble is, clear and simple means minimal risk and, of course, miserly reward, which, among other things, may render retirement problematic. This would not pose such a problem if the feds offered clear and simple as part of a menu that included complex and risky. But that seems unlikely -- at least until the agency is captured by lobbyists, Republicans or the Federal Reserve trying to goose bank earnings. Why? Because of the power of temptation, smart guy, and of slick salesmanship. Subprime ARMs didn't fall off trucks; they were marketed and sold. So were tech stocks. So was Bernie Madoff, who was premium plain vanilla. Like everything in regulation, there's a slippery slope lurking. Clear and simple sounds, well, clear and simple. But, alas, the world is damnably complex, and people are unfortunately people, sort of sophisticated, sort of clueless, meaning clear and simple will have to mean only clear and simple if this is going to work. No more lattes for you, Swahili. No more options.