"I think Warren Buffett's got the problem and Gates has the problem and Bloomberg's got the problem," the billionaire said. "And the problem doesn't just have to be at our level. It can be with people who have just a couple of million bucks." It was the second "just" in that sentence that made tears well up in Brancaccio's eyes.
Most of us once thought the problem was getting some money. Now what?
Squander: to spend or use something precious in a wasteful way. Squandering ranks even below "leaving it in a passbook savings account" on the list of the greatest personal finance sins of our age, according to Brancaccio, who hit the road to determine the right answer to the question of what to do with money. Brancaccio gets this question from Marketplace listeners all the time: What does one do with a lump sum, perhaps the proceeds from some stock options, the profit on the sale of a house, an inheritance, a bonus, a settlement, or even a modest accumulation in a savings account?
A natural storyteller, Brancaccio has a clear, intelligent, and delightfully offbeat way of explaining to his listeners the complexities of business, investing, and the economy. He has access to rivers of market information that should help answer this question of what to do with money. But data do not necessarily equal wisdom, so Brancaccio hit upon the idea of venturing out on a random "walk" to acquire some street smarts.
Imagining a windfall of his own and haunted by his own checkered history with money, Brancaccio embarked on a funny and irreverent personal finance pilgrimage. His travels took him from Minnesota's Mall of America to New York City's Wall Street to one of the poorest towns in the West. He encountered entrepreneurs in California, homeowners in New York, retirees in Arizona, and some folks following their lifelong dreams in Texas. A drifter in a desert offered advice. So did a U.S. secretary of the treasury.
Along the way, Brancaccio was challenged by a cascade of practical and philosophical issues: If consumption drives the economy, is there something wrong with saving? Is there such a thing as a socially responsible investment? Is charity an investment? If you can't beat a Las Vegas casino, can you beat the stock market?
While Brancaccio's journey was a personal one, his eye-opening adventures reveal a great deal about attitudes toward money in America at the dawn of the new century -- and they provide entertaining lessons about how best to spend, invest, and save.
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About the Author
David Brancaccio is host and senior editor of Marketplace, the half-hour business and finance magazine program produced by the University of Southern California and distributed nationwide by PRI Public Radio International. Putting a human face on the global economy, the program illuminates the ways that international business and finance relates to listeners' daily lives. It is the fastest-growing public radio program in America, quadrupling its audience in the five years Brancaccio has been host. In 1998 it won broadcast journalism's top honor, the Dumont-Columbia Award for excellence. Brancaccio received his Bachelor's degree in history and African studies from Wesleyan University, in Connecticut. He received his Master's degree in journalism from Stanford University, where he also taught a graduate level course in broadcast news writing. The son of a Colby College English professor, Brancaccio also had the experience of attending schools in Italy, Madagascar and Ghana. He speaks French and some German and Italian.
Brancaccio began his broadcasting career in Maine, where he served as newscaster, reporter and announcer for Waterville's WTVL-AM/FM for six years. Since then, Brancaccio has gained experience in several major markets, including newscasting and reporting positions at KQED-FM, San Francisco, and WASH-FM, Washington, D.C. In addition to these staff positions he did freelance reporting assignments for Marketplace, National Public Radio, Monitor Radio, Calnet and Voice of America.
During his three years at KQED, Brancaccio caught the ear of Marketplace' international editor George Lewinski, who, with the support of Marketplace executive producer Jim Russell, ultimately offered him a freelance assignment: to set up and maintain an informal news bureau in London. The bureau soon became a full-fledged operation. Brancaccio served as London bureau chief for three years before being promoted to his current position in September 1993. During his three years of reporting for Marketplace and Monitor Radio programs, Brancaccio covered Europe's rocky path toward economic and political union. He rode the gauntlet with British truck drivers while under attack from French farmers protesting the low price of British meat, and he reported on British consumers' attempt to take advantage of the single European market by importing liquor and cigarettes cheaply from neighboring countries. He also covered historic losses at Lloyds of London insurance market, described the effect of BCCI's collapse on Asian businesses in Britain, and documented Eastern Europe's bid to become part of the European Community.
"Brancaccio's international reporting and considerable travel overseas give him the kind of global perspective on news that the Marketplace host must have," noted Marketplace Productions' general manager, Jim Russell.
Read an Excerpt
Chapter One: The Naked Truth About Money
I once saw a naked Belgian accountant carrying nothing but her purse. She made it look easy. Her money was exactly where she wanted it. I, however, used to have a much tougher time knowing where to put it. I had a surplus once and didn't know what to make of it. I wanted to acquire that walk, that confidence, because I was determined not to make the same mistake with money again.
As host of a public radio program about money, I am asked all the time about what to do with it. During a time of great surplus for some, this is an acute occupational hazard, like that of the chiropractor at a convention of contortionists. I needed to answer the question for myself before I could have anything meaningful to say about other people's money.
What I really wanted were street smarts, so I went out on the road. Ten trips sprinkled over sixteen months of a busy work schedule. It was to be a pilgrimage to places that evoked ten plausible ways to use a lump sum. I didn't start out with a surplus, but I came back richer and no longer prone to breaking out in hives if I found myself in the clutches of a bonus payment, a severance check, a capital gain of one sort or another, an inheritance, a lottery win, a tax refund, or simply the realization that the passbook savings account finally contains some serious money.
I had figured a personal finance pilgrimage would be an amusing and productive way to "Do the Knowledge," as London cabbies refer to their apprenticeship in that city's confounding, gridless geography. It would be less painful than going to business school, given my math scores. It would be a pilgrimage to see what other folks were doing with their money as the century closed with a boom and to explore those possibilities in three dimensions, not just as data on one of my flat market screens. A pilgrimage, because you hear stories and because strange things happen, perhaps an encounter with another naked accountant.
Let me say more about the first accountant because it was she who got me going down this path. I didn't know her well, but I am convinced of one thing. There is no chance she would ever have broken out in hives when presented with a surplus. And she despised me for even needing to ask. Just where is the best place to put your money? That question became especially urgent for me as I, too, stood naked in the middle of a French town.
I had been passing through France when an editor for my program, Marketplace, telephoned with an oddly incomplete assignment. The mayor of a French seaside village would be expecting me at ten the following morning. The normal set of follow-up questions were met with suspicious pauses and dissembling.
"The story? You'll figure out the story when you get there."
I felt like Robert Mitchum's character in the noir classic Out of the Past, who tells a cabby, "I think I'm in the frame, but I still can't see the picture."
Cap d'Agde was just a couple of centimeters away on the Michelin map. I parked the car, grabbed a bag with a tape recorder and microphone, and then saw the sign: "Nudité Obligatoire." Obligatory nudity, no ifs, ands, or buts. I was in a town, population 20,000 in the summer, where no one wears clothes. It was not a nudist colony in the traditional sense but rather an entire nudist city. I swallowed hard, for when in Rome....
The interview with the naturist quarter's ranking official was memorable. There was no air conditioning in the mayor's office, and the Naugahyde chairs seemed to belch rudely when brushed by my bare thighs. In the nude supermarché, shoppers skated clear of the waste-high frozen-food section. In the one-star restaurant, diners with cloth napkins stretched primly across their loins enjoyed a three-course seafood lunch. Here was the real horror of the situation: French health and safety regulations allowed me to be naked, but not the waiters, bank clerks, or shop assistants. You haven't seen a French waiter really condescend until you are sitting there in the altogether trying to order the crudité. I am not ashamed of the human form, but it was all so incongruous.
But the most perverse moment for me was changing money in the naked financial institution, Banque Dupuy, Perseval. It was like my recurring nightmare: I stand up to do my solo and find the rest of the orchestra is in black tie while I am wearing only a black tie.
My challenge was figuring out how to "cover" this story. As the saying goes, there are a thousand untold stories in the naked city, but I was desperate for just one with a business angle.
A roly-poly pair of naked elderly folks nodded politely and offered the pleasantry used by German hikers when they squeeze past you on a narrow mountain trail. A jovial Brit in a tank top and no bottoms ominously asked if I wanted to try my hand at boules.
In the midst of this, I became increasingly aware of a cramping in my right hand. I had been tightly clutching a wad of French bank notes and franc coins since entering the place sans trousers. It was the call of the elusive business angle: how does one run an economy in a place without pockets?
I began my inquiries. A T-shirt vendor suggested the old credit card in the shoe trick, only I had left my Reeboks back in the car. Merchandising and innovation proposed another solution. I could purchase a rather jaunty round-the-neck, hermetically sealed money holder, now available in three designer colors. The vendor pointed with his chin at the striking sight of a woman striding confidently down a path to the shops.
"Now that is where you put your money," he said.
It was the Belgian accountant with her purse. When I say naked, that is not entirely true. She was wearing a wide-brimmed raffia sun hat, golden earrings, and golden sandals. She proved to be less eager than I for an interview about where to put money. I managed to get from her the Belgian part and the accountant part and not much more. She knew exactly what to do with money, unquestioningly. It was not just her profession; she was probably born that way. Nor was she about to discuss it with the likes of me. My lack of savoir-faire in these matters must have been plain to see. She vanished into some shops, leaving me standing there with my microphone dangling.
Chastened, I strolled down toward the beach to sort out my notes. At the edge of the boardwalk, the white heat was taking its toll on a group of naked volleyball players. The rest of the beach was packed cheek-by-jowl. For a passing moment I felt queasy forging into the crowd, unprotected as I was. Then reason prevailed. Who would notice one more pair of buttocks in a crowd this size?
Reason failed. No less than ten thousand people stopped what they were doing and watched intently as I walked from the sidewalk down to the cool sand at the water's edge. I had no idea why I was worthy of such scrutiny. Was it my tan line? Or my "skeptical reporter" tattoo?
One tends to look inward after a near-death experience like this. It wasn't so much the embarrassing stares on the beach. It had something to do with the Belgian accountant. She had judged me as unworthy; I could feel it. What kind of question is that, what do you do with money? It was an opening line that was doomed to fail with someone like her, someone who appeared to have the knack. I didn't intuitively have the knack, and somehow I would have to devise a way to acquire it. The idea of a pilgrimage would not gel for several more years. At that moment I was too busy blowing the most cash I had ever seen in one place.
The cash had materialized during the George Bush administration, those dark ages before the dot-com era, a time when money had to be earned the old-fashioned way. My wife and I saved it by being cheapskates. A rented apartment. Embarrassing, collegiate-style furniture. We ate in unless an out-of-town relative with a credit card was in town. When a second job teaching a college course forced the purchase of a second car, I found an eleven-year-old thing for $800 that I could keep running by threatening it in Italian.
That is how we managed to put $17,000 into our savings account. For the first time in my life, I had a positive net worth. I was liquid. I was home free, or so I believed. But just as I thought I was crossing into the end zone to score seventeen thousand points, the game changed. Now that I had some money, what exactly was I supposed to do with it? That was when the hives started.
I imagined a financial adviser's eyes lighting up at the sight of this little nest egg. Seventeen thousand dollars has "home mortgage down payment" written all over it. Cobble together another $2,000 and we would have had 10 percent down on perhaps a tool shed, given the real estate prices in northern California at that time. A house would bring a tax deduction. It would mean respectability. It would be the mark of a grown-up.
If I had seen fit to consult a financial adviser, I would have been asked about debt. We had very little debt. Every month our credit cards were paid down to zero and the student loans were nearly done, so debt relief wasn't a pressing need.
The adviser might have urged me to save some taxes by opening up an Individual Retirement Account. That is, saving it for old age. But at that time the nonprofit radio station where I worked had no pension plan. I had no broker. I knew one guy who was an arbitrageur who boasted he was a personal acquaintance of Ivan Boesky. But at the time I wasn't completely clear on what an arbitrageur did.
I did know one thing. I wanted to be a foreign correspondent when I grew up.
So my wife and I quit our jobs, sold the cars, moved with our infant son to London and blew the money in nine months.
But as our last few pence were circling the drain, a process hastened by one of the lousiest exchange rates for the dollar since the demise of the gold standard, something happened. Just about the time of the naked Belgian accountant assignment in France, other people's money started coming in to my little overseas bureau. The enterprise blossomed, and after three years it was possible to argue that the overseas lark was a good investment. We were enriched by the travel, the chance to break old patterns and try a new way of life. It was instrumental in getting the job I have now.
This is my rationalization, anyway. It is very easy to rationalize spending money. But the fact is, I can't prove that moving my family to London was the right thing to do with it. In other words, buyer's remorse has set in.
I think a lot about the wisdom of blowing our nest egg the way we did, because in my job now I am surrounded by such responsible people. I spend much of my day exchanging knowledge with eminent men and women of business and finance. Talking with two or three economists and analysts a day has an effect. One day who should walk into my office but someone as confident about what do with money as the naked accountant. It happened to be a U.S. Secretary of the Treasury, Robert Rubin, in the flesh. Well, not flesh. He was wearing a suit that probably cost more than another trip to London for my whole family, and he wanted to talk about investment capital working to help inner cities. How was I to look a guy like Secretary Rubin in the eye and admit that I once flushed away on some European fling seventeen thousand of the very dollar bills that bear his signature? I was living out a version of the Mel Brooks film Young Frankenstein. It was as though I spent much of my life menacing the villagers, then in some kind of twisted lab experiment, I exchanged my brain with an eminent financier. In the final scene I was the monster, propped up in bed next to Madeleine Kahn, reading the Wall Street Journal through banker's spectacles.
My transformation into Homo capitalis was nearly complete. Plugged in as I now was, I should have had all the answers. I consumed it all: live data pumped into my hands still warm from the market; electronic retrieval of nearly every English-language periodical on earth; correspondents in world hot spots just a button away; phone numbers for Wall Street sources that even their mistresses didn't have. One would think the wisdom about what to do with money must have been hidden in this ocean of information somewhere, if only I could find it. And there is no doubt that this tidal wave of information gave me a good handle on the state of the economy, the direction of interest rates, and the ability to make the occasionally decent call when it came to picking stocks. But months of pointing and clicking yielded more data, more questions, and not much in the way of synthesis and no useful answer to the question of what should I do with the proceeds, should I ever really score on a stock. It had become obvious to me that a piece of my education was still missing. But I couldn't just go. I needed a sign.
One day something terrifying happened at work that would be the catalyst that would push me out the door on my pilgrimage. With about a minute and a half to go before airtime, I was walking toward the studio, giving a script about the day's financial news a final, preflight check.
"While the Dow was in the dumps," the script read, "the gnostic was doing better, with the gnostic composite index rising 1.2 percent....A gnostic trader is quoted as saying, 'Everywhere investors look, they see reasons to buy.'"
I paused in midstep, about to recuse myself from further broadcasting duties that day on the grounds that I was losing my mind.
Did it really say "gnostic"?
I blinked twice and fearfully shuffled back to that page again, praying I would find instead the word "Nasdaq," the electronic stock market run by the National Association of Securities Dealers, the NASD. But it did not say Nasdaq. Settled before the microphone, in the remaining moments left before the show's opening gong, I was forced to go on a furious hunting expedition, crossing out as many gnostics as I could find.
"Thirty seconds," the director said into my headphones.
"What does 'gnostic' mean?" I asked, pressing the intercom button. The producer's eyes widened in panic.
"Number one, I don't know. Number two, you've got ten seconds. Number three, forget gnostic, they'll think you mean Nasdaq."
Greek isn't listed on my résumé as one of my languages , but I managed to recall that gnostic has something to do with knowledge, maybe self-knowledge. Somebody must be trying to tell me something with this gnostic thing, but what? It occurred to me that I could study all I wanted about money and how it works, but until I knew myself, I would never understand what to do with it.
The on-air light glowed red.
A forensic reconstruction of the events leading up to what has come to be known as the Gnostic Incident concluded it was "pilot error." An intern had thought he was doing me a favor by running an electronic spell checker on the script displayed on my computer screen prior to its posting on our Internet site. WordPerfect's spell checker did not recognize the word "Nasdaq." The spell checker had taken it upon itself to make the substitution. Gnosis does mean knowledge, but the kind of intuitive knowledge that is more at home around the word "insight" than it is around the words "curriculum" and "training." It is about coming to an understanding of yourself and then using that kind of knowledge to help interpret what is going on. It was the sign.
I concluded that it was time to get out and Do the Knowledge, just as we like to say we "Do the Numbers" on the radio program. Still, there were some practical preparations in order.
First, I had to secure an advance from a publisher to pay for the trips. Enough said.
Second, I had to arrange for some vacation time from a boss who would sooner put out his own eyes than give a fellow a day off. Actually, that was my paranoia talking. In reality, the boss turned out to be magnanimously flexible in return for me saying so here.
Third, I had to persuade my brilliant wife, Mary, to do all the research for the pilgrimage at no pay while allowing me to get all the credit. As a special bonus, she could shoulder all the extra child care duties for our three offspring during the ten times I would be away from home. That was my plan. The final bargain was if I got to do this, she got to go to an expensive graduate school.
All that remained was determining the route. A Ouija board seemed a tad random, so I combed through newspaper accounts about lottery winners for inspiration about ways to spend a surplus. Lottery winners have eclectic opinions on how to answer the legendary class of hypotheticals that includes: What if my ship comes in? What if I hit pay dirt? What if I get the Big Score? Newspapers cover this subject with loving dedication, perhaps because of the rags-to-riches human drama, perhaps because state lotteries are big newspaper advertisers. The lottery clippings that spoke the most to me fell into these categories:
- Spend it on a shopping spree.
- Do good.
- Start a business.
- Gamble with it.
- Give it away.
- Invest it in the markets.
- Buy a house.
- Go back to school.
- Retire early.
- Save it for a rainy day.
Once I knew the categories, the destinations for my travels would fall into place. I was summoned to a school reunion that would take me near the mother of all shopping malls, just the place to confront my own passionate impulse toward spending. Getting smart about money has to start with getting smart about consumption. I wanted to know if I could take a surplus to the mall and still get out alive.
Copyright © 2000 by David Brancaccio
Table of Contents
1. The Naked Truth About Money
2. Going Back to Shop Class
Spending at the Mall of America, Bloomington, Minnesota
3. Invest Like Your Very Liberal Mother Is Watching
Being socially responsible, Jackson Hole, Wyoming
4. Be Your Own Boss
Entrepreneurship in Pasadena and Universal City, California
5. Learn to Play the Game
Taking risks in Las Vegas, Nevada
6. Give It Away
Charity in Hawthorne, Nevada
7. Invest Like a Grown-up
Buying a fat hen on Wall Street
8. Getting Real
Dying for a mortgage in Levittown, Long Island
9. Quit Your Day Job
On sabbatical in Levelland, Texas
10. Seek a Gray Area
Putting it toward retirement in Tucson, Arizona
11. Go Conservative
Saving in Seattle