If You Were a Rich Man

By Joel Achenbach
Sunday, January 14, 2007

If you're like most people, you are content to live a modest, middle-class existence, built around the small pleasures of home, family, friends and civic duty, even as your long-term plan is to become filthy rich and live in a mansion with lots of servants and a backyard zoo and a heliport and a huge pool that has a grotto stocked with frolicsome nymphs and stone cupids that spurt water in a suggestive manner. You respect yourself enough to know that "having it all" is merely a baseline for your true destiny of having even more than it all.

Tragically, society has failed to compensate you in a manner commensurate with your dreams. Worse, you're losing ground: The ratio of the things out there that you want to the things you can actually afford grows higher with each passing day. Socio-economically, you are sinking into the murk. Who are they, these people who have so much money? How can they afford to live in houses the size of the Pentagon? What line of work could possibly pay for such opulence?

Here's what rich people understand: You'll never make money by working. Working is for losers, the rabble, the (cough, cough) "working class." No, you make money by already having money. Then you let your money cavort with other people's money in an orgiastic frenzy of money-breeding.

What you need to do is learn to invest. You must become someone who can talk about "derivatives" without vocalizing the quotation marks. Ditto for talking about other "financial instruments," such as "credit swaps" and "collateralized debt obligations."

Obviously, I got these terms from someone else, specifically financial columnist Steve Pearlstein. I asked Steve what a "credit swap" is, and he wouldn't tell me, saying the explanation would be "too painful." I think he meant that any attempt to explain it to me would be excruciating for him. But I persisted, and he said: "It's a derivative product. It has to do with swapping what would be a variable stream of income, depending on changes in interest rates, for a fixed stream of income."

Okay, so somehow if you swap the one thingy for the other thingy, money appears.

Next, I called a very successful investor, Tom Gardner, co-founder of the online investment community The Motley Fool. I told him I wanted to invest in a hedge fund, because from what I've read, they sound better than mere stocks.

"You can make an investment in a hedge fund, but you have to be a certified investor with a net worth in excess of a million dollars," he said.

Dang. So what if I just bought a stock or two that would make me sound, at parties, like a savvy investor? He suggested that perhaps I'd like to buy a foreign stock.

"You could be telling people, for example, that you own Cemex, the largest cement mixer in the world, based in Mexico."

Of course! Who doesn't need cement?

Doubts creep in: Wouldn't my interest in Cemex instantly doom the stock? I'm the guy who bought WorldCom at its peak. The market surely depends on idiots like me to buy stocks that are overpriced. Aren't I the pigeon in this poker game?

Actually, the news is even worse. My friend Michael Lewis, who used to be a securities trader and wrote a best-selling book about it, Liar's Poker, says only losers buy stocks now. "All the smart money's out of the stock market. It's into private equity," he told me. "What's that?" I asked. Private equity is -- well, it's like a party that's in a secret location and lacks adult supervision. And it's getting louder and more fun by the minute. But it's clear that even if I managed to locate the party, these people would just hand me their car keys as though I were the valet.

Very discouraging. Meanwhile, the investment firm Goldman Sachs had such a great year that it reportedly paid more than $15 billion in compensation to its employees for 2006. CEO Lloyd Blankfein got an annual bonus of more than $53.4 million. We're talking Grotto money.

Is there room in that world for those of us who bring to the table only modest amounts of cash and are so fundamentally stupid we are willing to pay 18 percent interest on a credit card? Yes, our role is to give the money we made with actual labor to people who own yachts and private jets and whose children are so rich they don't play with dolls but with rented babies.

There's only one sane approach to the market: Admit that you're at a casino and that the house is ultimately going to win. Then plan to get lucky. After all, a man's gotta dream.

Read Joel Achenbach weekdays at washingtonpost.com/achenblog.

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