Comments on: Where Did All The Money Go?

By: Measuring Your Net Worth, Spending Less During This Recession

Measuring Your Net Worth, Spending Less During This Recession — Thu, 12 Mar 2009 04:44:07 +0000

[...] Mint wonders where all the money has vanished during this heavy economic downturn. Manshu also talks about how we measure net [...]

By: manshuv

manshuv — Mon, 09 Mar 2009 23:16:05 +0000

@Dana – When I wrote about this I thought about the exact same points as you raise.

It is true that taking all amounts that someone is going to make and discounting them do not take into account unemployment and calamities. But I do think that this method is still “less worse” than what everyone is used to.

You could make it more complicated by using a smaller number as a rate of growth or assign or marking the net worth 10 or 20% down for safety — and that may do some good. I am not sure, just throwing out some ideas.

About inheritance and positive cash flows like lotteries — I think those are the kind of things that should be kept out of any calculation.

@Vilkri – I agree with you and here is what Bloomberg has to say about Greenberg’s lawsuit:

“What Greenberg rarely mentions is that it was on his say-so that AIG created its Financial Products unit, which is where these fancy new derivatives were created, vetted (or not) and marketed.

Greenberg himself ran off the unit’s creator who had insisted on constant critical analysis and re-vetting to minimize risk. The guy, Howard Sosin, just wouldn’t put himself under Greenberg’s thumb, so off he went, according to a recent three- part series in the Washington Post.

Credit Default Swaps

Nor is Greenberg fond of pointing out that it was under his watch that AIG began marketing credit default swaps linked to subprime mortgages, or that it didn’t actually take into account the risk involved in resting so much investment, so many bets, on so little substance.

And it is rarely convenient for him to mention his status as an unindicted co-conspirator in a $500 million deal involving General Reinsurance Corp. that got the indicted co-conspirators convicted and imprisoned.”

http://www.bloomberg.com/apps/news?pid=20601039&sid=apkB8U14Dado&refer=home

By: vilkri

vilkri — Mon, 09 Mar 2009 22:23:56 +0000

I don’t really agree that Ace Greenberg and I feel the same way about our vanishing net worth. Top reason: I did not directly cause the decline of my net worth while Greenberg was instrumental in building AIG into the kind of company that ended up bankrupt and that made his stock holdings practically worthless.

By: Dana

Dana — Mon, 09 Mar 2009 18:12:26 +0000

Umm, interesting.

I think the challenge is in valuing someone based on their potential versus what they have managed to accumulate thus far. It’s one of these instances where more emphasis is placed on past activities versus future plans to act.

It’s also difficult to predict when unemployment or disability/accidents may hit, or how inheritance or unexpected wealth may affect one’s “net worth”.

But our obsession with constant evaluation of one’s net work at any given point in time might be the problem. Good point raised here.

Thoughts?