Snow, Money

There you are--a good snow yesterday; cold rain today messing everything up. We are gearing up for the drive into Hartford to have dinner with friends and see a play at Theaterworks. It should work, Connecticut is good about snow removal and it's supposed to stop at about six so we won't come out of the play with vast new heaps to navigate. You just have to keep going here if you are going to enjoy winter at all; it's always easier when it first starts--by February this kind of thing will be very old.

We had been planning a very pleasant January/February in Africa. I have a trip to participate in some site visits starting mid-January; Roger was supposed to go to Malawi at the end of the month to work for two weeks. I had planned to join him there; I used to work on the same project and wanted to see old friends. The dates gave us time to do a little safari into Zambia and just hang out a bit before he went off to Ghana and I home.

Last week, though, we got news that the project he works for in Malawi was having financial difficulties because of the weakening of the British pound against the Kwacha and that all of the foreign consultants' trips were being canceled for the first part of the year. So I had to undo the safari plans and tell the cat's hotel that we wouldn't be needing them. When I explained the situation, my very pleasant correspondent from the travel agency in Malawi organizing the safari wrote:

Good morning.Thank you very much for the information below regarding the status of the financial crisis.Maybe next time will do.We just hope that this globe problem will be over in the near future otherwise its bad news.

That got me thinking about the remarkable chain of causality--a weaker pound means less work for Roger which in turn means one less booking for the travel agency, one fewer resident in a Lilongwe hotel, fewer dinners at our favorite restaurants in that city, less air travel overall and a whole month of booking canceled for the cat hotel here in Connecticut. Collectively, it certainly gives a sense of how connected everything is, and how much the world of commerce is contracting.

Like everyone else, we have been thinking and talking a good deal about money in the past week or two. Much of our retirement income is held in IRAs; we own and manage the money supposedly drawing enough every year to live on. When the market first started being really dreadful in September/October I was at first terrified--everything went down at once, bond funds and stocks, domestic and foreign, specialty funds in health care and commodities. We'd been through some very careful modeling of worst case scenarios given our mix of assets and this was worse than any of those. It felt like my fault; if I'd been clever and put everything into cash in the summer we would have been much better off. But after a while everything began to feel much more normal. We will have less income next year; our net worth is smaller. But we are a long way from any serious financial trouble. I worry more about the viability of our wonderful cat hotel and of the local fish market (fish is a real luxury these days). The wine stores should be fine; people drink more in times like these.

I'm old enough now that the government requires me to make withdrawals every year based on their calculation of how long I am likely to live. We prefer to take that amount as the guide for how much we can safely withdraw; if we stick to it next year the withdrawal will decrease by about 30%; reducing our base income by about 15%. That's hardly the end of the world; we have more than enough to live on; savings are already set aside to cover our share of the LeCompte-Engebretsen wedding which will take place here next summer. But we do need to watch what we spend so we've gone back, or tried to go back, to tighter budgeting with personal "allowances" for each of us each month. The exercise is fascinating but instructive; I'm overspent with Christmas; Roger is trying to save for new bicycle tires. We've canceled the very reliable but costly lawn mowing service and will need a new lawn mower so we can take over. And so it goes.

I'm sure, eventually, the crisis will end, stocks will rise at least a little and Roger and I can stop pouring over the grocery bill to see why it's so high this week. I suspect when that happens we'll miss this time--there is something comforting about being able to share with a distant travel agency and with the local vendors who are your friends your worries about the global crisis. It feels, at least faintly, like we're all in this together and have to help each other out.

I'll write about the exciting stuff, like Bernie Madoff, another time. In the meantime it's worth contemplating the fact that the storied Harvard endowment lost, on a percentage basis, about as much as I did. But the folks who manage it still got paid millions. It doesn't seem entirely fair.

Note the undecorated Christmas tree in the second picture; it should be decorated in a day or two.