Hearts and Minds - Reloaded

This post is a sequel to "Hearts and Minds" that I posted a little over an year ago.

I had the displeasure this last month (Sep/Oct 2008) of watching myself lose 8-10% of the value of all my investments parked in municipal bond mutual funds. While I am saddened by my losses at the municipal bond market, I would think that waiting out through the next 6 months would provide an opportunity to recoup the losses, esp. since municipal bond funds not only are most stable in price (they recover their price in less than 6 months, even if they lose initially), they also yield 4% tax free on average - which is more like earning 6% per year.

Enters my wife with a good argument - "I don't care how much the mutual funds went down percentage wise. I only care about the $ amount you lost. Short half the bonds. Figure out a way to make up for the current and future losses. Get a higher paying job". I thought - "Ya right, in this market!" . Unlike last time, I figured there wasn't any point in convincing her. I began wondering what was most important to me AND how much I am willing to pay for it.

What is most important to me?
Peace of mind - I didn't want to ruin every other conversation with my wife with her reminding me about the losses. That's like me trying to forget I have a wound under my bandage, while my wife gets a prick, opens the wound and just pokes around. Nice! (hardly)

How much am I willing to pay for it?
Any of these:
(a) Giving up rice for the rest of my life (*Dream on - not so easy*)
(b) Ask her to invest on her own only to find that we lose 50% of all our savings (*Yes, that I genuinely don't have a problem with in exchange for "peace of mind", but of course she does*).
(c) Really... anything between (a) and (b).

So how am I making up for our losses?
- I don't really know. The only option so far is.. right, get a better paying job - that's as though I've intentionally chosen a lower paying job over a higher paying one. Anyway, it is what it is.

How will I invest going forward?
- Don't you know by now? I am not investing at all! Consider this for a second - "I am willing to give up 50% of all the savings my wife and I have, just to have peace of mind (as defined above)". That's the equivalent of me giving up on investing somewhere where I can make a 150% return on investment (I say 150% because 33% of the profits are lost to taxes anyway). So in other words, I can afford to leave money under my pillow for the next 10-15 years of my life - instead of putting it on even S&P500 which would yield 150% in 10-15 years - all if only the bandage on my wound is not opened.

Have I bought my wife the home I said last year that I'll buy by this time (see this post)?
- Nope. Instead, she bought into my argument to wait out the housing bust for some more time. Maybe we'll buy in the spring of 2009. Can't wait with our daughter coming home this November.

Is this truly the smartest way to deal with my situation - to just "give up" and commit the ultimate financial hunger strike ->"not invest"?
- No. It certainly isn't the smartest way. The smartest way would be to say confidently that I'll get all our invested money back without any losses, if she could give me another 6 months. The smartest way is to flood her with articles that praise municipal bonds, and how the FDIC is so underfunded that one should seriously consider if the $250k deposit guarantee per bank account is truly something the FDIC can deliver on. The smartest way is to get some of our friends to speak to her and convince her that what I am doing is the right thing for us.

But then again, I am reminded of the first time I met her. I didn't have to tell her I couldn't live without her. I didn't have to flood her with roses and cheesy phone calls all day. I didn't have to boast about any of my accomplishments (not that I think I have any). I didn't have to explain to her how I was better than any of the other eligible bachelors. I didn't have to bring in others to tell her that I was a good guy. In short, I didn't deal with the whole dating scene in a "smart" way. All I did was be myself, at the risk of losing her to another man. After a few weeks, she chose me.

I am hoping for such a thing a second time. Maybe the "financial hunger strike" will end some day when she begins to measure my financial judgment by my decision reasons rather than the decision outcomes. Maybe its good to let things take their time. It took a few weeks during the "courtship days". Maybe it'll take a few years for the financial understanding to kick in between us. But then again.. I am told that the only thing in my favor during our courtship days was my month of birth - she always wanted to marry a Scorpio and I was born in November. What's that one thing in my favor this time to get rid of my "financial hunger strike"?