Joseph in Egypt

The market has been on a hell of a run. The investment newsletters and the commercial media, focusing on the market's momentum, the promises of a better business climate from reduced regulation, a return to something approaching theoretical full employment, and the icing on the cake, the recent tax cut, can say nothing but, "Let the good times roll."

Perhaps, we should revisit the story of Joseph in Egypt.

Joseph, to be fair, something of a bratty little brother, his father's favorite, was sold into slavery by his siblings. They told dad a wild beast ate him. Down in Egypt Joseph was purchased by Potiphar, the captain of Pharaoh's guards. God blessed the captain and everything Joseph did until Potiphar's wife falsely accused him of rape. Joseph was thrown into prison. There he interpreted dreams for two of Pharaoh's servants who were not currently in their master's good graces. One of them lived to tell the tale to Pharaoh when the ruler had a bad dream about seven fat healthy cows and seven sick cows. Dragged out of prison to interpret the king's dream, Joseph prophesized seven prosperous years to be followed by seven years of drought and famine. He counseled Pharaoh to set aside as much surplus grain as possible to prepare for the bad years. As a result, Pharaoh was just about the only source of food to be had in the Middle East. By this time Joseph was the Chief Operating Officer of Egypt, Inc. He sold grain to other countries at exorbitant prices. Joseph also came up with the bright idea of supplying seed corn to Egyptian citizens in exchange for a 20% tax to be paid on everything they grew-forever. The tax was still in effect hundreds of years after the end of the famine. Listening to Joseph, made Pharaoh rich and Egypt rich. To be fair, it doesn't seem that Main Street benefitted quite as much as the palace in this story, but it does give one pause.

When the roller coaster is on the way up, put aside some of those profits for a rainy day or a dry year, depending on where you live. Maintain that age appropriate balance between stocks, bonds, and cash. Do not use an increase in your home equity as an opportunity to take out a second mortgage for a new SUV or a trip to the Bahamas. Every bull market will inevitably be followed by a bear. Unlike Joseph, I don't know when the crash is coming, but I know that it will come. Nobody has figured out how to keep the business cycle from turning. If you have liquidity, meaning cash available at the bottom of the bust, then you will be able to buy shares in profitable corporations and rental properties for pennies on the dollar. Those assets will then pay you income for the rest of your life, and hopefully, leave your family a legacy that could last for several generations.

There is another lesson to be learned from the story of Joseph in Egypt. Just as he dreamed when he was still a spoiled child, his starving brothers bowed down before him to beg for food when he was the master of Egypt. Joseph knew who they were, but they didn't recognize their supposedly deceased brother. After Joseph revealed who he was and forgave his brothers, he told them, "You intended to harm me, but God intended it all for good. He brought me to this position so I could save the lives of many people."

Twice in my life, after unfortunate and unfair setbacks, someone "spoke Joseph" into my life, "They meant evil against you, but God meant it for good." It wasn't obvious at the time, but in one case, it spurred me to earn an engineering degree, giving me an entirely new career. In the other instance, I was driven by circumstances to learn enough about investment basics that I was able to find both financial freedom and early retirement.

Never give up. Good luck? Bad luck? Sometimes, we just don't know.