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NEAL CONAN, host:

Artist, editor, and sometime fishmonger Alexandra Penney was lucky and talented enough to write a couple of best-selling books and earn enough to buy a sunny East Side apartment in New York, modest homes in Florida and Long Island, and tuck away what most of us would consider a very comfortable nest egg. One problem: it was all invested with Bernie Madoff. She has written about the fury, anxiety, and clarity that followed, first in a blog called The Bag Lady Papers and now in a new book by the same name.

And while the details of her story are unique, some of you share the experience of plummeting from riches to rags. So if that's your story, what did you learn? Give us a call: 800-989-8255. Email us: talk@npr.org. You can also join the conversation on our Web site. That's at npr.org, click on TALK OF THE NATION.

The full title of Alexandra Penney's book is "The Bag Lady Papers: The Priceless Experience of Losing it All." The author joins us now from our bureau in New York. Thanks very much for coming in.

Ms. ALEXANDRA PENNEY (Author, "Bag Lady Papers: The Priceless Experience of Losing it All"): I'm delighted to be here, Neal.

CONAN: And do you still wake up every morning at 4:00?

Ms. PENNEY: I do.

(Soundbite of laughter)

Ms. PENNEY: I do. And what I've learned to do is either go to bed earlier because no matter what I'm going to wake up at 4:00. I used to have terrific anxiety and panic attacks. And one of the things I've learned, having - this book is basically about having the rug pulled out from under you. And one of the things I've learned is how to stop this constant panic and worrying. I'm a worrier, and actually I start cleaning the house when I'm worried.

CONAN: Yeah.

Ms. PENNEY: But this is bigger than cleaning the house.

CONAN: There's no house big enough.

Ms. PENNEY: Yeah.

CONAN: Or dirty enough.

Ms. PENNEY: That's, well...

CONAN: Well, my house. Maybe.

Ms. PENNEY: Yeah.

CONAN: But anyway.

(Soundbite of laughter)

CONAN: The day the trapdoor opens underneath your feet, you're about to host a dinner party, and in fact somebody calls you on the phone and says, you got to go turn on the TV, you're not going to believe this.

Ms. PENNEY: Exactly. It was my best friend. And at the same moment, a click on my cell phone was my son and he said, Mom, I know that you're invested with Madoff. He's just confessed to a Ponzi scheme. He said, you can come out and live with us. He lives in Los Angeles. So I kind of knew at that moment that it was the end. I mean, I've worked since I was 16, sometimes two and three jobs because I've been a freelancer, a book writer. I've always been an artist, and taking jobs to make money to afford my art.

CONAN: Mm-hmm.

Ms. PENNEY: So this was hard-earned money.

CONAN: And this was from a situation where you were envisioning a future where you all seem - you seem pretty well set.

Ms. PENNEY: Oh, I was totally set as I thought, given what I saw - I mean, not hugely rich, but because this is like a 401(k). It was an IRA, an individual retirement plan. So it looked pretty good on those Madoff statements which also looked pretty good to me. So one of the things that I learned was you can give up a lot of luxuries, but there's one big luxury that I didnt realize I had, which was pretty much peace of mind from having a savings account. Unfortunately, it was with Bernie Madoff.

CONAN: Mm-hmm.

Ms. PENNEY: Before that, it was in the bank.

CONAN: There's a fascinating part of your book where you encouraged some friends of yours. You basically asked them an email question, which is, what can money buy and what can't it buy.

Ms. PENNEY: Money is a very interesting phenomenon. Obviously it cannot buy you health. It cannot buy you - being taller. It cannot buy you...

(Soundbite of laughter)

Ms. PENNEY: ...a family. It cannot buy you integrity or your reputation. It cannot - it can buy you a trip to the sun, so I can't say it can't buy you the sun and the moon because money can buy you a place where you can see those things. But the very basic things like health and a healthy, loving family, it cannot buy.

CONAN: There's also an interesting point in which you ask yourself, would it be better to have had, as you did, it all, so to speak, and then lose it, or to have never had it ever?

Ms. PENNEY: You know, that's a very interesting question. And somebody had asked me that and that's why I wrote about it. If you have money, you see two things. Yes, it can buy you a lot of things, but it's not all it's cracked up to be. It - you know, it doesn't buy you health. It doesn't buy you real peace of mind, which comes from - back to what Skip Gates was saying, know thyself.

So it's a mixed bag. I would rather have it. I'd rather be on the inside and know what it was like and then to lose it. But I think that the big, big point is really that you learn who you are when you've had the rag pulled out from under you. And I basically totally surprised myself - and that's about this know thyself...

CONAN: Mm-hmm.

Ms. PENNEY: I thought I'd fall apart when my worst nightmare would come true, the nightmare of being a bag lady, which was a childhood fear and on and off throughout my adult years - a fear which many, many women suffer. What I surprised myself about was I didn't just get paralyzed. Fear like that, a trauma like that can paralyze you or galvanize you. So fear has actually a good part to it. And I just was totally galvanized. I had to go back to work to pay the electric bill. I'm an artist. I'm a photographer, and the art market had tanked so I hadn't sold work for months.

And so, after Madoff, I didn't have - I had a little bit in the bank account just to pay, you know, bills for that month and a couple more months. And I thought, where - how am I going to survive? But I didn't fall apart. That surprised me. I got up, I went back to work, I called an agent in London. I was - my 4:00 wake-ups were happening and he was up, of course, because the time difference is such. And I said, Ed, you know, you haven't heard from me in 20 years, but I need a job. I need to write. I need to write something right away.

CONAN: And that evolved first into the blog on the Daily Beast with Tina Brown called The Bag Lady Papers. It's now a book called by the same name, "The Bag Lady Papers: The Priceless Experience Of Losing It All." Alexandra Penny is with us from our bureau in New York. If you've had the experience of going through that financial trapdoor from riches to rags, give us a call, tell us your story 800-989-8255; email us talk@npr.org.

And let's start with Sheila. Sheila with us from De Peyster in New York.

SHEILA (Caller): Hi. It's not a rags, or riches to rags story, but my question is, I had read an article about Bernie Madoff, that part of his allure for what he was doing was not just to make money for people but to make them feel, if you're with me you're special, you're an extra level up from those other people that aren't investing with me. And I wondered if that was part of his pull to get people in, that you know, the emotional, you're special, you're more special than these other people.

CONAN: Yeah. The con, if you will. Yeah.

SHEILA: Right. Right.

Ms. PENNEY: Well, I never met Bernie Madoff. He was a great abstraction to me. The way I got into it was through an - I was - had my money in the bank and I had saved a lot because I'd written books and I had been the editor in chief of Self magazine. And I was talking to an old friend who said, My money has been with this man for years. My daughter's money is with him. Let me see if I can get you in because the fund is closed. I had no idea that this was some special thing.

Now, I made about nine to 10 percent, which I thought was a huge amount. I then was checking with people - Harvard MBAs, Wharton people, financial advisers, people in the business, because that's where - what a lot of people do in New York, and they said that's not a huge return, people are making a lot more, but the thing about Madoff is that he's steady and he's stable and he gives those returns. Little did I know he's giving people like 50 percent returns.

CONAN: Mm-hmm.

Ms. PENNEY: Then I would have like freaked and said there's something wrong here. But at that time, nine, 10 percent, this is, you know, at the height of the economy, was not greedy, not, you know, totally out of line with what other successful working women were getting.

CONAN: Sheila, thanks for the call.

SHEILA: Thank you.

CONAN: Bye-bye. Let's go next to - this is Afif(ph), I hope I'm pronouncing that correctly, in Cleveland.

AFIF (Caller): Yup. That's correct. First, real pleasure to get on the show. My family was living during all the '80s up until the first Gulf War in Kuwait. And, you know, we were - my father was working with the government, extremely successful. Every year we spent, you know, three months a year in, you know, my mother's home country of England. We had everything we could ever want -private schools - and we were on vacation and we got a notice, you know, from someone that, oh, Iraqi troops are gathering and, you know, we were assured from people back in Kuwait nothing's wrong and then overnight not only did, you know, we lose our home, but all our accounts were frozen because, you know, in the U.S. - and they didn't know what was being taken by the government.

So we went from, you know, this great lifestyle to literally, you know, an apartment in England with only summer clothes and, you know, with no work and no prospects of work. And you know, 20 years later I was telling your screener that just through perseverance kind of we rebuilt ourselves, immigrated to the U.S. and you know, been on the road back ever since.

CONAN: So what's the fundamental lesson, do you think, when you suddenly lose everything?

AFIF: One, is that - and your guest said this - that money does not define you. The most important thing to us was family. And two, that you can always, always persevere. And the story where she said she called someone that she hadn't talk to for 20 years, you know, my father, he had one conference (unintelligible) in D.C. and he literally rented a DOS computer at the time and typed up a resume and he got two job offers having, you know - with no money, no anything. And, you know, ever since that, there's literally nothing that if you put your mind to it, that it's possible.

CONAN: Well, Afif, thanks very much for the phone call. I had the chance to see Kuwait right after the war and it was pretty ruined. So...

AFIF: Right.

CONAN: Yeah, indeed. Thanks very much for the call. Appreciate it.

AFIF: Take care.

CONAN: We're talking about the experience of going from riches to rags with Alexandra Penney. Her new book is "The Bag Lady Papers."

You're listening to TALK OF THE NATION from NPR News.

And let's go next to John. John with us from Swansboro, North Carolina.

JOHN (Caller): Hey, sir. It's a pleasure to be on your show. I love it.

CONAN: Thanks for calling. Go ahead.

JOHN: I actually am a photographer also. I do family studio work and we had the grace to be on a military base. We had a government contract for the past three years. And unfortunately, due to renovations in the studio space and the area around us, we - our contract was ended a few years early. And we've now had to find a place to move our studio to and not being into a high traffic area like we were, where we were doing 12 hundred sittings a year, now the past few months I've done two sittings.

CONAN: Wow.

JOHN: And, yeah, it has dropped my income from almost 200,000 to almost nothing, literally. And it's the first time in my life where I've actually had to start budgeting and clamping down. For most of my life, I was lucky to have family and friends who are - helped me out when times are tough. And now my fianc�e and I, we're on our own trying to figure out how to pay bills and keep things going without living beyond our means anymore.

CONAN: And what have you learned through this?

JOHN: Mainly, just to kind of watch the pennies and dimes. The pennies and dimes honestly has helped us out. Instead of buying the name brand stuff, we've gone to the Foodline brand and the off-market brands and cutting back from expensive cable to basic necessities. Figuring out what those basic necessities are are key to making it - at least for us in the economy where it's at right now.

CONAN: Alexandra Penney, you write about going from the gourmet Dean and Deluca coffee to, what, Caf� Bustelo?

Ms. PENNEY: Yeah. Actually, I love - it's actually (unintelligible). But you know, what I did? I sat down - I had so many friends who helped me and once said, you know, what's your strategy? I said, I don't have a strategy. And he said, come on, you got to sit down. And what I did was I made a very detailed list of every single thing I spent money on and I said to myself, I'm cutting it down by 60 percent. I have to. Or 70 percent. There's no wiggle room here.

You know, I need food, I need my computer, I need electricity, running water. And you know, I stopped subscriptions. But you know what? You can live with so much less and you do not feel deprived - at least I didn't. And it came from knowing that I could work again, even if the art market had tanked away, the photography market has tanked for your caller. And that if I did one particular thing - two things: one, no self pity. I allow myself self pity maybe one minute a day. No more. I don't even do that anymore. And the other was stop negative thinking, because it made me panicky and anxious. So I do SNT, stop negative thinking. And also I do stop future thinking, SFT.

CONAN: Mm-hmm.

Ms. PENNEY: Because if you start thinking about the future and what might happen and the fact that I have no savings and if some new catastrophe would happen, what should I do? So the mental discipline of saying stop future think - you're talking to Neal on the phone, your - or on the radio.

CONAN: On the radio today, yes.

(Soundbite of laughter)

Ms. PENNEY: You sound like my friend on the phone. I'm talking with Neal on the radio, you know, I'm enjoying myself listening to your listeners, and everything is okay. So I don't even think about tonight when I get home and maybe a new bill might be there. I try and keep the anxiety completely at bay. And in that way, I can get to work with a clear mind - not all the time...

CONAN: Mm-hmm.

Ms. PENNEY: ...but that's what the discipline is. That's what I learned.

This year after Madoff taught me so much, and basically I wrote this book so that people could understand that you will surprise yourself, you have strength, you have resources like your caller from Kuwait, and that there are ways you can control your thinking so you don't get, you know, completely crazy and anxious, and you can work and concentrate and focus.

CONAN: John, good luck with your photo studio.

JOHN: Thank you very much.

Ms. PENNEY: Good luck. Absolutely.

JOHN: Thanks.

CONAN: Bye-bye. And, Alexandra Penney, this probably not a 10-second answer, but did you ever get any of your money back?

Ms. PENNEY: I'm going to get, I hope - it looks very good - something called Sipik(ph) money, which is a fraction of - it's what you get from a government agency that insures it.

CONAN: Some kind of investment.

Ms. PENNEY: Yeah. Who knows if I'm going to get it, but it's looking good. Not that much. But anything helps, believe me.

CONAN: The book is "The Bag Lady Papers: The Priceless Experience of Losing It All."

Alexandra Penney, thanks very much for your time today.

Ms. PENNEY: I love being with you.

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