Most investors are familiar with the observation regarding the ‘Lost Decade’, a term that describes ten years of demonstrated zero returns on invested capital (on average) in the stock market. The term however, does not include the massive losses experienced a few years ago by retail investors who bought ‘high’ and were forced to sell ‘low’ as a result of a contracting economy and predatory practices by major banks, brokerages and miscellaneous financial institutions.
In my view, another buzz-word term, ‘The New Normal’ is an abstraction from the retreaded relationships that are developing between investors, market-makers, financial advisors, the U.S. Treasury, regulators, and so forth. The reality that is emerging is far more dire, and politicians and others in authority are relentless in their attempts to obscure the ‘facts’ of the world’s predicament at present.
The true scope of the task facing humanity is this: the transformation of our technical and industrial society to painlessly mesh with the planet’s web of life. This means careful consideration of resource use, limiting the encroachment of society on the eco-niches of other species, and devising sustainable living practices for the long term. The first thing we need to do is to educate everyone to the fact that Mother Nature never intended the human race to exceed the natural bounds of our habitat.
We, as humans, have no special rights to the planet. We are simply one species of many, with our own unique survival skills and adaptations. But, unlike other species, we have the brain power and knowledge to understand our position in the web of life, and our potential for destroying it through uncontrolled growth of our population, and excessive consumption of natural resources. The clock is ticking, and the time to make these wrenching changes to global societies is NOW. We cannot afford to shrug off the problem for future generations to deal with. It will require painful readjustments to our global value systems and beliefs, and many personal sacrifices. We no longer have the luxury of promulgating quaint regional social structures and political systems, or religious beliefs and practices that have a negative impact on the world’s ecosystems and our precious web of life. This is ‘change’ we can all believe in. But, it starts with you and me. In the final analysis, it is what we do as individuals that matters the most.
So think about all this as you hear the hype and propaganda. The world must shrink the population down to where there are more resources than consumers of those resources in order to grow jobs and standards of living around the world. We are nearly seven billion people competing for a resource base that is only capable of sustainably supporting about two billon humans world-wide. Where then, should you be invested to secure your future? I would offer that at present, cash is the safest place to be until there is better clarity. As it stands, return-free risk abounds. And, the risk will be amplified as more and more businesses contract or fail. Even real-estate is a risky asset. Governments faced with huge populations of the unemployed, will raid the assets of the wealthy, confiscate holdings of precious metals, and when that well runs dry, will burden landowners with higher and higher taxes. Where else will they get the money?
Now, the foregoing is not to suggest that there will be no opportunities at all. In my view, attractive investments will emerge in environmental remediation, geothermal energy, waste management, recycling, and so forth. Whether there are any retail investors left to take advantage of these opportunities is another matter entirely.
To quote James Kostohryz, one of the few investing ‘Gurus’ that I respect, “As a practical matter, a successful investment strategy for most individuals must place a primary emphasis on avoiding bear markets. This implies being willing to take profits during bull markets and leaving potentially illusory gains “on the table. By studiously avoiding bear markets, investors will be more financially and emotionally equipped to purchase stocks when the herd is selling, valuations are cheap and long-term expected returns are optimal.”