Several rather unconnected reports give a poignant lesson on the importance of true principles. That is, if you follow a correct idea through to its conclusion, it does not matter what the established facts may be at a given time, your hunch will come good.
In a not unexpected report (Financial Times), it’s announced that the G20 Summit is set to deliver a coordinated removal of the various stimulus packages that have, for the past year or so, “rescued” our economy from the “the Abyss“, as our beloved Rudd called it.
Jean-Claude Trichet, European Central Bank president, writing in Friday’s Financial Times, has outlined for the first time the principles the ECB would use to unwind the exceptional steps it has taken.
The OECD is forecasting that in 2009, the contraction in output among G7 nations will be 3.7 per cent, less severe than the 4.1 per cent decline forecast just a few months ago. The OECD downgraded the outlook for the UK, which will be the only G7 nation not to show growth in any single quarter of 2009.
The idea still holds true that, had there not been any stimulus packages, and had the market been allowed to take its natural course (as a side effect of an untenable and unnatural way of doing things over the past several decades), then we would have reached the bottom sooner. Arguably, more villains would have been caught off guard and not given the precious time they’ve now gotten to re-manoeuvre themselves before the safety net is removed. And the idea of saving the Government splurge money instead of spending it has once and for all proven correct. It was never going to last anyway.
Still, it’s frightening to see such unison in global economic policy. The more this happens, the more you can be assured that Democracy is dead. They have decided that, through their artificial economic “stimulus”, they have convinced enough rabbits that the sky was not really falling in. The cute little bunnies have come out of their warrens, raising their furry ears once more. They are ready once again for the slaughter, and the big slaughter machine (the Stock Market) has had its blades resharpened.
The voice of experience and wisdom is well heard in Bill Bonner’s latest Daily Reckoning article, where he says that the market (and the economy) never reached its true bottom:
We say that because stocks never went low enough to qualify for a genuine bottom…and investors never showed the kind of disgust that you usually get at real bottoms.
We say that, too, for a second reason – the economy. In order to have a booming stock market, you need a booming economy. Earnings need to go up. That justifies higher prices. It also contributes to the positive mood among investors that persuades them that things are getting better and better…and that stocks deserve not only higher prices corresponding with their higher earnings, but also higher P/E multiples. That was the kind of mood that sent the Dow up from under 1,000 in August 1982 to over 14,000 twenty-nine years later.
The market is headed south (chances are it will declare itself as early as next week), yet our neighbours decided to pull up their veggie patch and plant flowering bulbs – good times are back again, after all. So we sat back and wondered, why are people such fools? Why do people sit, day after day, watching the television (or reading the tabloid newspaper), taking it all in, reciting it like it’s some kind of deep, irrefutable truth? Why don’t people think any more?
Well the fact is, most people never really did any thinking. Humanity, on the whole, has always outsourced its thinking, more or less. It has to, because the human intellect is not really capable of processing all of the information all at once and getting it anywhere near right. This is a strong point of Christianity. It gives a template for life which, applied properly and widely enough, leads a society to flourish in every respect. The proof of this is everywhere.
So it brought a chuckle and a smile to read in the Telegraph of a bit of new, kitschy research that reveals how “Men lose their minds speaking to pretty women“. But it’s worth remembering something about what Western Civilisation has become – an ordered, scientifically tested and heavily manipulated social system. It’s plainly obvious how much sex is being used in the media, more and more, to manipulate the mindsets of both men and women, and even boys and girls. There is a general massaging of minds to doubt and disregard the ages old principle of heterosexual monogamy, of the obvious advantages of family unity, and so forth.
The biggest predator of the innocence of children is television and radio. And now, of course, the Internet. People instantly think of a dirty old man with his greasy nose against the monitor, trying to talk his way into the pants of an under-aged schoolgirl, but this is a problem that pre-dates electricity. It’s not the Internet’s fault. The real danger is the recording and advertising industries, with their psychologists, sociologists, artists, and marketing gurus, designing material intended to fleece the unassuming of their money, morality, spirituality, their freedom and even their lives.
As it is with the poisoning of relationships, where people are misled by false ideals and moral relativism through psychology and deception, so it is with money. People are led to believe that there is such a thing as a free market, universally fair accounting, and so on. They forget that Some People Are Created More Equal Than Others. Commentators on the economy always fall back to the same erroneous assumptions which perpetuate the problem, namely that some how Government policy is directed towards the interests of its people, or that market movements are a result of “sentiment” (whereas they are now almost entirely computer generated, driven by word searches on media reports). On the contrary, more than ever, it is the whistle blower who can provide the real information on where things are headed.
It’s like this. Since the majority of traded share volume is electronic and driven by supercomputers, basing their decisions on split-second price movements and news reports coming out of Reuters and other mainstream agencies, an inevitable predictability develops in market movements, because even a clever computer is predictable. Editors of news articles can now influence stock prices by the mere wording they use, and owners of media conglomerates can flood the news with fear stories, and the market jumps (even though no human being jumped). So it’s no surprise that researchers have noticed patterns revealing the hidden hand behind the stocks. There are algorithms which now reasonably predict stock market crashes. But this electronic milking machinery is counterbalanced by the ongoing human factors of insider deals and trading, which compounds the futility of a slow-coach, honest human being trying to win in the greatest casino of all time – the Stock Market. “You can only win if you know the agenda behind the agenda behind the agenda”, is what we overheard in a busy coffee-shop once. It’s rung true ever since.
We found one more article this week that was noteworthy. Eric Hommelberg at goldseek.com suspects that gold prices are about to go through the roof:
The simple truth is that GATA has done such tremendous research and has come up with so much evidence that even some major banks like Credit Agricole and CITI Group have published bullish reports on gold projecting $2000+ gold based on GATA’s findings. As John Embry of Sprott Asset Management once said, everyone with a IQ higher than a grapefruit should admit GATA has a point. Obviously GFMS Chairman Philip Klapwijk fails to meet Embry’s IQ criteria since he refuses to debate GATA on grounds you shouldn’t deal with terrorists.
The reason I quote his article is because he smells a rat. Gold prices are heavily manipulated, a point that is now well and truly proven. Gold is not a money generating asset in and of itself, but a purely speculative item. It need not be avoided like the Plague, but it ought to be treated with the same respect and caution as a vial of Plague. It’s a morally neutral metal which is there to be understood and taken advantage of, should there be any advantage to be taken. Eric puts it like this:
A decrease in gold demand is simply a myth being kept alive by desperate gold bears sitting on huge short positions that can’t be covered at current price levels.
The whole system [of US money] is based upon faith and backed by nothing. A skyrocketing gold price would set off all kinds of alarm bells which could lead to a dollar collapse. This is the one and only reason central banks have been dumping gold (through sales and leasing) into the market for so long.
The US can’t reveal its strong dollar policy without undermining its own credibility. Admitting they have been suppressing the gold price for so long would have had devastating consequences for the US dollar. Therefore at all costs, gold policies must be kept secret for the public.
GATA has long argued that gold has been oversold by banks, and that they are likely short of it (stated inventories overstate real inventories). The article might well be on the money. Gold looks set to skyrocket within days, as the stock market looks set to crash at about the same time. Might the US dollar collapse also? Food for thought, and perhaps it’s worth a quick lottery ticket (in the form of a lump of gold, that is).
Well, back to the point of our own article: Principles.
The principles we follow are those of monogamy, family, avoidance of debt and the respect for real work and genuine merit, and a distrust of all things bankish. If the government is stupid enough to throw free money at you, take it and shove it up the bank’s anatomical equivalent of a backside by paying off your debts. If the media tells you to dump your kids in a creche, look after them at home instead. If they say you should buy a flat panel screen, go and sell your old TV and go to a second hand bookshop and buy a classic, like something by Mark Twain or G.K. Chesterton, and shove the rest of the spare cash up the bank’s backside. If the government says put all your spare money away into your superannuation fund, don’t, and once again shove it up the bank’s backside. And so on. If, at the end of it all, the backside is full, use the money to build real wealth for yourself.
The recipe for success in this era is to hold to old, proven principles, despite every message to the contrary. Reduce the difficulty of doing so by not permitting the media to bombard you with uninvited propaganda. Pick and choose your own reading, and clear your mind.
When visiting the elderly sick in Hospital, or in nursing homes, many different scenes can be observed. A few hours of sitting, listening and looking around reveals much about the society in which one lives, and in a short time, the most important lessons of ageing can be learnt. Just look and you will see old people with sons, daughters and grandchildren filing in and out of their hospital rooms, surrounded by flowers, cards and gifts. Next to them, people gazing blankly at the ceiling, having not met a familiar face since falling ill. It is the latter scenario that most people fear in their old age. Unfortunately, it is a growing minority that is destined for this situation.
Many elderly are practically childless. They may have several sons and daughters (whom they already rarely see), but in hospital, they are totally alone. Not a soul visits them and it is only the nursing staff who will spend any time interacting with them. But hospitals are busy places and the nurses come and go, and the doctors are even less accessible, since they are spread thinly between so many and inundated with paperwork. These poorly paid and seriously overworked hospital staff become the surrogate family for a time. When old people get sick, they rarely recover to their original state of health. When they go home, or “to the Home” things are never the same.
In hospital, they all appear rather alike – frail, depressed, sick and all dressed in patient gowns. But talk to them and you will hear a surprising variety of histories. Among them are former professionals, tradesmen, housewives, labourers, the educated and the uneducated. Why they are so alone is not usually a simple matter, but, despite their differing backgrounds and stories, several themes tend to run in every case. While people describe annoying traits such as rudeness and crabbiness as a reason for the problem, they don’t distinguish these as being a cause or an effect of one’s predicament. The reasons for their loneliness go beyond personality.
Loneliness in old age is associated with depression, dementia, suicide, higher blood pressure, substance abuse (alcoholism, heavy smoking, etc.) and generally poorer outcomes from an episode of illness. It’s no surprise, since people are social beings and most people, without social interaction and the responsibility that comes with it, become slothful and fall into self neglect. People need people. Growing old gracefully has little to do with material wealth, but everything to do with being surrounded by loving people.
So who should look after you when you are old? Who will come and visit, bring you the things you need and help out without taking away your dignity and freedom?
Socialists would argue that governments have the role of ensuring that all the social needs of the elderly are catered for in an institutionalised manner, and that anyone who had made better preparations (by saving, working hard and avoiding debt) would be called upon to help out those who had made none (by being taxed). Capitalism teaches that if people failed to save for their old age, then it’s solely their problem. In both ideological systems, the idea of family rarely comes to the fore. In the U.K., for example, the emphasis in the debate is on Meals On Wheels type services, organised and paid for by local government agencies. These services end up being run in a similar way to every other service – impersonal, cost orientated, and usually of a consistently low standard. The result is crappy food at home, crappy food at the hospital, and unenthusiastic, distant people providing said food (and other services) to unenthusiastic recipients. Nobody wants that.
The fear of being institutionalised is powerful and has been used to great effect, particularly by the Australian Government. Using this fear, successive governments have driven people to increasing superannuation contributions, pursuing the home ownership ‘dream’ and buying up private health insurance. All of these are ultimately geared around the assumption that children won’t look after their parents, the Government will stop the pension and the health system will be unable to look after the elderly. None of these assumptions is fact, but, as prophecies, they are self fulfilling.
As a result of fear and Government policy, people preparing for retirement invested in financial instruments such as shares and superannuation funds. A lot of this money has evaporated, wiping out years of hard work and savings. Before the financial crisis, people would speak of investing in superannuation and shares as a way of making sure they were not dependent on their children in retirement. They assumed that children had no desire to help their parents in their old age, that they would rather lock them up in a nursing home, never to be visited. The older generations view their own children as avaricious, selfish and disloyal, but the finger of blame frequently turns upon itself. Paradoxically, by their greed, people are ensuring their own poverty.
What people should be doing is investing in real things and real people – the ones who matter most. The practice of trusting one’s own welfare to strangers has never proven to be wise. Refugees, for example, are at much higher risk of separation, loss of wealth or even death than people who try to survive a conflict by staying and hiding in their own, familiar environment. Yet this goes against what many may assume to be true, but just as it is better to avoid becoming a refugee, it is similarly foolish to throw one’s self on institutions for support. As much as people may detest the idea of becoming a burden on their children, as a rule they are better off in such a situation than becoming dependent on faceless organisations whose priorities are based in accountancy and legalism, not humanity.
In many ways, the people who do not think so much of the future but put their resources into supporting their children and close relatives are the ones taking the path of wisdom. Several hundred thousand dollars on an investment account is a mere promise of material support when compared with the same, invested in one’s children and their families. By placing their money, emotions and priorities in favour of children, parents are buying into their children’s success, with the reasonable expectation for reciprocal support later on. This is far better than the default scenario of entrusting one’s self in government pensions or private superannuation fund returns.
Of course, there is more this than money. If the approach of trusting one’s children is to succeed, then the children have to be trustworthy, yet this can only come from leadership by example. The onus is on families to build a culture of trust and accountability, of straight talking, straight thinking and keeping promises. Traditional families are well placed to survive economic and social upheaval because they are based on these principles and their reliance on institutions for survival is minimal. By building ties with the children in meaningful ways as they move from being dependent to independent, to being family builders themselves, the older generation ensures that it is looked after and respected. Avoiding loneliness in old age comes from engaging in the lives of the grown children (as equals), in showing respect as well as giving guidance. It’s that simple, yet perhaps the reason this does not occur as often as it should can be attributed to children wanting to rebel against their parents, and the poor way in which this is dealt with by parents themselves. A cycle of animosity develops which perpetuates itself for decades, during which important events in the children’s lives pass by without the parents’ involvement. Eventually the parents become elderly frail, at which point it is too late to make amends.
Loneliness in old age, by rights, should be a rare problem. Becoming old, though itself not a particularly pleasant thought, should come with the great compensation of feeling satisfied what one’s life has achieved. There is no greater source of this than to see one’s own children and share in their success. Family life, therefore, should be the “superannuation fund” of first choice, since its returns are of an enduring and fulfilling quality that institutions cannot match.
Think back to the time you last sat in front of the television. In all likelihood this is not a difficult task. Most people can think back half a day.
When listening to financial news, it has not been uncommon to hear the reporter say things like “And Jones Heavy Industries beat the trend to finish 20% up at the end of trade!” One is led to think “I wish I had my money on that one!”. Flick to the station for the illiterati and it’s the same thing except in dumb-speak: “And Mrs. Jones of Smalltown won five hundred thousand dollars with her lucky numbers 3, 6, 42…” and one is led to think “I wish I had put those numbers down on my lottery ticket!”.
Few people are unaware of the fact that horse races and lotteries are worse than a zero sum game. The House always wins. Stocks are no different. The Trading House always wins. The people owning the horses don’t make as much of a living from having winning horses than they do from fleecing the punters at the races. So it is for stocks.
And in a losing streak, or a “Bear Market”, the same gamblers are out in force, each trying to guess when the losing streak will end. At the horse races one sees the old gambling addicts, chewing their pencils and working the probabilities. It’s all self deceit and with all the same, potentially lethal consequences as alcoholism or gambling.
People have woken up to this truth rather late, unfortunately. Many have nothing else and today they are desperate.
But if you go and sit where you always sit, in front of that television, turn the volume to zero and close your eyes, something will happen. The resulting silence can speak volumes about your inability to have a real conversation with your spouse, the absence of your kids or friends, or the absence of anyone at all. It is an altogether too threatening silence for many to withstand – a typical television withdrawal effect. But keep the sound off. Think a bit longer.
With the television off for several days, the mind will clear. Maintained for several weeks, your ability to think about your life will return. You will find the days filling up with social contacts, with unfinished jobs around the home, with gardening or with those long forgotten hobbies.
Even selling the television has benefits. You will end up with another useful corner in a room and perhaps several hundred dollars in your wallet, and several extra hours in every day, absolutely free of charge.
It is at this point that, for the first time in probably two generations, someone in your family has finally broken free. Your future becomes brighter. You have taken your first step towards surviving the coming upheaval.