18 Jun 2010, 4:14pm
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  • the bearish argument ALWAYS sounds smarter

    Hat-tip to Monevator for the phrase. He’s right, dammit, particularly in a time when Mr Market is feeling down, but perhaps more generally. The bearish argument always has more drama to it, since it inherently assumes a change to the status quo. There’s no news buzz in ‘sun rises today’, no excitement to draw the attention.

    There are a lot of things that I could name, that indicate that the world is going to hell in a handcart.

    • Peak Oil
    • population increase
    • the increasing risk-aversity in the West
    • the baby-boomers retiring and stiffing the stock market for the next 20 years by selling out of it
    • inflation fallout from the credit crunch of 2007

    The problem is that at any time in history one could find a litany of things that were going to end the world. In the 1960s and 1970s it was nuclear armageddon, starvation, global cooling (!), oil running out.

    Some part of me still sees an incoming crapstorm, as the West surrenders its economic and intellectual fire to the East, and it is hard to insure against that sort of thing. Turning paper investments into real stuff is the only way to hedge that, and in the extreme you end up hoarding tins of lentils and lots of ammo. I’m old enough to come to the conclusion that’s not a life I want to live.

    I’m older than Monevator. I remember watching the moon landings on the black and white TV at primary school, and being enthralled. There were no limits to growth, then. My optimism survived the 1970s, and my college years, but something went badly wrong in the 1980s. Ever since watching Survivors on TV in the late 1970s I’ve had a penchant for the apocalyptic vision.

    Jenny from the 1970s Survivors series, played by Lucy Fleming

    At that time I also had a penchant for Jenny 🙂 So I tend to be drawn to posts like Early Retirement Extereme’s The Wealthy Shall Inherit The Earth.

    I’m on the general same wavelength, though I hadn’t thought it out anywhere nearly as well as Jacob. Peak oil will roll back the advance of globalisation by increasing the costs of transportation, and will probably define the high-water mark of living standards as measured by stuff.

    Britain isn’t in too bad a position as far as Jacob’s prognosis – largely above 50 degrees North, with ample water, reasonable amounts of coal and fertile soils. But it does probably have too large a population.

    Peak oilers and folk like Jacob are well outside the mainstream, but their ideas seem to be spreading. Insurance group AXA are taking a pretty dim view of future life in Southern Europe and in particualr the PIGS economies. EC head honcho Jose Barroso is anticipating dictatatorships in Club Med, purely from the financial fallout, rather than rising oil prices etc.

    We seem to be in a phony war with the recession, and losing ground as time goes on.

    And yet…what if Monevator is right? More recently, the UK has looked better relative to other European countries. Some part of that is the promise of an end to the profligacy of Gordon Brown, though overall I’m glad he and Alistair Darling handled the crisis itself, rather than the as yet untested Osborne. I’m not sure I would go as far as to say Britain is booming again, but I sure hope it is. How do I get exposure to the upside of that?

    Well, to some extent I do already. My AVCs are invested in L&G Global 50:50 FTSE and it’s the best investment I’ve made so far, which is just as well as it has most of my cash in it 🙂 It makes sense to do it in my pension savings, which I don’t plan to access for up to ten years. If Jacob’s vision comes to pass, then pension savings have no real meaning anyway, for the debased currency will hold no value. It will be destroyed by successive waves of inflation in booms and busts as the oil price see-saws, choking off each recovery as it gets off the ground when the increased demand for oil meets the implacable limitation of declining production.

    My post-tax savings in ISA and cash I am using to buy productive assets and investing in establishing a business that I can use to generate an income after finishing office work at The Firm. That way I am riding the bulls with long-term pre-tax savings while trying to hedge the bears with more immediate post-tax savings. I hope the bulls will pull ahead, and that my attempts to hedge the bears will turn out to be misallocated resources

     
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