Saturday, November 15, 2008

Day 16: Letter to Dad

Here's an email i sent off to my dad because he didn't really get why i'm not all hype about buying stocks now that the market's low.

Hi Dad,

the major concern i have w/ the future of the economy is the fact that the oceans are becoming depleted of fish, forests are being depleted, and we are running out of clean water and healthy soil. Basically, the economy is built on growth, but the environment and the resources it provides are reaching their limits. Although you can say that "in the long run" the trends show that the markets will recover and continue to grow, i feel like the economy (and humanity) are heading into completely uncharted waters. There is no precedent set for what will happen if and when fisheries collapse, if and when food shortages become more and more commonplace, when oil and cheap energy which our socieities are built on become more and more expensieve, and less and less availalbe for the masses.

Also, it is accepted that industry has changed the global climate enough that we can expect rising sea levels, and more hurricanes, tsunamis and tornados. Though this has sadly boosted the economy in the past, i think in the future the financial strain they may have on any and all countries (and subsequent mass migration of peoples) could be terrible.

The scientists know that these changes are already happening in our lifetime. I don't know much about money, but i feel that consumerism and capitalism, in the end, may be remembered for their short-sightedness. i can't say how my concerns would play out in the stock markets, but i can't imagine it would be good. Part of me thinks there could be a financial crash that will never recover in my lifetime, or at least not to its present format.

As you say, hope for the best, prepare for the worst. In a best case scenario, i think the concerns mentioned above will not happen in a quick or definitive way. Rather, they will happen slowly but surely, but in a way where i personally won't suffer the fall-out so much. Maybe the stocks i have will be lucky enough to continue appreciating in my lifetime.

For a worst case scenario, maybe i should be investing my money in a piece of property which has access to local agriculture and energy.

Anyhow, thanks for taking my rmb bk to Canada and helping look after my investments. For now i'm happy to follow yr advice re: investments, espectially as i don't know what else to do with my money for now.

Obviously i should do more research about money and stuff, but all the above is my gut-feeling about what the future may hold. What do you think? I know it's a little Doom and Gloom, but i don't think it's unrealistic.

Ok. talk to you soon.



1 comment:

lenka said...

Hi Will, I debated for a while if I should comment on this one. Considering that I spend hours each day following the financial fiasco and the upcoming depression that will result from this greed, I feel I really need to post in response. Not just for you but for your dad as well.
Your dad's argument boils down to stocks being cheap and that, historically, stock only go up. It was not long ago that many "investors" bought into the same argument vis-a-vis housing. Not just in Canada but in the US, China, Dubai, Eastern Europe, and pointedly, Iceland. Arguing that stocks are cheap is akin to arguing that Calgary's or Vancouver's housing is cheap because it has come down in price.

What most amateur investors seem to miss is that we find ourselves on the back side of the biggest credit bubble in history. Cheap money has inflated assets (housing, stocks, bonds, currencies, land, commodities, etc. in short everything) beyond any reasonable fundamental value. So far, the housing deflation in the States, UK, Spain, Australia, China, Phillipines, Laos - you get the point that the greed money is spread throughout the system like cancer - is only a precursor of what is to come. We are entering the monster of all deflations, bigger than the Great Depression. Bernake and Paulson with their "friend of Hank" bailouts have been trying to hold the shit together with a duct tape. They cannot hold the economy together because the ponzi scheme has lost true believers in the institutional ranks (i.e., pension funds, endowments, sovereign wealth funds, etc.) The small investor, such as yourself and, even more importantly, your dad are being told to buy because everything is so cheap. You will be the last sucker to hold the bag of stinking shit that does not have, and never had, any real value save the "faith" that others will stand in line and buy this stuff from your hands. Ain't gonna happen.

Smart money (and I mean really big money with access to information beyond your financial advisor and the globe and mail) are bailing en masse. They need you to bail them out by buing "cheap". Small investors are going to be slaughtered like they always do in a ponzi scheme. At this point, you are buying into a collapsing pyramid scheme that will crush you and your little pile of money (you know the money that you come by honestly by working your ass off everyday, dealing with cranky parents to boot)

I have a proposition for you: take 10% of your money every month and light it on fire, this way you can get used to the rate of destruction of your money from now, till you have nothing left. At least you can rest assured that some as**ole banker is not sailing around the world on his luxury yacht on your dime.

Will, you say you know nothing about financial matters. You should if you want to understand the scam and brazen looting taking place today, and every day since the shameful bailout of connected friends (this really started in August 2007), that will lead to social chaos and painful adjustment. Don't worry about the banksters and other monied class, they will be OK.:)

I think your idea of buying productive land with food sources near by is far more enlightened than feeding the greed monster that is our financial institutions and addictive credit on which all prosperity depends. Access to credit is gone; that goes for individuals and companies. Imaginary earnings on which price/earnings ratios were built are gone. Housing as an investment strategy is gone. Specualtion is built on easy credit, that is gone for our lifetime for sure. Nothing is cheap in this environment of "wealth" destruction.

The Americans are going to join the Chinese in being collectively poor. We just have to make alternate plans. Water, food, land, community, sustainable energy will soon be the new buzzwords - and thank god for that. It may seem like a disaster but it is the only way we are not going self-destruct in this perpetual growth model.

I have seen an empire to just whimper and die. The US is not going down that easily but it is going down. Doom and gloom? No. The only option we have left so we may as well embrace it (hey, you never were a materialist so you won't suffer). Just thought I'll end on a high note :)

Perhaps the most important note I wanted to add: everyone needs to be interested in money because money is a proxy for power. Being ignorant of "financial stuff" gives the elites an infinite right to loot us all blind and rob as of social wealth that we will desperately need. No, you have no excuse, and neither does your dad. Google it, it is as simple as that.