If you read the paragraphs that Farrell wrote on those points, it is hard to disagree with the nature of the problems he cites. However these are not new issues and Farrell offers no reason as to why 2012 must be a tipping point for any of them. While I apologize for not taking the time to look I would venture to say that these points or similar ones were predicted by him to be tipping points in previous years.
Expectations of torn social fabric, or the breaking down of society were made at the beginning of the crisis and have not panned out and are unlikely to. Some things have gotten worse and will continue to get worse but we collectively can adapt better than most, probably not all, countries. To repeat an idea I have mentioned frequently, the US is the world's most important customer and so other countries have a vested stake in our remaining functional. Remaining functional is not a Jim-Paulsenian argument to be bullish but does argue for the US' ongoing ability to slog through as we have been.
Some of the other reasons cited by Farrell seem totally disconnected from the thesis of doomsday. His number 7 was about market technology whose consequence is that "average investors are no match for Wall Street’s 'high-frequency traders.' " He's probably right here for average investors who actually try to hit bids and lift offers faster than the machines but more practically average investors buy a few shares of broad based ETFs or blue chip stocks with the intention of holding long term not to scalp pennies before lunchtime.
Further, individuals have always been disadvantaged when compared to professionals and they always will be. No argument from me if anyone thinks that is wrong but it is hardly new. It is not plausible that a decades old issue can cause a breakdown in the magnitude he seems to suggest.
Farrell's last reason for doomsday was actually a suggestion of sorts about what to do in the face of doomsday not a cause of it. He cites advice given by Barton Biggs about being able to grow your own food, real everyone into the bunker stuff, except that advice from Biggs came from a book published in 2008. Based on what I have seen of Biggs' TV appearances he appears to have distanced himself from those opinions (please comment if I have that wrong).
We have real and seemingly (almost) unprecedented problems but end of the world arguments like "the next crisis, according to Weiss, 'will destroy the incomes, savings, investments and retirements of millions of Americans.' Yes, destroy. 'It will plunge vast numbers of families into the nightmare of poverty … hunger … and homelessness. Only a minority of investors will survive intact' " have been made for thousands of years, there has always been a big market for selling fear.
It is important to understand the threats but not overreact to them. It is also important to understand the hopium sold by Wall Street and understand how markets and compounding can work. Understanding both sides gives a better chance for successful critical thinking that is required for successful cycle navigation.
Away from investing we need to do our best to be healthy (fit might be a better word) and remain individually adaptive. We can't know how our individual circumstances might evolve. While I hope that my financial situation never relies on my generating an income from being an EMT if it ever does, then I will be grateful that I went through the process.The need for innovative personal solutions, a long running theme here, will become increasingly more important as time goes on. My neighbor with the backhoe is the best example of this that I know.
18 comments:
Roger, you have given a super response here!
What is Paul Ferral's record on prognositications out of curiosity?
Growing your own food is something we have always done. It is fun and has its benefits. BTW, we grow our own food and are fully invested.
If one wants to read about some serious future issues, check out "ASHFALL", bookstores or Kindle.
7:59,
Candidly I do not know when he went apocalypto but he could probably claim being right about the financial crisis but I don't think of him as having been correct on the magnitude in that he was calling for the breakdown of society, as he is now, similar to Panzner.
Roger,
Paul was correct back in june. For now i am waiting for the shoe to drop on europe before i call it bottom.
jeff from milan, italy
Our only hope is to colonize the newly-discovered earthlike planet.
http://tinyurl.com/cfsm97j
But seriously, Paul started down this path before 2008 as I recall. He used to be a champion for the individual investor, now he seems more intent on spreading fear. I sometimes wonder if it's all an act on his part to boost readership. If so, it doesn't work for me, get enough of that from mainstream media. I much prefer a balanced, constructive approach, such as you offer Roger.
stealing someone else's joke, I'm not sure how guys like Farrell even get out of bed in the morning
I certainly do not buy Farrel's doomsday argument; but it is going to be a nasty election, probably much more so than most. The President cannot run on his record, but will have a billion dollars to smear whoever the Republican candidate is, and he and his adoring main stream media will.
12:49pm: "The President cannot run on his record." Why not??? Given the obstructionism of the crazies in Congress, President Obama has done a more than creditable job domestically and internationally. I think he will welcome the chance to "run on his record." That's my opinion, at any rate. Bring it on!
02:36 seems right on. The president doesn't have to spend a billion dollars smearing the GOP candidates. They and the GOP congress are painting quite an astounding picture of ineptitude all on their own.
Roger, you miss the point about high speed trading.
Stock pickers, and the ranks of the retired are full of them, no longer can count on a stock's behavior being linked to the health of the underlying company.
Fundamental analysis is moribund, if not outright dead, and high speed trading has made the casino aspect of the market dominant.
I might be missing it, certainly possible but haven't there been other times where short term movement was not connected to fundamentals? The internet bubble comes to mind. What about solar stocks in the early 1980s, tv stocks in the 1950s and auto stocks in the 1920s?
Legitimate questions, but apparently all sorts of experienced hands are complaining about a total and unprecedented disconnect between stock price action and fundamentals, and this is not their first day at the rodeo.
And if these seasoned pros can't make sense of it, how is the home-brew stock picker going to avoid shredding?
If a do it yourselfer put most of the their portfolio into SPY and then a little into two different large cap stocks that are household names with the intention of holding for a long time then how could they have been shredded?
The stock picks pay or may not have worked out depending on the names but making sense of the short term is far different than investing for the long term which is the point I am trying to make in the post.
sorry the context of my last comment was buying at the start of 2011
To the comments about Obama being able to stand on his record, even ROBERT REICH doesn't buy that crap.
I am no supporter of the GOP candidates, they are all dreadful but so is Obama.
Two words: Supreme Court.
No matter what you think of Obama, you've got to admit he's got better taste in judges.
Chief Justice Roberts overturned a century of precedent to make our elections more crooked, not less. So much for stare decisis. The Koch Brothers may have celebrated, but democracy suffered.
The Republican clown-show we just saw inspires zero confidence, even among many Republicans.
I vote for the grown-up. And so will the country.
I've said a couple of times that I think the 2012 election will be a lot like 2004; truly dreadful sitting president who holds on because the other party is somehow worse although I think the GOP has a slightly better shot than Kerry did.
In Joseph Waumbaugh's novels about police work and policemen -- new centurions, choir boys, etc -- a theme that comes up again and again is the way that policework can sour you on humanity: You see the armpit, the crap that people do to people, so many times that the whole world begins to smell.
Farrell, Panzner et al are good cops I think but it is quite possible they've seen/smelled a little too much pit.
Roger, I know you like ETF's, but with so many evolving, stocks have just been commoditized. Individual investors have never had to deal with this scenario before and as it extends into the future. Paul may be right, no one really knows.
There is a dramatic lack of leadership. The U.S. is rudderless. Neither Obama or the "publicons" can guide us.
My third thought: Over the holidays, I had the opportunity to visit with a large number of late 20-yr olds, all graduates of a major recognized engineering program. Most had their MBA's. With all their talents, not a single one was working in a productive area of the economy. However, int eh engineering class I teach, all of my foriegn students are going back to their own countries in industry. Just food for thought!
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