Making the Impossible Possible

This week brought new evidence, not necessarily that the stock market efficiently allocates capital to its most productive use, but that it effectively separates fools from their money.  The fool gives…Wall Street takes away.  In other words, the house always wins.

“Patience and fortitude conquer all things,” said Ralph Waldo Emerson.  Clearly, he could not have imagined the current bear market, which commenced with the opening of the new millennium.  Nonetheless, Emerson’s ultimately right, patience and fortitude will prevail.  But what good is it if, by the time they do, your retirement account’s ravaged and the money you’ve saved to cover your kids college tuition runs out one semester into their sophomore year?

Bear markets bring clarity to the world. Without the current bear market, for instance, one of the wonderful dogmas of the 1980s and 90s bull market would not have been exposed to be a farce.  What we are talking about is the great Wall Street myth that you can retire a millionaire and enjoy an extended life of leisure by buying and holding an index mutual fund.

In the year 2000, everyone knew this was true.  In the year 2011, everyone knows this is a crock. Continue reading

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The Next Crisis No One Is Talking About

Mark Twain once remarked, “Whiskey is for drinking; water is for fighting over.”  If the convergence of water scarcity factors currently shaping up comes to pass, this could be the century of water wars.

No doubt, a devastating water crisis is approaching.  While the world once possessed a massive supply of fresh water, human mismanagement of this precious resource has resulted in an abundance of scarcity issues.  Rivers, lakes, reservoirs, and below ground aquifers are drying up…and those that haven’t are so polluted proper water treatment would cost a fortune.

Without fresh, drinkable, water humans cannot live.  Moreover, just a temporary water supply disruption would wreak havoc on the economy.  If the water supply were cut off to your city what would happen?

It’s probable that within one week the whole place would verge on disaster.  The sewage problem alone would be horrific.  On top of that, if water resources were cutoff to the vast irrigation network that supplies agricultural fields and makes the desert bloom, food production would crash and chaos would follow.

Yet no one is talking about this looming crisis… Continue reading

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Warning Signs of a Financial Vesuvius

The Day Mount Vesuvius Blew

“Injustice, swift, erect, and unconfin’d,
Sweeps the wide earth, and tramples o’er mankind” – Homer, The Iliad

Everything was just the way it was supposed to be in Pompeii on August 24, 79 A.D.  The gods had bestowed wealth and abundance upon the inhabitants of this Roman trading town.  Things were near perfect.

Residents of Pompeii lived in large homes with elegant courtyard gardens and all the modern conveniences.  Rooms were heated by hot air flowing through cavity walls and spaces under the floors.  Running water was provided to the city from a great reservoir and conveyed through underground pipelines to houses and public buildings.

Fresh fish from the Bay of Naples were readily available in the Macellum (great food market) and countless cauponae (small restaurants).  Entertainment was on hand at the large amphitheatre.  Life was agreeable, affable, and idyllic for all…and it was only getting better.  Everyone just knew it.

By 79 A.D. Pompeii had experienced nearly uninterrupted advancement from its founding almost 700 years earlier.  That this would ever change was unthinkable Continue reading

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The Decline of Per Capita Wealth

Yesterday was a momentous day.  According to the State of World Population 2011, published by the United Nations Population Fund, it was the day world population topped 7 billion people.  We find this to be momentous not just for the sheer size of the population, but, more importantly, for the rate at which it is increasing.

For example, at the time of Christ’s death the world’s population was around 300 million. Slowly, over the next 1800 years, the planet added 700 million more people…hitting 1 billion when John Adams was President of the United States…and causing quite a shock to the intellectuals of the day.

The world’s burgeoning population produced visions of apocalypse for English economist, Robert Thomas Malthus.  Between 1798 and 1826, he scribbled six editions of his famous treatise, An Essay on the Principle of Population, in which he predicted a massive collapse brought about by population increasing faster than the supply of food.

Of course, Malthus was dead wrong.  Just 127 years later, in 1927, world population hit 2 billion.  Then, 32 years later, in 1959, the 3 billion mark was reached.  Fifteen years later, in 1974, the population topped four billion.  Thirteen years after that, in 1987, five billion was surpassed Continue reading

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