Today’s Markets and Money will deal with health and wealth – in equal measure (with a dose of inflation thrown in). Having good health, especially as you get older, is a form of enrichment so there’s symmetry between it and your wealth. And if you’ve been to a doctor / specialist / hospital recently, you’ll know maintaining your health is not cheap.
If you’re interested in improving your health, or if you’re feeling sick, depressed (and we don’t mean from your daily DR dose) or just lethargic, read on – this might be the most important essay you read all year.
But first: A special announcement. A one-off Markets and Money is going to hit your inbox in 24 hours. Quickly, some background…
Since the October lows, many global stock indexes are up about 20%. Aussie stocks put on 1% yesterday. European stocks closed at a six-month high. This really is some rally. But it’s still a bear market rally. Meaning the longer it goes on, the bigger the correction when it happens.
Stocks are not going up because the global economy is getting healthier. Businesses are paying off debt instead of expanding. Companies are laying people off instead of hiring. Banks are deleveraging instead of lending.
What you’re seeing in the markets right now – pure and simple – is central-bank-engineered asset inflation. It’s unsustainable.
So here’s the million-dollar question for Aussie investors: how do you successfully invest in a market with deflation as the over-riding influence, but punctuated by bouts of inflationary euphoria? Can you even make returns in such a market?
Over the Christmas break we did some serious thinking on this issue. We took some time on the beach (when it wasn’t raining) to relax…to step back from the rescue plans and bailouts… and focus on what’s REALLY going to matter for Australian investors this year.
The result is a report you’ll receive – for free – tomorrow.
What we’ve come up with aren’t direct recommendations. They’re warnings. Or rather they’re three big mistakes we think many Australian investors will make this year that will lose them money.
We think you’ll find it good reading – and hopefully it will help you make some good investing decisions this year.
And now, from the health of the economy to the health of your colon…
We bring up the topic of health after recently watching a cracker of a show called ‘Fat, Sick and Nearly Dead’. It’s been around for a year or so. But this was the first time we’d seen it on TV.
It’s a documentary about a Sydney bloke named Joe Cross. Joe is an entrepreneur. He spent most of his early years focussing on building wealth. He worked hard and, judging from his physique, ate pretty hard too. By the age of 40, Joe was nearly 140 kilo’s and battling a rare autoimmune disease called chronic urticaria.
As a result he was necking the powerful steroid, prednisone, daily. If you’ve heard of this drug, you’ll know it has some nasty long-term side effects.
Joe realised he was in trouble. He needed to do something about it. So he went to America and put himself on a (medically supervised) diet of nothing but vegetable and fruit juice for 60 days.
The results were amazing. He dropped about 45 kg. More importantly he dropped the chronic urticaria and got off the prednisone. While that sounds impressive, there’s another character in the documentary whose story will blow you away.
By cutting out processed foods, which are full of sugar and fat, Joe (and the other bloke) restored their health. It required a lifestyle change. But they were on their way to an early grave and had no other choice. They don’t live on juice now of course. But they needed a circuit breaker and it worked.
Fancy that. By eating food provided by nature, we become healthy. By eating food processed to within an inch of its life, we slowly kill ourselves. Most of the food sitting on supermarket shelves has minimal nutritional value. In order to extend the shelf life, most of the nutrients are killed in the process.
Our diets are full of sugar, fat and sodium. These things are long-term, silent killers. And the unhealthier society becomes, the more national healthcare systems buckle under the, err…weight of the cost of looking after a sick nation.
Demand for drugs goes through the roof. Western nations are over medicated. The pharmaceutical companies make a bundle from treating the symptoms, not the cause. We waste billions of dollars going around in circles.
We’ve got a theory about how things have got to this point. It involves central banks, excess credit and stealth inflation.
But first, there’s a personal element to this. So we’ll slip into the first person…
A few years ago I suffered from a major bout of eczema. I had it pretty bad as a kid, but it went away…forgotten about.
Then, a number of highly stressful events brought it back. Face, head, eyelids, ears…I was an itching, weeping mess…and very miserable.
Several trips to the doctor yielded numerous prescription ointments. I got a referral to a highly paid skin specialist who gave me samples of branded moisturiser creams and told me to keep up with the prescription ointments. Cheers for that.
Thinking I might be allergic to certain foods, I arranged a blood test through the health system. Because my skin reacted to dust mites, the genius doctor advised me to thoroughly air out my room. Apparently it wasn’t eczema, I was allergic to dust mites. Thank you taxpayer.
Things got worse and my doctor prescribed prednisone. This stuff cleared up the eczema within hours. But you had to keep taking it. And as I said earlier, this is a nasty drug.
It gives your body a blast of cortisone and fires up the adrenal glands. Like a central bank offering cheap money, it masks the underlying problem and tricks your body into thinking your adrenals (sort of like your body’s stress regulator) are okay.
At a decent cost, the health care system attacked the symptom, not the cause. I was throwing hundreds of dollars at the problem for no result.
Feeling increasingly miserable, I decided to see a naturopath. I was put on a strict diet for 6 weeks. No booze, no coffee, no bread or wheat, no meat…just lots of water, fresh fruit and vegetables. After a month my eczema had gone. Completely disappeared.
The moral of the story? Modern living can make you sick. Nature, not prescription drugs, can make you better.
So why is the food we eat slowly killing us? Why is the ‘market’ providing consumers with a choice that is actually harmful to them? That’s not how capitalism is supposed to work, right?
No it’s not.
Here’s our theory as to why things have gone wrong.
For the past few decades, central banks have held the price of credit artificially low. This has created excess credit, which translates into increased demand or purchasing power.
But the benefits of this credit boom, in general, have not accrued to the middle and working classes. Yes they have become wealthier. But they have had to increase their debt considerably to display that wealth.
The abundance of credit and resultant financialisation and globalisation of economies around the world put the focus on cutting costs. It became about achieving ‘economies of scale’ – a fancy term for bigger is better and cheaper. Nowhere was that more prevalent than in the production and distribution of food.
This reorganisation of resources and the economic structure of food production didn’t lead to lower prices AND a better product. That’s the hallmark of real technological improvement and genuine capitalism in action.
Instead, it led to lower prices and a reduction in food quality. The government agencies that compile inflation data just looked at the price, not the deteriorating quality. As a result, CPI inflation remained low. This kept interest rates low and allowed the credit boom to continue.
In industries where there were real technological improvements like computing, the statistician made a ‘hedonic adjustment’ to account for the improvement. The result? Very low inflation all around.
This made central bankers look like geniuses. And the middle class thought they were becoming wealthier because debt was cheap and allowed them to have ‘stuff’ they couldn’t previously afford by taking on more and more debt.
Low inflation – known as the great moderation – is a fraud. We’ve had doctored low consumer inflation numbers at the expense of our food quality.
In the meantime, Australia and the US have been vying for the gold medal for the fattest nation on earth.
Maybe it’s just a coincidence that obesity has become a major societal issue at the same time as the global credit bubble expanded. Maybe, but we doubt it. The West has many economic problems associated with debt. It also has many health-related issues.
You might think the link is a tenuous one. But if you think about it hard enough, it’s there.
What do you reckon? Do you have a story about food/health/wealth you want to share? Write to us at email@example.com
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