We sat at our computer this morning weighing up the brewing battle between private equity and energy for the soul of the market. Which will be the bigger story in 2007?
Then we recalled a television from the early 1980s that used to give us nightmares and may have had something to do with our propensity to see worst possible outcome in any given scenario. It was a film called “The Man Who Saw Tomorrow,” in which an inhumanly round Orson Welles, dressed all in black like a harbinger of the apocalypse, revealed the stunning predictions of Michel Nostradamus.
After showing that Nostradamus forecast a great war between an oil-rich Middle Eastern tyrant (the anti-Christ) and the West, Orson waxes philosophic. We listened and were caught between laughter and thoughtfulness, which is the sure sign of a serious joke. Is a clown or prophet?
“He [Nostradamus] wrote about the end of the world in a letter to his infant son,” Wells says. “And you know it’s at such times that each of us looks at the long road head, contemplating not only our own future but the future of our children. Not many of us can see the future. But none of us need be Nostradamus, or have his gifts for seeing through time, to sense that we are at a crossroads, that our immediate future could hold the worst war man will ever know.”
Not many of us can see the future? Can any of us see the future? Well, no. We do know that there are certain laws of nature and probably, of markets. And we know that if you’re on the surface of the earth and you throw a ball up in the air, it will return to your hand at the rate of 32 feet per second, per second. From laws like gravity you can construct probabilities. And of course, from the accumulation of past data or experience, you can roughly say that things in the future may turn out to be a lot like things in the past. We can say this for sure with respect to asset bubbles driven by cheap credit.
But if all credit bubbles resemble each other in their happy, inflating days, each unhappy bust comes about in its own memorable and painful way. There is nothing we can do if a war in the Middle East creates another oil shock and rocks debt-leveraged Western equity markets to their shaky foundations. Welles says, that “We must each of us, in our own way, do something to make sure that war will never happen. Perhaps if we heed Nostradamus, it will not be too late, or for our children, or for our children’s children.”
We recall a comic saying that every time he heard the expression “our children’s children” he thought, “Do we really want our children having children?” Frankly despite the soothing attempt to make things better, Grandpa Orson is whistling past the graveyard of history. Each of us, in our own way, must prepare for the financial future that lies ahead. That means, we think, sticking close to hard assets, energy assets, and shunning debt. It’s old fashioned. But it works.
Incidentally, Nostradamus predicted that after the great apocalyptic war from the Middle East, there would be great peace and harmony until 3797, when the world would officially end. So, you know, we’ve got that going for us.