Houses, horses, and husbands rarely get better with age. People often marry with the hope that time will improve their spouse. “When he matures,” the poor girl thinks to herself, “he won’t be such an oaf. He’ll acquire money and manners as he grows up.”
The horse buyer, too, hopes that his horse can be trained…refined…disciplined.
And the homeowner is often sure his house will become an object of greater pride and joy as others come to appreciate it more and its price rises.
Alas…all are usually disappointed.
Reluctantly, we’ve come back to London…and back to reckoning.
The northern hemisphere summer is over.
And what do we have to reckon with today? Several things.
We check the latest market information. What has happened since we were gone? Not much. Stocks seem to have come back a bit. Confidence has been restored. All it took was a cut in the discount rate…and a few hundred billion of extra liquidity. See how easy it is!
“What impressed me,” said Elizabeth over the weekend, “was how fast I changed my own opinion about owning property. When I bought that lot in Canada, I don’t know what I was thinking…but it never occurred to me that I might lose money. That’s the thing; I didn’t think about it…I just knew property was a good deal. But when I realised that I couldn’t sell it, it was as if the sky fell down on me. Maybe I will be able to sell it eventually, but now I just have to pay property taxes on it. It went from being a plus to a minus in my mind almost overnight…
“And I wonder how much of our lives are like that…we make assumptions about things without realising we’re making them. And right now, we’re all assuming things will continue more or less in the same direction…with no serious problems to worry about. We assume we’ll have money to spend. And we assume we’ll have the liberty to spend it. We can travel almost anywhere. Our assets are generally becoming more valuable. But I wonder if we aren’t living through a rare stage in history…and whether…one day…we’re going to wake up and see things entirely differently…and all of a sudden things we thought were assets – like that lot in Canada – turn out to be liabilities.
“I’m reading a biography of Madame de Pompadour. In a way, the 18th century must have been a lot like our time. People moved around a lot. Not the poor people, but the rich. And they enjoyed a remarkable quality of life…for a while. But then came the French Revolution…and then the Napoleonic wars. Life was not so agreeable. And then, after Waterloo, Europe was at peace for a long time again…and it was very prosperous. And then came WWI and the Russian revolution…and then the stock market crash and the Great Depression. I guess what I am saying is that these episodes of peace and prosperity don’t last indefinitely…but when they are here…we take it for granted that they will continue…”
Most of the time, they do continue. And the longer they continue…the longer the bailouts and baling twine hold things together…the more confident people become.
The perverse work of the financial markets is to set up investors so they lose as much money as possible. That requires confidence.
In this, of course, they are aided and abetted by the usual assortment of conmen, Congressmen and incompetents. George W. Bush announced last week that the Federal Housing Administration would come to the aid of distressed mortgage payers. The Federal Reserve, of course, recently flew to the aid of distressed speculators. And the financial industry has bent over backwards for the last ten years – helping investors get themselves into positions from which it will be hard to get out without great losses.
During this entire period, it was hard to get through a single day without someone offering to lend you money. Pity the poor people who took the bait.
We don’t know anymore about what will happen than we did before our vacation began. We spent the time in contemplation and meditation, of course. But, generally, we were contemplating how to paint a shutter or meditating on how to build a stone archway.
Neither the contemplating nor the meditating took us any closer to solving the mysteries of markets…but at least our shutters aren’t rusting…
Markets and Money