The title above is the short version of the title I’m using for my presentation to Agora Financial Investment Symposium in Vancouver. It reflects my belief that this moment of financial uncertainty, like all those before it, is a golden opportunity for investors with vision to buy emerging disruptive technologies at truly bargain prices.
I’m constantly amazed by the sort of sentiment I read in mainstream financial publications. Stocks are down, so people decide they’re going to sell off and look elsewhere for profits. The stock market “stinks,” they say. Seriously, am I the only person who finds this sort of short-term thinking addled and absurd?
After all, we’ve seen financial cycles since… forever. We know they happen. We know that the best time to buy is when stock markets are depressed. So why are so many people acting as if the markets are broken?
Oh, wait. I know that one. It’s because most people are driven more by herd psychology than higher-order thought processes.
I’ve been reminded, while working on my Vancouver presentation, why I like the Austrian economist Joseph Schumpeter so much. One reason is that he considered big business cycles the inevitable consequence of innovation, as well as the resistance to innovative change that always exists within the old order.
This view, that cycles cannot be eliminated due to the biological imperative of human nature, sets Schumpeter apart from other economists, even of his own Austrian School. In fact, many of my friends of the Austrian persuasion who adhere more strictly to the banking theories of Mises and Hayek tend to irritate me. They’re. So. Whiny. They complain and complain about the stupid things that governments do and the fact that stupid people enable those stupid things… stupidly.
So what? If you can’t change it, accept it. And profit from it.
By this point in history, given that we’ve suffered through far more serious injuries to our economic system, and more than recovered every time, it should be obvious that human nature is not “repairable.” There’s not ever going to be some sort of global — or even societal — awakening, in which the vast majority of people suddenly realize that government is basically incapable of improving on free markets to any significant degree.
Societies do, however, respond to the pain caused by government-induced failures, just as B.F. Skinner’s pigeons learned complex behaviors without ever understanding them. We are, in fact, well on the road to recovery, though I admit that more people are going to have to suffer negative reinforcement (pain) before we are ready to make up for lost time. But we will.
Speaking of lost time. Much of my working day was disrupted yesterday when an unlucky bird managed to short out the transformer in front of my house. I’ve got backup power for my computers, but not the air conditioner, so I spent several hours working out in the pool. My pool isn’t long enough for laps, but 10 pounds of iron on a dive belt makes treading water a great aerobic activity. I alternate with sets of weightlifting, thus remaining cool even outside in the Florida summer with no air conditioning available.
Treading water with a weighted dive belt is far superior to swimming laps, which is excruciatingly boring. I find the struggle to keep my head above water in the deep end of the pool is not boring at all.
I’m sure you know the Chinese curse, “May you live in interesting times.” We do, in fact, live in very interesting times, and it may seem as if we’re treading water with iron weights hanging from our waists. On the other hand, it’s not boring, which means a lot to me. More importantly, we are in a period of historic opportunity, which we may never see again.
Yes, yes, yes — the market is down. Stop listening to the whiners. Now, when there’s blood in the streets, is the time to invest. Later on, when stocks have been doing well for a while and every moron decides that it’s time to buy equities, we’ll be in positions to “sell high.” You can’t really do that, however, if you got caught up in the pessimism, lost faith in human ingenuity and neglected to buy low. I’m probably preaching to the choir, however, so I’ll stop.
for Markets and Money
From the Archives…
China’s Coming Assault on the Western Financial System
20-07-2012 – Greg Canavan
Has Bernanke and the Fed Discovered a New Invention in Wealth Creation?
19-07-2012 – Greg Canavan
Why You Should Watch Your Blind Spot For An Oil War
18-07-2012 – Dan Denning
Flexible Investing to Become a Relaxed Investor
17-07-2012 – Murray Dawes
China’s GDP Figures… Lies… Damned Lies?
16-07-2012 – Dan Denning