The world is often messy and sometimes a horrible place. If we’re going to be investors we have to get used to this reality. In an uncertain world it might be hard to find certainty, but as investors our job is to operate with certainty.
Nouriel Roubini, economics professor at NYU, called the real estate crisis and financial crash in 2007 and has these 6 things to warn us about in our economic recovery (from a June interview on CNN):
6 World Events That Could Hurt Our Global Economic Recovery
1. Economy of China is heading for trouble and will surprise investors to the downside. This will create problems in Asia (See #6).
2. The Fed moves too fast, normalizes interest rates too soon and crashes the market.
3. The Fed moves too slow, normalizes rates too late and creates asset bubbles.
4. Emerging markets will suffer as the US raises interest rates, global demand for raw materials wanes and China slows.
5. Ukraine-Russia conflict becomes a war and involves Europe and the US; Russia cuts off gas supplies to Europe and sends it into a depression.
6. Rising Asian nationalism leads to conflict between Asian powers – a real shooting war.
There was a song back in the late 50’s when I was a kid that was apropos for the cold war duck and cover nuclear holocaust on the horizon world we were in:
They’re rioting in Africa
They’re starving in Spain
There’s hurricanes in Florida and Texas needs rain
The whole world is festering with unhappy souls
The French hate the Germans
The Germans hate the Poles
Italians hate Yugoslavs
South Africans hate the Dutch
And I don’t like anybody very much
But we can be tranquil and thankful
And proud for man’s been endowed
With a mushroom shaped cloud
And we know for certain that
Some lovely day someone will set the spark off
And we will all be blown away
They’re rioting in Africa
There’s strife in Iran
What nature doesn’t do to us will be done by our fellow man
——Kingston Trio – Merry Minuet
Thoughts on Nouriel Roubini’s Predictions
It and Roubini’s concerns remind me that the world is rarely a tranquil place. People aspire for more. “More” can mean more freedom but usually does not. It usually means more good ole fashioned religion, the kind that tolerates nothing.
Our forefather’s came to America to practice that sort of serious type religion because they weren’t being allowed to do so in Europe. It seems most people in Europe didn’t want to hear that they shouldn’t drink, dance, date, party or play cards.
When surveying the world today we might want to remember that our ancestors wanted everyone to worship exactly the same way and live in theological communities too and went to a lot of trouble extinguishing the locals so they could worship god the right way. And, as I recall my history, they were quite willing to kill you dead even if you weren’t a local if you didn’t get with the program.
In fact, the only state that didn’t have an enforced state-wide religion in the original 13 was Rhode Island; everyone else had their own version of Christianity and those state religions were enforced to varying degrees depending on the level of seriousness. The Puritans of Massachusetts were very high on the seriousness scale and seemed to feel it was useful to hang the occasional Quaker to get everyone’s attention, particularly if they could also see some witchcraft going on behind the scenes.
Investing in the Real World
Point being, if you’re going to be an investor, get used to the world being a messy place. You’re going to be operating without certainty in the big wide world for your entire investing career.
Which is why it’s nice to be an American investor. We’ve pulled through so many crises so many times that it’s a good bet that whatever is happening out there, the USA is going to prevail, and dominate.
So while the world may be blowing up, America isn’t and won’t and it will pay in the future to invest your money on that long-term certainty.
Now go play.