Vern Gowdie – Markets and Money (Australia) –
‘Here’s to you Tommy…’
Who was Tommy?
He was a regular patron at his local pub in Surrey.
The barman told us that ‘Tommy was part of the furniture.’
Every afternoon, for 41 years, Tommy would take up residence on his favourite stool and enjoy a pint or two.
Everyone knew and loved Tommy.
After a short period of ill health, Tommy passed away.
The barman lamented: ‘It feels different to see someone else sitting in the space we permanently reserved for Tommy.’
Then, with a shrug, he asked a question without really expecting an answer…
‘Nothing lasts forever does it?’
‘Too true’ was my reply.
On a daily basis, we go about our business. One day is the same as the next.
We become creatures of habit.
When our daily routine is disrupted, it can be unsettling. Our autopilot has to revert to manual.
For several decades, we’ve become accustomed to the economy and financial markets turning up every day in a predictable fashion…just like Tommy.
We make decisions — loans, savings, investments, purchases, etc. — based on an understanding that tomorrow is going to be the same as today.
History tells us this is a flawed principle.
The devilish thing about change is that it usually comes when people least expect it.
The record-setting Dow Jones. The low level of investor complacency. The optimistic growth forecasts for 2018.
These are all signs that people are expecting tomorrow to be even better than today.
We’re being set up for a major change…but hardly anyone is expecting it.
Today I’d like to share with you the foreword of the latest book I’m writing.
The book is titled Impermanence.
The more research I do, the more I’m convinced we’re ing into a period of change that is going to be highly disruptive. Most people are not equipped emotionally, mentally and financially to handle the changes coming.
Politicians and central bankers have cossetted us from the harsh realities of life.
Entitlements. Bailouts. QE. ZIRP. They’ve done us no favours. Increasing our dependency on the state and eroding our independence…especially the ability to think for ourselves.
Impermanence is my small contribution to awakening people to the possibility of tomorrow being vastly different to today…
‘Decay is inherent in all component things.’
‘Impermanence is a Buddhist concept.
‘Nothing ever stays the same.
‘Our lives are in a constant state of flux…even if we think all around us is calm and steady.
‘We grow older on a second by second basis. The cell formation in our is continually changing.
‘The evidence of impermanence in our lives is captured in the photos taken in our youth compared to the ones we see of ourselves today.
‘On a day to day level, one 24-hour period feels like another. Same day, different issues.
‘However, those 24-hour periods gradually become years, and the years become decades. Then, one day, that permanent daily routine becomes impermanent.
‘Over the course of our lives, none of us remain the same person…physically and mentally.
‘Disruptors are not unique to the tech world.
‘Life has its own disruptors…
‘Youth. Good health. Ageing. Ill-health. Accidents. Education. Employment. Redundancy. Retirement. Love. Marriage. Divorce. Dementia. Death. War. Peace…and that’s just to name a few.
‘Life is a continual state of flux.
‘Impermanence is not a spiritual journey…but rather, one of enlightenment. Awakening you to a coming state of flux that hardly anyone is expecting.
‘The intent of Impermanence is to open your mind to ideas and possibilities that previously you may not have consciously considered or entertained.
‘In recognising and then acknowledging the state of impermanence in our own lives, we are more open to accepting that all things in life are subject to an evolutionary process…in particular, the economy and financial markets.
‘The pace of progress of transformation from one state to another can be short or long.
‘For example, the lifespan of an ant is over in a few weeks. Whereas the Ice Age lasted thousands of years…hence the term “glacial speed”.
‘What’s important to recognise is that everything eventually changes.
In theory that may seem blindingly obvious. However, in practice, our daily lives function on the principle of “tomorrow being the same as today”.
‘Buddhism states that in this world there’s nothing that’s fixed and permanent.
‘You’ll note that this statement does not exempt “economic growth and asset price appreciation’ from the law of impermanence”.
‘Yet, after decades of markets behaving in a predictable manner, there’s an almost universal belief that “what has been will continue to be so”.
‘While the rest of our lives are subject to the laws of impermanence, we rest comfortably in the knowledge that asset prices and the economy are somehow immune to this law.
‘Permanent growth — with only the occasional and temporary setback — is what we’ve been conditioned to expect.
‘For proof of this belief, ask any financial planner for a projection on your capital. Without exception, they’ll use a range of positive returns — depending on your risk profile.
‘The prospect of a prolonged period of negative returns is not factored into the forecasting calculations. This notion is dismissed as an impossible scenario.
‘Yet, impermanence teaches us that nothing is permanent…not even positive returns.
‘From 1990 to 2012, investors in Japanese shares learnt this lesson the hard way.
‘Just as our ages, so too does an economy. After all, economic activity is a function of human activity.
‘The once lean and youthful economy of the 1950s is now old, tired and bloated. Needing more and more financial stimulus to keep the heart pumping.
‘We are planning our futures on the misguided belief the economy has its best years to come…when, in fact, the prime of our economic life is now a dim memory.
‘Impermanence gives you a panoramic view of the global economy. Taking you back in time to show you how we’ve been in a constant state of economic flux…even if you didn’t consciously recognise it.
‘The unprecedented levels of growth we’ve experienced in recent decades is but a passing phase…not a permanent state.
‘The economy of 2018 — with trillions of dollars in unfunded welfare commitments, record debt levels, massive shortfalls in private pension funds, deteriorating demographics, unprecedented central bank intervention, and historically low interest rates — is vastly different to the one of 1958.
‘Expecting the future to be a repeat of the past is the equivalent of expecting to stay young forever.
‘That image in the mirror is your daily reminder of impermanence.
‘The ageing economic reflection we see today is the result of decades of development, debt and demographics.
‘The pace of development is faster. Debts are greater. And we are older.
‘Decay is inherent and apparent in all the components of our past economic success.
‘In spite of this deterioration, there’s widespread belief that the future will be better than the past.
‘This is not logical.
‘Change is coming.
‘The future we’ve borrowed so much from is now going to make us pay our dues.
‘The only thing permanent about the years a is going to be the loss of capital by those who failed to recognise and understand the nature and impact of impermanence.’
Nothing stays the same.
Basing your retirement plans on what has happened over the past decade is, in my opinion, a massive miscalculation.
The only thing that saved (and I use that world loosely) the world since Lehman Brothers went bust is a US$91 trillion increase in global debt.
Who would have thought the solution to a debt crisis is more debt?
We’re being set up for the biggest financial failure since the Great Depression…and people are partying like it’s the Roaring Twenties.
How are they going to cope if change brings us a 1930s- economy?
To learn how you could minimise the permanent loss of your capital, please go here.
Editor, The Gowdie Letter
Editor’s Note: Due to the Australia Day public holiday, our offices are closed for the day. Bill will return with his regular essay on Monday.