A philosophical question: If I am in the woods, and my wife is in town and cannot hear me when I speak, and I say something, am I still wrong? Can I ever presume that I am right? Of course not! I cannot presume to be right any more than I can presume to know the future. “Boast not thyself of tomorrow. For thou knowest not what a day may bring forth!” The Dogs of the Dow Strategy has worked for the last 45 years multiplying a beginning amount by 50 every 20 years. Therefore, we know for a certainty that it will continue to work this way in the future.
“Not!!!!!!!!!!!!!!!!!!!!!!!!” No, we do not know this. The stock market has been the main driver of wealth accumulation for over a century and will continue to be so long into the future. Really? Are you sure of that? We live in exciting times and dangerous times. There are major demographic forces at work and technological breakthroughs just over the horizon that will bring the possibility of amazing opportunity and, at the same time, unprecedented peril.
At some point in this century, the tidal wave of “it’s all about me” consumerism and investment activity generated by the Baby Boomers will fizzle off into retirement placidity. There will, one day soon, be a situation where one retiree will be supported by two workers. And imagine what happens if life expectancy is increased dramatically by medical advances and you young devils find yourselves stuck with us old geezers for a lifespan of 40 years longer than expected. Shazam! Will Social Security collapse? Will the stock market’s up and down cycle that is more up than down in the long run be changed by the sudden absence of large numbers of Baby Boom investors? And consider the effect of other technologies. Heard anything lately about material science and bioscience?
There are major multi-billion dollar projects underway now in these areas. The nation that figures out the material science puzzle first is supposed to be the new economic superpower. When you can restructure matter at the sub-molecular level, you can create anything you desire: products that can be constructed in a microwave-appearing device in the home by reconstituting molecules of air, heavy durable goods assembled by an automated process from the basic building blocks of matter found in anything whatsoever, or a navy of one thousand vessels that appears overnight manned by robotic beings armed with weapons of mass destruction. (Upon seeing the Tower of Babel, God said, “And nothing shall be impossible to them that they desire to do.”)
Bioscience has the potential for creating an amazing bounty of food and wealth and also for environmental disaster. There was a documentary on PBS (I was one of the six people who watched it) about bioengineering. A species of salmon was altered so that it grew much larger than normal and much more quickly than normal. The females of this species have always mated with the largest males because they are the ones, it is theorized, who have always possessed the greatest skill at surviving. (It is “theorized” because no one has actually talked to a female salmon except for a male salmon. However, “Hey, chicky baby, you lookin’ fine!” would not contribute anything to our understanding.) These genetically altered fish were so young and inexperienced that they were poor at surviving, yet the females mated with them because of their size. These bio-engineered fish are kept in pens surrounded by wire mesh in the ocean. They grow very large and are a potential source for a harvest that could help eliminate hunger in the world.
There have been computer projections that have been done on what would happen if they escaped the pens and bred with the salmon in the open ocean. These studies suggest that the entire species could cease to exist in a few months. The young inexperienced fish can survive in the pens. But after their genetic structure became dominant in the species because of the female’s preference for them, the species at large would be incapable of surviving. Some scientists claim that this could happen, though it’s not likely, if even just one fish escaped. Many of the bioscience developments have this two-edged sword kind of potential for blessing and disaster. Bioscience can help bring a Great Dawning or a Great Doom. There is a feeling is some quarters that we are playing God and we are not really qualified for the role. One tiny miscalculation, one microscopic error, could hurl a species into oblivion or create an environmental catastrophe of Biblical proportions.
So let’s all just curl up in a fetal position and cry for the fear that is come upon us. “Woe! Woe! Woe!” No, more like whoa! Hold on there! Let’s remember our Lamaze training and breathe: “Hee, hee, hoo, hoo, hee, hee, hoo, hoo.” Feel better now? Ok, let’s find some hope in all this.
First, let’s state the Reward Principle: The reward we receive is proportionate to the size of the problem we solve. Maybe the business world does not always work this way, moment by moment, but it should. Ultimately, in the long run, I believe it does. A problem, then, is an opportunity for wealth building. You figure out how to solve a problem and then get someone to pay you to solve the problem. An abundance of problems equates to an abundance of opportunity.
Second, there have been forecasts (negative and positive) in the past that were wrong. “Social Security is going to collapse.” A lady I work with who is in her sixties said that she has heard that all of her life. “Everything that can be invented has already been invented.” This observation was made at the dawn of the twentieth century. “There will be air conditioned domes covering cities in the future.” Can you imagine the fuel cost on that one? This idea, portrayed in futuristic magazine articles in the fifties, betrayed the notion that cheap fossil fuel was supposed to be virtually unlimited and would always be available in abundance. We were also waiting for the “problem” of radioactivity to be solved so that atomic energy would usher in the New Age. Post war optimism was so great that we were sure it would just be a matter of time before this “problem” was solved. There was an old Bugs Bunny and Elmer Fudd cartoon that showed Elmer shooting at Bugs through the decades. When he got to the sixties, he was using a ray gun. There were folks predicting flying cars by the nineties.
We always expect a lot out of our future. In the past, they thought we would be doing exotic, spacey things in our time that never came to pass. Yet there were many other things that came into existence that were far beyond what anyone imagined: the personal computer, the Internet, VCR’s, DVD’s, the gigantic share of our economy dominated by entertainment, World War II, the Holocaust, the slaughter of 100 million people in a vain attempt to impose Marxism on the people of this planet. Most of what we fear never happens. Most of what we hope for never happens. Then other more terrible and more wonderful things that we cannot imagine do happen. We adjust, we study trends and try to stay ahead of these as they change, and we position ourselves to serve by solving new problems.
Third, rapidly developing change is the order of the day, the norm. This is both a problem and an opportunity. In April of 1995, I was sitting in an introductory Systems Management class at the University of Texas at Dallas and the professor said that the head of his department believed that there had to be a way to use the internet for commerce of some kind. That was just 160 months ago, as of this writing. Just 160 months ago, the internet was not commonly used as a marketplace. Now, every product, every new movie, every TV show has its own website. If you miss one investment “train”, worry not, another one will be along shortly. A tsunami of change and problems presents a plethora (I just had to find an excuse to use that word) of opportunities to respond and solve the problems and collect the financial rewards for doing so.
In light of all of this, the problem, then, in the investing arena, is knowing what the trends are and how to use them to make money over the long run. My answer to this problem is that I have no answer. I study all the time and recommend that you make reading, studying, and research a way of life. But, even at that, I am not smart enough and not knowledgeable enough to stay ahead of this game. So I try to identify certain people who are consistently ahead of the curve. Two such people at the present time are, in my opinion, William J. O’Neil (editor of “The Investor’s Business Daily” and author of “24 Essential Lessons for Investment Success”) and Martin Weiss (www.moneyandmarkets.com).
There are several other “ahead of the curve” guys and gals, but I want to keep the list short to simplify things for the one who is just now beginning to try to understand the process of making investment decisions. If this is new to you, just try to get your mind around a few concepts at first to keep from being overwhelmed. Remember, you can go to the nearest IBD Meetup Group to surround yourself with mentors who will help you through the investment decision process. Look on the internet to find the location of the nearest Investor’s Business Daily Meetup Group.
You will identify several others, as you go along, that have a handle on what is going on, a perspective that is overarching, and who are perceptive of the shape of things to come. You can tag along with people like this, not that you just blindly accept whatever they recommend. Check out the trends they see and investigate the information they provide, and if you agree, act on it.
http://www.DebtDestructionEngineer.blogspot.com Your wealth is hidden in the fragments of your life.
August 13, 2008 at 10:29 am |
Thanks for sharing that!