The title above is the short version of the title I’m using next week 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 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 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.
Which reminds me, we’re just finishing up this month’s Breakthrough Technology Alert issue. I’m constantly amazed that new and brilliant biotechnology opportunities continue to appear — even though I’ve always predicted that it would happen. This month, we have a superb company that combines computer technologies with biotech in ways that will make personalized medicine a reality. These are truly wonderful times to be alive, with technologies capable of significantly extending our lives appearing every day. I’ll have much more on that in Vancouver. (If you haven’t already secured your spot, there are a few left. Click here for the details.)
Patrick Cox, for The Daily Reckoning
Patrick Cox has lived deep inside the world of transformative technologies for over 25 years. In the 1980s, he worked in computer software development and manufacturing. By the mid-1990s, he worked as a consultant for Netscape — the company that handled 90% of all Internet browsing traffic at the time. InfoWorld and USA Today have featured Patrick's research many times. He's also appeared on Crossfire and Nightline. This expertise bought him to Agora Financial, where he now heads Breakthrough Technology Alert, the only place you'll find the truly transformational technologies that offer exponential gains.
“So why are so many people acting as if the markets are broken?”
10,000 retirees a day, 10,000,000 repo homes in the pipeline, cities going bankrupt with no relief in sight, tremendous financial pressure for either/or inflation/deflation with no sign of stability, taxes high and going higher and with ever greater pressure for ever greater taxes, major financial systems lying through their teeth about what they are doing and where the money is, record food stamp enrollments and an american administration actively soliciting illegal aliens to get even more, shutting down border patrols, foreign nations desperately trying to find a way around the world reserve dollar, trillion dollar deficits as far as the eye can see with no political will to reduce them by one penny, talk of universal digital currency, everyone looking to china to save them when china is only 1/3 of the u.s. economy and is desperately trying to stay even that high by building ghost cities, japan about to be put in a rest home, american industries gutted beyond all measure, higher education supported solely by out-of-control student loans that are not being repaid ….
That’s a fine description of a “buy low” opportunity there, gman. Epic fail on your attempted contrarianism.
There is a book from Mises.com written by one of the big Austrian economists called “The Panic of 1819″. Same economic panic cycle way back then. Book has hundreds of citations from back then and many of the newspaper accounts from the time. It reads like what is going on today. We are in a cycle and it will end. The cycle affects a lot of things like politics, industry and immigration. I think Rothbard wrote the book in 1962 so it is not a book written in response to today’s headlines. It is an excellent book!
So cheer up life will go on and we will pull through this. It is hard to see a cycle when you are part of it.
I’m sure that’s what the Romans thought, too. It’s just a cycle, we’ll go on forever. The empire will be fine, just fine…. gman is right. We’re in trouble, folks, this isn’t a cyclical or seasonal thing, it is structural and institutional, and deeply embedded. There will be major changes, pain, and dislocations before we see anything approaching fiscal health in the US and the world.
“That’s a fine description of a “buy low” opportunity there, gman”
yeah, if you think that this is the “low”. it ain’t.
“We are in a cycle and it will end.”
yep, it sure will, and things will pop right back up again … in a few generations, in another nation.
“this isn’t a cyclical or seasonal thing, it is structural and institutional, and deeply embedded.”
Good summary on the 20th gman! What does “g” stand for “genius”?
As Bill Bonner (I think) once wrote that the cycles in the past were significantly fuelled from new inventions and developments which improve production efficiency – hence ‘everlasting’ economical growth… These days, the sources of energy are the same as they were 100 years ago, nothing new out there except the computer, nuke and a promise of a new pill that will make humans live longer…
“What does “g” stand for “genius”?”
I wish. no, it’s just an old nickname earned decades ago.
as for the summary, was just getting warmed up. didn’t even mention fiat debt currency.
Every time I think about the economy, all I can think about is the pain we will feel when the interest rates return to “normal”. I’ve read that at 5%, it will take something like 1/2 of our GDP just to service the debt. And what is Washington’s traditional solution to that problem? Inflation–LOTS of inflation.
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When you've got a room full of 200 oil insiders scratching their heads at current high prices, something's gotta give.
For most investors, it’s weird to think of stocks as their go-to investing option.
The petropoly has bills to pay and setting the price of oil was a simple way to balance their budgets.
Investors don’t seem to care that what's propping up their investments is what will ultimately destroy them: government monetary policy.
For the next decade the energy revolution will be likely confined to the US, displaying the robustness of American entrepreneurship.
Why the Sage of Baltimore’s commentary persists through America’s changing times.
After attending Platt’s oil conference in London I want to relay two important themes you need to know.