We Are One Humanity & One Planet
August 14, 2019
Dear Friends,
As I write this on August 14, 2019, the U.S. market averages are still positive for the year, despite recent ups and downs. You wouldn’t know it from the financial press commentary. Some thoughts:
There are several observations, perhaps truisms, that are being demonstrated now relating to economics and financial markets which can help us to better understand much of what is transpiring.
The first of these truisms is that where we put our attention is where our reality manifests. In other words, what we give undue prominence in our minds and feelings filters what we experience and tends to only allow what we focus on to fill our perception. This psychological subjectivity fills us with that which we expect. When we fear something, our senses are acutely attuned to the presence of threats…whether or not those threats are actually present in our environment. For example, when walking alone down a dark street, late at night, in an unfamiliar location, our senses are acutely attuned to potential threats. There may actually be threats, but we are likely to perceive threats where none exist. For example, we hear the sound of a tipped over trash can and we are startled, the adrenaline pumps, heart rates increase, blood pressure rises and we ready ourselves for “fight or flight.” At the end of the block or alley, we see a cat jump and a rolling trash can and we realize that there was no threat, only the appearance of one. But I guess that old amygdala did keep some of us out of the jaws of the sabre toothed tiger back in the day. It has its uses. However, much more often than not, our fears dissipate and do not materialize.
It has been said that the past does not repeat itself, it echoes. Well, there are patterns in the economy and markets that recur in principle. Economic growth phases are usually followed by a pause or even a decline. The declines have been temporary in the economy and in the markets and the advances have been permanent. This explains why the size of the U.S. economy was $14,713,000,000,000 at the end of 2008 is now $20,000,000,000,000. We have had more than 10 years of economic expansion.
There will probably be an eventual slow down and pull back in economic activity at some point in the future, as there has been in the past. It isn’t likely that the last economic and market decline will repeat the same pattern as the last one. That decline was induced by an extreme structural dislocation in our economy that resulted in very high unemployment and a decline in corporate earnings to zero in 2009. The housing and mortgage markets had gone to an extreme which was reinforced by human nature, government policies and corporate exploitation. And, this was not just in the U.S. It was true in Europe and in Asia as well. Market sages have observed that declines happen when euphoria characterizes attitudes and expectations, not when fear rules. Pessimism is the theme of today, not euphoria or even confident optimism. In my opinion, the global economy is too interdependent to actually fracture. While we cannot rule out unseen risks, what is going on now is a rebalancing of power, economic and other, in a world of prosperity where once poor countries will become, or have already become, affluent.
We are a problem creating and problem solving species. We may not be addressing the issues of the day at the rate you or I would desire, but self-interest by all humans tends to ultimately discern solutions to even dire circumstances. Let’s not participate in the drum beat of economic peril. Millions of people go to work every day. The great companies of the U.S. and the world will continue to provide increasing material prosperity.
Prosperity is not a zero sum dynamic. It would take many pages to outline all the ways we are addressing ancient realities of scarcity. Communications and travel have so enhanced our awareness of world events, constructive and destructive, that we seem to find little escape from it all to contemplate how much good has been created in the last 200 years. Yes, many have paid and are still paying a terrible price. Yet billions of humans are living lives that even the wealthiest people on planet earth could not have imagined 200 years ago. When we look beyond the artificial separation, we are one humanity and one planet.
As always, here’s to Y(our) Good Wealth.
Jerry!
