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Slow money can jumpstart your resilient investing plan

Did you hear the joke about why the farmer crossed the road? The punchline is that she wanted to go to the bank to ask about getting a loan. Not very funny, except that by the logic of bankers and Wall Street, the idea that a farmer would qualify for financing might elicit a guffaw or two. Small-scale farming is considered a high-risk, low-return activity that any prudent investor should steer clear of.

And yet, wending their way across the highway to the farm, who’s that? Why, it’s a gaggle of Slow Money investors, taking action on their desire to build local food systems. Are they just being charitable, driven by idealism to donate a bit towards keeping a neighborhood farm alive? Not at all—they actually are investors, doing exactly what a traditional investor does. They are considering their own financial situation and how it fits into their overall portfolio. They are asking lots of questions, getting to know the business, assessing the risks, and looking for ways that not only their money, but their expertise, could help assure the success of their investment. And they are negotiating a deal that works for both parties.

Wall Street “professionals” can’t relate to this new breed of more creative and engaged investors because

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Resilience in Action – Vanuatu Shows the World how to be Ready for Anything

One of the key traits of a Resilient Investor is putting focused attention into being prepared. This time-honored theme is one that I explored on March 11th on the C-Realm podcast in an episode called “Ready for Anything.”  In turbulent times it’s impossible to know exactly what situations we might have to face, let alone how to be ready for them. But there is great value in considering a wide range of plausible scenarios, and preparing for those that seem more likely. Last week, that lesson was brought home by the resilient people of Vanuatu, as their preparation for extreme weather paid off with priceless returns.

Eyewitness reports of Cyclone Pam were truly scary: it was one of the strongest tropical storms ever to hit land, with gusts over 200 mph. But remarkably, there were only eleven deaths from the storm. This really made me curious! Was it was just luck? Or, had this island nation pulled off a remarkable feat? Turns out it’s the latter, and from the stories trickling out it’s clear that we could learn much about resilience from their example.

The first thing to note is that Vanuatu has been actively preparing for stronger storms. For several years, the World Bank and international aid agencies have been working with the government of Vanuatu on a program aimed at “increasing resilience to climate change and natural hazards.”

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Are You Ready for a Crack-Up?

A core premise behind Resilient Investing is the knowledge that in these complex times, we could be in for a wild ride. We present four widely-divergent, yet plausible future scenarios in Chapter 6, “Be Ready for Anything.” One of the key skills needed to get yourself ready is to take an eyes-wide-open approach to surveying the news, as well as the commentary of pundits who hold various points of view. You don’t want to assign certainty to any particular viewpoint, but it’s crucial to at least survey the landscape.

2015-01-26 11.30.07Speaking of spectacular landscapes… on a recent trip to California, my wife and I stopped in at a visitor center in the middle of the vast Mojave Desert. There were a few people there, learning about the history and incredible biodiversity (we looked for the Desert Tortoise but they were sleeping). I wanted to buy a T-shirt, but the clerk was engrossed in a phone conversation that I could tell was about investing. When he got off the phone we started chatting, and he told me how worried he is about the state of the global economy, believing this to be a most dangerous time for financial investments. I asked where he gets his information, and he mentioned David Stockman, a former congressman who later became the Director of the Office of Management and Budget in the Reagan administration. Today his website, Contra Corner, is a go-to site for well-argued commentary that is critical of the financial press, government policy, central banks… indeed, there are few feathers he hasn’t ruffled!

So I was interested to hear what he would have to say when Chris Martenson of Peak Prosperity interviewed Stockman on Feb. 15th. The title will tell you a lot: “The global economy has entered the crack-up phase.” As Martenson summarizes, Stockman “predicts an increasing number of “financial breaks” that will add to the unpredictability and instability of the environment for investors.”

This was not a big surprise, but what grabbed my attention is when Martenson, who has been a long-time teacher of practical resilience skills, gave his response to the implication of this view for investors:

David Stockman:And so therefore, you know, at the end of the day, we are more exposed to unexpected dislocations to the so-called black swan events than ever before. And when you have a system that has never been this unstable and fragile, in which the environment is rich with opportunities for surprise and dislocation, I think it is a very dangerous time.

Chris Martenson: I couldn’t agree more. And since we can’t predict what’s going to happen, I’m constantly advising people that they should be prepared for almost anything. So true diversification is really important these days.

This is a good summary of our book’s central theme, and “true diversification” is exactly the reason we created the Resilient Investing Map. While Stockman will likely leave you feeling glum, its important to consider this point-of-view as you face the future. But what’s really interesting about resilient investing is that it need not be approached as a survival-tactic, but rather as a way to enrich your life, regardless of what may unfold. It helps you to see that typical, Wall Street investing is merely one strategy among many. There are eight other Zones in our map, so we encourage you to focus some of your attention on investments (of time, money or both!) in ways that are less dependent on the vagaries of the global economy.