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.

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