Infinite growth

We may also be headed toward a social unrest crisis, as people suffering the brunt of the effects of the virus without much outside support may get fed up of people who can protect themselves at their expense. The U.S. have already been pretty close to implosion this year, some other changes to the world order may happen.

Which brings me to think: if we really want to become resilient, what we need is friends and skills. You may want to pack some assets (including food, warm clothes and medicine) in hidden places in case you end up needing them and some wealth in different kinds of vehicles but if you’re set with them, then you can loose almost everything to an economic crisis and still be fine. After all, most people around you will have lost everything as well.

This to mean: I think it’s worth it to cover our asses against the fundamental threats we’re facing. Past that basic level, we can take risk: we’re only just playing with gravy.

I like the idea behind your blog, by the way. :wink:

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Warning: lengthy philosophical post ahead! :slight_smile:

Portfolios aside, this is one of the fundamental questions of human beings, has always been and will always be.

We live in a world that doesn’t explain itself. As Kierkegaard said: ”life can only be understood backwards, but it must be lived forwards”.

How we deal with this uncertainty is a very personal matter. Depending on the times that we live in, we’ll be influenced by one scary scenario or the other. For example, my parents grew up during the cold war and for them, an escalation to a World War 3 was a very real threat. On the other hand, if we read a book like “1913” by Florian Illies, we see that almost nobody had any clue that World War 1 was about to destroy their lives; they all had their own worries and were caught by surprise. Us nowadays, we think about the impact of AI, social inequality, government debt, hyperinflation, etc. Or maybe China is indeed going to be a problem, as this article in Foreign Affairs suggests (English, not paywalled)?

Interestingly, I think that many people don’t think about these things at all and just presume that nothing will ever change. Unsurprisingly, the topic comes up regularly in this forum: people who have the analytical skills to bother about their finances will end up seriously thinking about the future. Which is of course a good thing.

Yuval Noah Harari writes in “21 Lessons for the 21st Century” that driven by technology and AI (quote) “not just entire classes, but entire countries and continents might become irrelevant.”

There’s also an interesting interview with the historian Edward Chancellor in NZZ (German, not paywalled), where he expects increasing social unrests.

I believe they are both right.

Scay prospect; however, I do not believe that we’re going towards a total collapse of law and order (at least in developed countries). Unrests, crises: yes; apocalyptic collapse: no. Of course, there are people who say otherwise, but they don’t know any better than I do. If it really comes to a total collapse however, then Bitcoin will be as worthless as gold. You won’t be able to walk to your local farmer and exchange that gold nugget for corn. You’ll be ambushed ten times over before you get there. As @Wolverine says, we’ll need friends and skills; but hopefully not guns and ammo, I might add. At least I’m not expecting and preparing for that.

My investment strategy is thus: I agree with @dom.swiss that rather than bonds, money is currently the better option. I would consider short-term government bonds for the risk-free part of my portfolio, but as long as they have a negative yield, I’ll stick with cash.

I do not hold gold as I believe that it works based on the “greater fool principle”. Gold can only gain in value if there are other people who are more scared when they buy it than I would have been when I bought it. It is an unproductive good, it generates costs, it is not as negatively correlated to e.g. stocks as it should be, and its historic yield is rather low. And as I said above, I don’t expect a “Walking Dead” world where I’ll exchange it for food.

I also do not hold Bitcoin for the reasons that I’ve written here in this forum: I consider it as digital gold, though its easy tradability gives it some characteristics of a currency; but I don’t concede it the capability to replace government issued currencies.

The risk-exposed part of my portfolio is in stocks. Not only because of the historic and expected returns, but also because by investing in companies, I invest in people: there are billions of people out there who go to work every day, companies that compete with each other, technologies that are evolving and new products that hit the market.

Or to say it differently: I have trust in my government (cash, bonds) and in humanity’s potential to innovate and grow (stocks). I balance these two in a way that I’m comfortable in bearish and bullish times. Been doing it since 2006 and went through the 2008 crisis and I’m fine this way.

That would be the old and infamous market timing trick… :wink:

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Great thoughts! I love a philosophical backdrop to the penny counting we are practising most of the day :wink:

I hold it with @San_Francisco who in his response to @OogieBoogie mentioned some truly devastating times. Going back to the 2000 internet bubble burst or even the 1973 oil crisis does not cut it for me anymore.

There are developments that follow natural or quasi-natural laws and developments that are random or political. WW1 may have been caused by a series of random events and unfortunate alliances. The relationship of capital and GDP seems to be a quasi-law, and we are at a point where capital is mostly funneled into stock and housing market, which are mostly outside the real economy. There will have to be an event to enable further growth. Could be a war, a crash or - here come AI and clean energy again - a fundamental innovation - anything to allow capital to be converted into meaningful production.

This is not a criticism, but more a note to self: it might help to dissect topics for absolute thruths (if there is even such a thing) or natural laws and avoid comparisons. The frog in the boiling pot only ever feels a slight temperature increase, while an observer with a thermometer would have a more objective view of the real risk involved.