The initial response of the stock markets to Trump’s hostile takeover was a boomlet based on optimism that tax cuts and a business-friendly anti-regulatory reign was in the offing. When the new president and congressional majority began to look ineffectual the boom was labeled a bubble.
More recently, due to international turmoil, fear has taken over, bidding up “safe haven” investments like gold, the yen and treasuries.All of which proves nothing except that Warren Buffet’s mentor, Ben Graham, was right when he argued that all investors, like it or not, are partners with Mr. Market. And unfortunately, he is a bipolar fellow always going from elated highs to despondent lows.
However, the fear index has lots of other components than simply the gyrations of he stock market, and they have been flashing red lately. Trump was elected based on fear of the future and a yearning for imaginary better days gone by. Brexit was the same, as the Brits hoped to recapture their cozy, little, walled-off island existence.
This rise of an inward looking, regressive ideal is also at work in the appeal of a toxic nationalist movements in France, the Netherlands and elsewhere. People are freaked out by rapid change, by globalization, climate alteration, refugee crises, the coming of AI and robotics. In all these cases and many more, one trivial event here or there seems to cause huge effects elsewhere.
The Wall Street Journal reports, for example, that the price of Toronto real estate has risen 28.5 percent in a year, causing worry for a city that represents 20 percent of Canadian GDP and the banking system that has to deal with this bubble. Why did it happen? Because wealthy Asians have been buying up real estate in Vancouver which is handy to their part of the world. Canada looked like a safe bolt hole, a place to flee in case of turmoil in their part of the world.
The Vancouver city fathers enjoyed the money until the cost of real estate threatened to price Canadians out of their own market. So they imposed a 15% tax on purchases by non-citizens. That didn’t make the Asian money stay home, rather it moved to Toronto and made its real estate unaffordable,
Similarly, some wealthy people worried about climate change shifting the world’s bread basket from the American Great Plains north into Canada have begun buying up land there and in other previously frigid climes, just in case.
Everyone’s seeking safety because everyone’s afraid of one apocalypse or another. Liberals fear a return to a world that devalues Civil Rights, Women’s Rights, Minority rights. Conservatives believe a decadent moral decline on a scale not seen since Rome is under way. Repent!
Survivalists think the government is after our guns and we will be living in Mad Max territory soon. Feminists think The Handmaids Tale is just around the corner. Environmentalists believe we will be eating Soylent Green any minute. And even Silicon Valley billionaires and scientific royals like Elon Musk, Bill Gates and Stephen Hawking have begun to worry that The Terminator wasn’t fiction. The robots will turn on their creators
And then there are the threats of Islamic terror and Korean nukes which are all too real. The smart money might want to consider shorting Hyundai, Mitsubishi and Amazon if Kim Jong-un has really got the ability to start lobbing nukes at Seoul, Osaka and Seattle.
These are strange days indeed, as John Lennon sang. There’s no way to predict what will happen next, but as several of the examples above suggest, like most times in history, the well-fixed and well-connected will manage to make a buck from the apocalypse and/or engineer a means of escape. Some tech worries have bid up prices for safe hideaways in New Zealand in case of trouble in California. Others are looking to escape to Mars. Really! Musk and Bezos are building their own rockets in case an escape on a planetary scale is required.
The rest of us will be left to fend for ourselves, like all the peasants of history — rolled over by the Roman legions, by the invading Mongols, Huns and Visigoths, by the lunatic, religious catastrophe of Thirty Years War, pick your historical misery.
It is tempting to repeat the famous John Maynard Keynes quote, “In the long run, we are all dead.” But it is actually a quote out of context. What Keynes actually meant was the opposite.“The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again.”
In other words, it’s in the short run you’ve got to figure out how to survive. It is not enough to assume that “this too will pass.” The Brits in World War II, alone and under the falling bombs of the Nazi menace, famously were counseled to Stay Calm and Carry On. But also to fight on and never surrender.
Today the dangers we face are more amorphous, mysterious, ill-defined, but I see little alternative to carrying on. And that means first of all, trying to tell real threats from chimerical fantasies. So we must all vow to carry on. But to do calmly may be asking too much of people less phlegmatic than the Brits. I’m trying for intermittently alarmed.