Fear and loathing

Michael Lewis - The Big Short - Cover

Image by Cea. via Flickr

“Knowledge is power, but where that insight and knowledge comes from is anyones’ guess.”

I’m reading Michael Lewis’s book, The Big Short, which weaves a fantastic story as explanation of the key characters plotting for, and oblivious to, the 2008 financial meltdown that occurred. There’s a little Darwinism in us all, and the creative people at the heart of financial instrument creation are as talented as any manufacturer of contemporary consumer goods, perhaps even more so. Natural selection, my boy.

The themes he artfully describes in such compelling dialogue: contrarians, detailed legwork and research, hard and smart work, and pursuing a hunch in a number of different ways to achieve a similar result, produce a small band of merry men and women amongst the misery of the 2008 crash.

My late Great Aunt never invested in the ‘stockmarket’ as she was petrified it was going to lose all her money, and she’s right, and also wrong. However, the bigger risk is that the jar on the windowsill full of coin won’t keep up with inflation, so in 20 years time, what was $100 will be worth far less, in purchasing terms. Emotions running peoples’ views (and actions) of something they don’t quite understand.

The malaise the global financial markets have gotten themselves into, even before 2008, is entirely to be expected. Pushing boundaries, combined with fools very high up in financial markets, will always produce stunning results. Not necessarily sustainable, but stunning nonetheless. Utopian dreams of equality are sadly incompatible with recent and new financial ‘instruments’, with which institutions firstly create a buy and sell margin out of the new market they create, and secondly ensnare the unwary.

The ease of separating fools from their money is an age old practice, but unfortunately it can’t be legislated away, as folk will always be foolish to an extent. ‘Know what you’re buying’ is probably the best advice, but covered in glitz and pizazz, it’s a brave soul who bucks the norm, doesn’t canter with the sheep, goes their own way. That’s why the wilderness is so great, there’s usually nobody selling snake oil… that I know of.

Countries can’t go bust, can they? Would you run your current account so far in the red, that you were barely able to service the interest on the debt? Didn’t think so (in most cases). From a consumer led boom over the last decades, we’re now realising that wealth creation may not go on forever, jobs may not last when they’re not viable anymore, and yes, countries may well go bust in the future.

Knowledge is power, but where that insight and knowledge come from is anyones’ guess. In the meantime, be careful with your spare coin, invest it wisely – perhaps in yourself. Investing will forever be associated with greed, fear, and loathing. When the market moves against you, perhaps remember the times it has moved in your favour?

43words ©David Binstead 2012

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