Recently, I watched a 2011 documentary on the History Channel entitled, “Prophets of Doom.” One of the programs main points is that, “Every great empire, no matter how powerful, eventually falls.” The program calls upon the expertise of some of the world’s most renowned authorities on such topics as financial instability, oil and water depletion, hostile technology and terrorist aggression. Using credible evidence from various sources, they make a case not for the world’s destruction, but for significant problems which they believe are looming.
My reason for sharing this is as follows: Because we are entrusted with our client’s money, we should be mindful of the risks which would pose a threat to their wealth. Following are some brief comments from the program.
One expert believes there will be a major financial crisis within the decade. He says there is an assumption that our natural resources and economic output will continue to grow each year at a healthy rate. The reality however, is that our resources are finite and global growth will eventually slow. The wealth of the past several decades has been built largely on credit and is quite unsustainable. He further stated that the global financial markets are a huge Ponzi scheme and that at some point this house of cards will come crashing down. All it would take to create a major crisis is for one significant debtor to default. Because the financial markets are so derivatives laden, and currencies are supported merely by confidence, if confidence fails, the financial markets would collapse.
One expert calls our economy a water economy. His reason? Without water, nothing else can exist. True enough, I suppose. We need water for just about everything. In 2010, Governor Schwarzenegger of California said he would not sign another bill until legislators addressed the water shortage. This expert explained how a main aquifer which runs north and south through the center of the U.S. is not replenished by rainfall and that our rivers and streams are more polluted than ever.
One expert explained (using U.S. government data) how easy it is to steal the crucial element of a nuclear bomb. Referencing one particular year in the U.S., he explained that the U.S. caught several hundred criminals doing this very thing. However, for every 100 we catch, how many do we miss? Moreover, when you consider Russia, Pakistan, Iran and several other countries with nuclear programs, most of which have more lax security than the U.S., this threat is increased.
We’ve only been using fossil fuels since the mid 1800s. The program’s expert contends that this is a finite resource which will be depleted one day. His belief is that we should accelerate the development of alternative fuels, but admits it’s not cost effective at this point. He also believes we will largely ignore the problem until we see the bottom of the (oil) barrel.
The food we consume travels an average of 1,500 miles from the grower to our table, according to another expert. He suggests that we should redevelop our railroad system, as this is a cheaper way to transport food than by tractor trailers. He also believes we should develop more locally grown food which would not have to be shipped as far.
Each of these experts was quite articulate about the risks in their specific field. Although it all sounds a bit gloom and doom (hence, the program’s name), I find it good food for thought. I didn’t mention Bill Gates (he was not on the program) who believes that artificial intelligence will be a trillion dollar industry by 2030. What should we do in response? First, there are needs which will need to be met. Hence, we should be on the lookout for companies that are in these niches.
In addition, perhaps we should protect our clients’ equity exposure with options, stop orders, etc. Perhaps we should recommend buying some tangible precious metals which can be used in commerce if needed. Perhaps grow a garden (although I have no talent for this). Whatever your response, I’m confident that you and I have clients that have been exposed to this school of thought. They may like to hear what you have to say.
Until next week, thanks for reading and have a great week!