About Us
It all seemed so logical, so obvious and agreeable in the last five years of the 20th century. Stocks and shares went up year after year. The Cold War had been won. There was a new 'Information Age' making everything and everyone so much smarter – and richer, too. The world was a happy place.
Anglo-American consumers were the envy of all mankind. The United States guaranteed peace and freedom to the entire species. Britain stood shoulder to shoulder with the US, if not with goodness, intelligence, and foresight...then at least with a military arsenal to help blow any adversary to kingdom come.
The circle had been squared between socialism and the free market too, or so Tony Blair claimed. Indeed, people everywhere believed Francis Fukuyama's 'The End of History' had arrived. It scarcely seemed possible there could be any major improvement. But "it's a funny old world," as Maggie Thatcher once remarked. She might have meant 'funny' in the sense that it is amusing; more likely, she meant it is peculiar.
What makes the world funny is that it refuses to cooperate; it seldom does what people want or expect it to do. In fact, it often does the exact opposite. The Daily Reckoning is written to underline the point that the world is funnier than you think. And the more you think about it, the funnier it gets.
This free daily email is also written in a spirit of runaway modesty. The more we think, the more we realise how little we know. In fact, we are far too much in awe of the world, and too deeply entertained by it, to think that we can understand it today or foretell tomorrow. Life's most attractive components – love and money – are far too complex for reliable soothsaying.
Still, we can't resist taking a guess.
We may not know how the world works, but we are immodest enough to think we can know how it does NOT work. Take investing, for example. The stock market is not a simple mechanism like a cash machine, where you merely tap in the right numbers to get cash out when you need it. Instead, the investment markets – like life itself – are always complicated, perverse and absurd. But that does not mean they are completely random. Though unexpected, life's surprises may not always be undeserved.
Delusions have consequences. And, sooner or later, the reckoning day comes. The bills must be paid. In this sense, the investment markets are not mechanistic at all, but judgmental. As we will see, they reward virtue and punish sin.
Our approach in The Daily Reckoning is a little different from that of the typical investment email, newspaper column, economics tome or investment advisory. Instead, it is an exercise in what is known, derisively, as "literary economics"...what used to be called “moral philosophy”. Although you will find statistics and facts, the metaphors and principles we aim to provide are more important.
Facts have a way of yielding to spin like a jury to a barrister in court. Under the right influence, they will go along with anything. But the metaphors remain...and continue to give service long after the facts have changed. As Norman Mailer once put it, "There is much more truth in a metaphor than in a fact."
But the trouble with metaphors is that, if the mass of people pick them up – the lumpen investoriat, as we call then, after Karl Marx’s own downtrodden masses – the ideas almost immediately become worn out and false. For the whole truth is always complex to the point of being unknowable, even to the world's greatest geniuses.
Only simple ideas can be held by large groups of people. Commonly held ideas are always dumbed down until they are practically lies, often dangerous ones.
Property prices only ever go up...
Governments and central bankers really do know what they’re doing...
You can borrow yourself rich...buying things you don’t need with money you don’t have...
And once the mass of people comes to believe one of these lies, they adjust their behaviour to get into sync with it. Thereby they change the world, and the world then no longer resembles the one that gave rise to the original insight.
Soon, the situation is so at odds with reality that a crisis develops. The individual person must seek a new metaphor to help make things clear. In the financial markets, this pattern is well known and frequently described. You may have experienced it yourself in the late 1990s.
In early 2000, for instance, no end of pundits and shills were sure stocks would always go up. They gave countless explanations for this faith, but their main reason was simply that it was just the way the world worked. Once the lumpen investoriat joined the party, however, moving all of its money into stocks and shares to take advantage of this insight, few buyers were left.
Meanwhile, share prices had risen so high that neither profits nor growth could support them. Yet investors were deeply disappointed when stocks fell three years in a row! How could this be, they asked themselves. How could it have been otherwise, we wonder today.
But we do not write The Daily Reckoning to carp or complain. Instead, we offer it – for free, and with your privacy assured – in the spirit of constructive criticism. Or at least, in the spirit of benign mischief. We do not know any better than Alan Greenspan... Mervyn King... or your stockbroker...what the future holds. We only guess that we are now at one of history's crisis points – one of its reckoning days – where the metaphors of yesterday no longer seem to describe the way the world works today.
The financial markets are not the congenial cash machines of investors' fantasies, after all. Nor is the political world as safe and as comfortable as people have come to believe. That is another aspect of The Daily Reckoning you may find unusual. We dip into military history and market history as if passing from a hot-tub to a swimming pool. Both illustrate the lively influence of group dynamics. The currents of mass sentiment are similar.
Readers will note, however, that political episodes tend to have tragic endings... whereas markets typically end in farce.
You may also be curious as to our focus on European history. We make no excuses or apologies for it. Our offices in Paris and London are surrounded by reminders of Europe's past. Can we not help but learn from it?
Finally, we do not include the throwaway share tips or easy recommendations of most typical free investment emails that have followed in our wake since we began writing The Daily Reckoning in midsummer 1999. Instead, we offer only a few simple ideas that you may well find helpful in the years ahead.
I hope you enjoy the ride...
Bill Bonner
