In a brief moment of clarity, Mike Tyson once said, “Every man has a plan—until he gets hit.” When events are beyond our control, we can’t tell what’s coming next. Well-laid plans usually get abandoned in moments of crisis. Remember “The Paulson Plan”? Exactly.
Given the complexity of the financial system, and the current situation which is getting worse, not better, another disaster is inevitable. Forget about the Citi bailout. Yeah, fuggetaboutit. If it actually happens, it won’t matter. It’s irrelevant. The writing is already on the wall. The world’s problems go far beyond one bank dubbed “too big to fail”. Just know that it’s already a failure. Most banks are.
The current global financial crisis has resulted from what sociologist Charles Perrow might call, “system accidents”. In his book, Normal Accidents, Perrow points out that once a system—like the financial markets– reaches a critical mass of complexity (viz. CMOs, ABS, CDOs, CDS, etc.) there is no one clear cause for the “accident”. Accidents become an inherent characteristic of the system. They become inevitable. One negative event leads to another, in a sort of feeding frenzy.
Remember the sub-prime crisis? That crisis or “accident” has now spread so quickly, and morphed into a global crisis, with far more consequences and irreparable damage than people expected.
From a moral and ethical perspective, the problem is much deeper and goes right to the heart of man: arrogance, self-centeredness, complacency, avoidance of suffering and obsession with wealth. “The love of money is the root of all evil”. This speaks to the spiritual condition of all of us and is at the epicenter of these trials and tribulations.
I believe that we are now on the verge of a global depression. I don’t know what can prevent it from happening. It is inevitable, given the multiplicity of the problems.
I know, many people don’t like to use the “D” word. The glass is simply half full, right? Wrong. I believe that this thing will turn out far worse than many can even imagine. This is just the beginning.
More banks will fail.
There is no solution on this earth at the present, to stop a full scale meltdown and a total renovation of “the system”. (And, we haven’t even talked about a terrorist event, like a “dirty bomb”, or a potentially massive earthquake in Japan). The end of all this will not be pretty.
While we can’t tell exactly what’s coming next, or what it will look like, we can take the steps and make the necessary preparations before that point comes. That will determine whether or not we survive the next “big one”.
That said, I’m going to be hiding out in cash, soon. Very soon. Sell into the rallies.
Given the severity of how all this might turn out, from a financial perspective, the way to survive is by playing both sides of the market, by hit and run trading with a percentage of your cash.
From a more important perspective, it’s come to Jesus time. Time to get right with God.
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