In his 2008 best-seller, "Wealth, War & Wisdom," hedge fund manager Barton Biggs warns that investors must "assume the possibility of a breakdown of the civilized infrastructure."
And to prepare for a breakdown of civilization, "your safe haven must be self-sufficient and capable of growing some kind of food. . . . It should be well-stocked with seed, fertilizer, canned food, wine, medicine, clothes, etc." Bloomberg Markets suggested that by "etc." he meant guns, as Biggs added "a few rounds over the approaching brigands' heads would probably be a compelling persuader that there are easier farms to pillage."
That warning isn't from a hippie radical. Biggs was a respected Wall Street guru at Morgan Stanley for 30 years. As the company's chief global strategist, Institutional Investor magazine put him on its All-America Research Team 10 times. SmartMoney said: "Biggs is without question the premier prognosticator on the international scene and a mover of markets from Argentina to Hong Kong."
Biggs is advising America's wealthy elite. But what about Main Street Americans? Investors often ask me where to invest today, even Bogleheads and investors committed to the Lazy Portfolio strategy. They see the Goldman Conspiracy manipulating this rally. That worries many.
What do you believe? What value do you give to "the future"? First, answer these three questions:
What's your investment strategy if you know you might die on Dec. 21, 2012? Or possibly this year after getting a negative diagnosis from an oncologist? Or maybe not till 2050 when the United Nations says global population will be 50% higher (rising from 6 billion now to 9 billion), while demand for energy, oil, gas and coal doubles and the global supply of those commodities remains relatively constant?
Disaster films, terminal illnesses, 2050 and 'The End'
- You'll go see the upcoming disaster film "2012" about the end of the Mayan calendar. After all, it's by the same director who "destroyed" the earth in "The Day After Tomorrow," "Independence Day" and "Godzilla." No new investment strategies, but a must-see film, a great catharsis and distraction.
- If you had a terminal illness, the future is here, now. There's no tomorrow. You're concerned about protecting loved ones and future generations with what you have, and enjoying time with them.
- But how to invest for the "end of civilization" coming around 2050? The next 40 years will be confusing: accelerating struggles between aging populations and disenchanted youths, soaring commodity prices, global warming, peak oil, food shortages, famine, blackouts, rationing, civil disorder, increasing crime, worldwide jihads, riots, anarchy and other dark scenarios of a tomorrow with "warfare defining human life."
Yes, that's how doomsayers label the worst-case scenario. It also must be what ultraconservative guru Biggs worries about in his darker moments.
So back to the question: What will Main Street investors do? Here again, even with the planet's survival threatened, they'll go watch "2012," be entertained, experience a catharsis, feel relieved and afterward have dinner and slip back into denial. And later, they'll vote against anything that offers solutions to future problems, especially if it raises taxes.
Why? Very simple: Our "brains aren't wired to fear the future," writes New York Times columnist Nicholas Kristof. We're wired to respond to crises, while pushing off the really big problems (health care, Social Security, etc.).
That's basic behavioral economics: Over tens of thousands of years, evolution has programmed our brains so that collectively we will behave in ways that are counterproductive, making an end-of-civilization scenario inevitable, a foregone conclusion, a self-fulfilling prophecy. Why? Because our brains are handicapped, we are literally incapable of acting soon enough to solve the problem.
6 simple rules
1. Greed is really good: Yes, if you are going to follow the same advice as the rich, you and your family always come first. Grab more than your share, many times what's fair. No remorse, because 2050 is coming sooner than you think. Create a protective wall of money and resources that will make whatever time's left as comfortable as possible.
2. Invest in Goldman Sachs and its Wall Street co-conspirators: Seriously, these guys are the poster boys for the word "greed." The Goldman Gang, Goldman Conspiracy, whatever you call them, these guys just took control of Washington and the Treasury; their rapid recovery is proof that "greed is great." Do what they do. Amass as much capital and goods as possible, ignoring the rest of us, then cruise to the finish line.
3. Frugality, stockpiling, hoarding: Thomas J. Stanley's "The Millionaire Next Door" says it's very simple: "Frugal Frugal Frugal! . . . Millionaires live well below their means . . . Being frugal is the cornerstone of wealth-building." That way you can stash away lots more for later when the going gets rough, when others attack to get what you've stockpiled.
4. Return to your roots: Remember Biggs' advice about subsistence farming. Survival instincts and personal ingenuity will be your best investment. Your family could be without electricity, water, gasoline in the final days, so keep "well-stocked with seed, fertilizer, canned food, wine, medicine, clothes, etc. Think Swiss Family Robinson."
5. Global warfare, plus ammo and guns: Five years ago Fortune did report on the Pentagon's "weather nightmare." Yes, the military warned of "the mother of all national security issues" as "the planet's carrying capacity shrinks (and) an ancient pattern re-emerges: the eruption of desperate all-out wars over food, water, and energy supplies." So invest in the defense industries America needs as the rest of the world reacts more to our greed.
6. Accept death: Back in 1973, my first year at Morgan Stanley, I read Ernest Becker's brilliant Pulitzer Prize winner, "The Denial of Death." Today his message is even more powerful: Yes, we will all die, tomorrow. But to enjoy the days left, you must accept death today -- even as behavioral economists warn that our brains are our own worst enemies, as well as the planet's, for we are on a self-destructive path of no return.
Parable at the Pearly Gates
"Mother Teresa died and went to heaven. God greeted her at the Pearly Gates. 'Be thou hungry, Mother Teresa?' asked God. 'I could eat,' Mother Teresa replied. So God opened a can of tuna and reached for a chunk of rye bread, and they began to share it. While eating this humble meal, Mother Teresa looked down into hell and saw the inhabitants devouring huge steaks, lobsters and pastries. Curious but deeply trusting, she remained quiet.
"The next day God again invited her to join him for a meal. Again, it was tuna and rye bread. Once again, Mother Teresa could see the denizens of hell enjoying lamb, turkey and delicious desserts. Still she said nothing.
"The following day, mealtime arrived and another can of tuna was opened. She couldn't contain herself any longer. Meekly, she said, 'God, I am grateful to be in heaven with you. But here in heaven all I get to eat is tuna and a piece of rye bread, and in the Other Place, they eat like emperors and kings! I just don't understand it.' God sighed. 'Let's be honest, Teresa,' he said. 'For just two people, it doesn't pay to cook.'"
So, cheer up. Maybe the "end of civilization" won't be all that bad, even for Wall Street, if you take Barton Biggs' advice and stock up on something other than tuna and crackers.