Friday, January 24, 2014 | Issue #2214
Are Investors Missing
the Big Picture?
Alexander Green, Chief Investment Strategist, The Oxford Club
| A Note From the Editorial Director: Alex Green caused a bit of a stir some weeks back with a column he wrote for Spiritual Wealth, our weekly newsletter on the intersection between the financial and the transcendental aspects of fine living. Spiritual Wealth is a benefit packed with valuable insights that are usually reserved for Oxford Club Members. But his column a few weeks ago is too important not to share. Enjoy.
- Andrew Snyder |
 In my new book An Embarrassment of Riches, I argue that we are living in the best of times. Human progress is in a decidedly upward arc. And this has tremendous investment implications.
Yet many investors can't see it. So let me point it out...
The human life span has nearly doubled in the last hundred years. Formal discrimination against women and minorities has ended. Standards of living have never been higher.
Crime is in a long-term cycle of decline. Senior citizens are cared for financially and medically, ending the fear of impoverished old age. Literacy and education levels are at all-time highs.
Technology and medicine are revolutionizing our lives. With the exception of greenhouse gases, all forms of pollution are in decline. And the risk of death by violence has never been smaller.
In the West today, we have tremendous economic and political freedoms. We work shorter hours, have more purchasing power, enjoy goods and services in almost limitless supply, and have more leisure time than ever before.
Travel - to the next town or the other side of the world - has never been easier or more affordable. Access to the arts has never been greater.
I'm not trying to idealize your life or argue that we live in a perfect world. Far from it. But the trend is clear: Our lives are getting better, not worse.
Yet today, Americans routinely tell pollsters the country is going downhill, their parents had it better, and their children face a declining future.
A Rasmussen survey released in October shows the majority of Americans think the nation's best days are behind us - and one released last month reveals that 62% of voters believe the country is on the wrong track.
Our discontent is not feigned. Throughout the U.S. and Europe, incidence of clinical melancholy has risen in eerie synchronization with rising prosperity. Depression is 10 times as prevalent today as it was 60 years ago.
So readers keep asking me the same thing: "If things are so good, why are we so glum?" I believe there are eight primary reasons: - Lack of Perspective. Few of truly realize just how tough life was for our ancestors. Over 98% of human history was pre-agricultural. We hunted and scavenged to survive. Most people were dead by the age of 25, usually of unnatural causes. Even with the advent of agriculture, people still performed backbreaking work for a subsistence living. Beginning in the 19th century, the Industrial Revolution improved our lives. But most folks still worked long hours doing hard physical labor. Your great-great-grandparents would view your life today - with all its modern conveniences - as the realization of utopia.
- Media Negativity. Turn on the news channels or pick up a paper and you'll quickly conclude that the world is going to hell in a hand basket. You hear about war not peace, corruption not honesty, short-term setbacks not long-term advances. According to a recent study, over 90% of the articles in The Washington Post have a negative slant. Last year, for instance, the media warned investors about the dire consequences of "the fiscal cliff," "the sequester," and "the government shutdown." The result? The S&P 500 put on its best performance in 23 years.
- Habituation. Whenever new products or developments appear, we rapidly adopt them and they soon become ho-hum. Heart transplants, space probes, high-speed Internet connections, smartphones, 60-inch LCD screens... so what else is new? This may simply be part of the human condition. More than two centuries ago, Goethe observed that if a rainbow lasts more than a few minutes, we cease looking.
- The Hedonic Treadmill. In some ways, we are hardwired to feel dissatisfaction. Psychologists call it the hedonic treadmill. We strive to achieve what we desire. Those things satisfy us for a while. But nothing ever quite does it for us. And so we yearn for something more: a better-paying job, a new car, a bigger house, a firmer abdomen, a sexier spouse. It's a guaranteed recipe for unhappiness.
- Status Anxiety. Scientists have found that, to an astonishing degree, our satisfaction with life is tied to positional and relative rankings compared to what others have. This denies us the contentment we deserve and is an insult to ourselves. Worse, it's entirely self-imposed. Honoré de Balzac called envy "the most stupid of vices for there is no single advantage to be gained from it."
- Apprehension About the Future. Despite widespread prosperity, people often remain convinced it cannot be enjoyed because of the coming (take your pick) economic meltdown, political crisis, terrorist attack, population explosion, bird flu epidemic, mineral shortage, debt default, environmental catastrophe or other supposed calamity. Let me be the first to concede that future peace and prosperity are not guaranteed. But there are two things to keep in mind. The first is that alarmists of all stripes have been telling us to cup our groins and curl into the fetal position for centuries now and things really haven't gone their way. Today human beings, technology and free markets operate as an enormous problem-solving machine, improving our lives in almost every way imaginable.
- Lack of Community. Years ago - before the triumph of the electronic screen - people entertained themselves with dances, dinner parties, social meetings and competitions. That is the exception today. According to a new study by eMarketer, Americans spend an average of four hours and 31 minutes a day watching television and another five hours and 16 minutes looking at other screens. That's nearly 10 hours a day, the majority of our waking hours. Yet Facebook, Snapchat, Instagram and Twitter provide only a superficial connection with other people. Real conversations are awash in facial expressions, tones of voice, body language and other nonverbal cues. There's a big difference between pushing a "like button" and seeing people laugh and smile.
- The Decline of Traditional Religious Faith. The number of people who do not consider themselves part of an organized religion has jumped dramatically in recent years. According to the General Social Survey, the percentage of Americans who claim to have no religious affiliation is the highest it has ever been since data was first collected in the 1930s. Traditional monotheism told us we live at the center of a caring universe. Modern science tells us we're not at the center and the universe doesn't care. Many find this unsettling. It's more challenging to create new meaning than to accept old verities.
Looking at this list, you might be tempted to better inform your perspective, pay less attention to the media, step off the hedonic treadmill, quit comparing yourself to the Joneses, log off your laptop, live in the now, and contemplate what it is you're really living for.
I'm not arguing that your life is nothing but a bowl of cherries. No doubt you're struggling with work problems, family problems, health problems or financial problems, just like all people in all places and times. But you're grappling with these issues in the midst of the most favorable milieu in human history.
Moreover, the many positive trend lines in communications, technology and medicine have enormous investment implications. But if you're feeling pessimistic, however, you either don't see them or won't take advantage of them.
So I encourage you to see the big picture, the true long-term trend. Not only will it improve your investment performance but your disposition as well.
As author John Horgan writes: "The best spiritual advice is the simplest: Pay attention. See! Or rather, cherish. Cherish what you have before it's gone."
Good Investing,
Alex
P.S. If you are interested in picking up a copy of my new book An Embarrassment of Riches, Amazon is currently offering it for 39% off the cover price. For more information, click here. | | Recent Articles:
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