Markets and the Aurelius Vision


We’ve spent the past week moving house and family from Sydney to Melbourne.

We don’t recommend the experience.

You spend weeks packing all your belongings. Then some blokes come along and squeeze it all into a shipping container in a matter of hours. A few days later some other blokes unload the container in even less time, leaving you swamped with boxes and stuff you forgot you even had…and can’t find any room for.

Our wife and daughter flew down yesterday. Melbourne welcomed them with a pleasant blast of Antarctic air and persistent rain. We welcomed them with a wall of boxes and a lounge room that looked like a Picasso painting.

As much as we wanted to continue to find space for things we don’t need and don’t use, we couldn’t neglect our Daily Reckoning duties any longer.

So we came into DR headquarters in St Kilda this morning to reckon. But about what? We’ve had no time to keep up with the world this past week. We’ve slipped into ignorance.

And, as the saying goes, ignorance is bliss. We have worried less about the world this week. Everything seems fine when you’re not looking too hard. Sound bites and headlines only make you think you know what is happening. They provide no context, no details.

Here’s our impression of the world following a week of ignorance.

Of course these points tell you nothing. They’re simply statements. That’s the problem with living in a world that fires information at you 24/7 at 360 degrees.

Which is where the Daily Reckoning comes into your life. We aim to piece the absurd and nonsensical together and give you some context. You may not always agree with what we say, but if we make you think each day then we’ve done at least part of our job.

Because the informed and thinking investor is much better equipped than the ignorant investor. Ignorance breeds complacency. Complacency leads you to put off making important decisions about your finances. And you generally remain complacent until it’s too late.

Back in late 2006, we moved our parents’ superannuation portfolio into cash. That was after speaking to their financial adviser whom we concluded was ignorant about the market and therefore complacent.

We didn’t want him advising our parents in what we saw was a highly riskly environment. So we sold and moved into cash. The trick is to panic before everyone else…or at least before the complacent investor.

So, what is going on in the world? Financial markets are grinding higher…feeding the complacency.

Well, nothing has really changed, dear reader. Put simply, too much unproductive debt is weighing on the global economy. It’s ‘unproductive’ because the projects the debt helped to finance don’t generate enough cashflow to even service the interest repayments, let alone repay the principle.

It is ‘bad’ debt. Instead of recognising this and liquidating these ‘bad’ investments, governments and central banks prop up the system through the creation of even more debt. It is a policy based on hope. We would suggest it’s a policy bordering on insanity.

Which brings us to Marcus Aurelius. He was Emperor of Rome from 161 to 180AD. According to Edward Gibbon, author of the Decline and Fall of the Roman Empire, the decline started following Marcus Aurelius’ death and the ascension of his son, Commodus.

We bring up Marcus Aurelius because we stumbled upon some of his writings when unpacking. And instead of getting on with the job, we sat on a box and flicked through them. The following quotes from Aurelius are worth pondering in today’s complacent environment.

They serve as a reminder that wisdom is not evolutionary. It is timeless. Despite all the ‘progress’ humans have made over the centuries, we are just as dumb as we’ve ever been.

‘The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane.’

When really pressed to think about it, even the ignorant observer would acknowledge that the creation of ever greater amounts of debt to solve a crisis caused by too much debt is insane.

‘Everything we hear is an opinion, not a fact. Everything we see is a perspective, not the truth.’

Truth, like beauty, is in the eye of the beholder. There really is no such thing as the truth in financial markets. There are lies aplenty…but the truth?

‘Look back over the past, with its changing empires that rose and fell, and you can foresee the future too.’

This is practically our mantra at the Daily Reckoning. We look to the past to give us a guide to the future. Without knowledge of history you’re flying blind in today’s investment world.

Armed with just a little history, a few things are certain. That is, today’s policymakers will continue to make the same mistakes made in the past – just under a different guise. And gold will continue to fulfil its role as the ultimate form of money.

Until next week…


Greg Canavan
for The Daily Reckoning Australia

Greg Canavan
Greg Canavan is the Managing Editor of The Daily Reckoning and is the foremost authority for retail investors on value investing in Australia. He is a former head of Australasian Research for an Australian asset-management group and has been a regular guest on CNBC, Sky Business’s The Perrett Report and Lateline Business. Greg is also the editor of Crisis & Opportunity, an investment publication designed to help investors profit from companies and stocks that are undervalued on the market. To follow Greg's financial world view more closely you can subscribe to The Daily Reckoning for free here. If you’re already a Daily Reckoning subscriber, then we recommend you also join him on Google+. It's where he shares investment research, commentary and ideas that he can't always fit into his regular Daily Reckoning emails. For more on Greg go here.

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3 Comments on "Markets and the Aurelius Vision"

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4 years 5 months ago

Truth is a bit like the stars… A connect-the-dots world, where most can not be seen, the biggest are not necessarily the brightest, and where some were put there by other men.

4 years 5 months ago

No situation is new, just a rehash of the old.

To know the future, look to the past.

Its all there somewhere, you just have to know where.

4 years 5 months ago

Seeing as though Gibbon popped up, maybe a copy of Dostoyevsky’s “The Idiot” might be lurking in one of those boxes. The monologue I would cite on the Roman Empire and the Church of Rome is near the closing but the personality, social, and cultural psychological gems are on the path more than a little like Dante’s road in the Divine Comedy.

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