Mediocre investment portfolio tested by crisis and aftermath: http://www.wisebread.com/how-one-mediocre-investor-prospered-after-the-market-crash my latest at Wise Bread
There’s a whole genre of collapse-oriented investment writing. I’m something of a connoisseur of the form. But one really needs to treat that sort of literature as pornography—interesting to read, if you’re into that sort of thing, but almost nothing in it is stuff you’d actually want to do.
There are two ways most collapse writers go wrong. One is to assume that keen insight into the nature of the problems we face will allow one to make a bunch of smart investment moves in advance—as if there were some advantage to being the richest guy standing in a post-apocalyptic world.
In his recent post Where Should I Put My Money Before Things Collapse? John Robb avoids that trap pretty well. He understands that the systemic nature of the problem makes attempts to align your investments with the underlying trends pointless:
Looking for a safe asset class today, is like a Soviet bureaucrat in 1989, sensing trouble ahead, looking for the directorate with the safest job.
The other is to assume that there will be a collapse event. Those writers seem to suggest that you can spend your time until collapse behaving much as you do now (with some occasional time off to stock your shelter and practice your marksmanship), and then spend the end times hiding out in your shelter. That’s wrong, because there’s no reason to assume that there will be a collapse event. It’s at least as likely that things’ll go on much as they have been, with occasional points where a bunch of people lose their jobs, yet another class of investments suddenly becomes worthless, and various things (such as food or fuel) spike up in price.
John Robb does pretty well avoiding that trap as well. He understands that the only sensible response is to find a lifestyle that works now, and that will continue to work as collapse proceeds.
Just as he indicates, the right responses to problems like peak oil, peak debt, climate change, environmental degradation, habitat loss, and so forth are going to be community-level responses. With that in mind, he’s putting his money into supporting efforts to create that community response and those communities.
Having said all that, four decades of reading collapse literature have convinced me that collapse happens slowly. Very slowly. Slowly enough that we’re going to need to go on investing in ordinary investments for quite some time to come.
It seems like it would make sense to want those investments to be informed by the societal problems that we face, but my experience has been that an understanding of the sources of impending collapse doesn’t lead to useful investment insights.
There are a lot of reasons. First, as I said, collapse happens slowly, meaning that shorter-term trends will end up dominating. Second, a lot of governmental power will be brought to bear in support of pre-collapse norms, meaning the sort of large profits that might be produced if your investments do align with the large trends are prone to being seized or taxed away. Third, the situation is intractably complex, meaning that even a clear understanding of several of the problems may yield predictions that end up being trumped by other problems—no one can say whether peak debt or peak oil will influence the course of the economy more strongly or more suddenly.
The upshot is that investing for collapse is as pointless as Robb points out; I merely disagree with his analogy. Rather than being like a Soviet bureaucrat in 1989, I figure it’s more like being CEO of a department store chain in 1969. There are still opportunities to get ahead following the old arrangements, but all the most powerful forces of society, human nature, and nature itself are arrayed against you. You’d be much better off charting an entirely new course—and Robb’s suggestions are good ones.