Most of the time (or "ostensibly" as Shane Richmond put it, to my unabated delight) this is a blog about media economics. In the midst of the largest financial crisis in living memory it's worth taking a moment to remember that we have much bigger things to worry about than which new website is shiniest, so I'd like to pass on some excellent advice on what to do about the current financial crisis from Roger Ehrenberg's Information Arbitrage:
"To survive what could be a multi-year recession, a nuclear winter of
sorts, people at all levels of the wealth spectrum need to get the big
things right. And what, exactly, are those things? Liquidity: Do you have at least a few years
worth of ready cash, in case the job is lost or prices of key household
items unexpectedly skyrocket? Volatility: Can you live with your financial profile, understanding that the worst of the economic downturn might still lie ahead? Stability: Do you have expenses coming up in
the intermediate term that could materially impact your financial
picture, should the recession last longer than anyone expects, e.g.,
tuition expenses, new car, loan amortization payments, etc.?...I am not saying to sell all your equities. Not at all. But I am
suggesting that the lion's share of most households' time should be
spent answering the three questions I've listed above, and not on
whether Google is a buy at $350. Because while the answer might be yes,
you'd be missing the forest for the trees."
For what it's worth my money is still in cash and has been since the start of September. Sure, this looks like a bottom. Friday looked like a bottom and not so long ago 5000 on the FTSE looked like a bottom. It's a good time to realise we can't predict the future. We're not at the point where your best investment is a shotgun, a mountain fastness and a decade's worth of tinned goods. But I think we're a long way past the point where your biggest worry should be whether Google looks cheap at today's prices. The future, as the man says, will be discontinuous. Perhaps alarmingly so.
(And yes, I am aware that to some extent the crisis is made out of market and consumer confidence, and that some people hope we can talk our way back out of it. I resort at this point to my favourite quotation - McLuhan's "there is no inevitability provided there is a willingness to contemplate what is happening". Sure, positive sentiment is what we need next but let's not get all cargo cult about it. We aren't going to collectively trick ourselves out of the economic crisis.)
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