by
Bill Bonner
"Anyone can get old," said Queen Elizabeth II, quoting Groucho Marx on the occasion of her 80th birthday, "all you have to do is live long enough." We would have put it differently: the secret to getting old is not to die. And it brings to mind a thought: many of the best things in life are achieved simply by not doing anything. The Queen has ruled with charm, wit, and integrity largely by refusing to get involved in the arguments and follies that have brought so many of her family and her ministers to ruin. She has outdone them all by remaining aloof, doing her duty, and conducting herself with such a dignified restraint you'd hardly know she was part of the government. "Lethargy just shy of laziness," says Warren Buffett, describing his investment style. He is willing to wait...and wait...and wait...until he finds something he likes. This is not baseball, he says. You don't have to swing at every good pitch. Instead, you can wait for the perfect pitch. What's the secret to saving? Simple, just don't spend. What's the secret to losing weight? Simple, just don't eat. The queen waits. Once, she went unannounced into a clothing shop to have a look around. A fellow shopper turned to her and remarked, "You look just like the Queen." "How convenient," Her Majesty replied. Investors rarely show that kind of calm. They can't seem to wait. It is as if their money were contaminated with leprosy; they are so eager to get it out of their pockets and into someone else's. And they're not entirely wrong. Money these days in the form of dollars has a lethal disease, like leprosy. Day by day, parts fall off, and little by little, it dies away. Ah, there's the rub. You hold your money in short-term Treasuries. You make no mistake. You do nothing, and still the dollar can sink 20%, 30%, or more. You thought you were 100% insured against loss, but you hadn't counted on the money itself wasting away. That is the trouble with the dollar; it is a faith-based currency. It floats on a sea of faith. When faith goes down, so does your wealth. But what can you do about it? If you put your money into gold you still have a problem. As we've seen in recently, the price of gold can drop, too by more than 20% in only three weeks. Doing nothing is not easy. The ancient Chinese knew this when they spoke of wu wei, or the path of non-action. It was not really inaction that they were describing, but a kind of flow...spontaneous with no striving, no hard edges: "The Tao abides in non-action, Yet nothing is left undone," wrote Lao Tzu. And in much the same way, the secret to investment success is not simply doing nothing at all, because you're always doing something with your money, even when you're trying your hardest not to. But the secret is you don't have to do much, because unless you're doing a lot of investment research, unless you're very lucky, or unless you have inside information, you're not likely to be able to find the one stock that goes up while the others go down. Nor are you likely to buy commodities when they are at a three-month low and sell them when they are at a three-month high. There are a few traders who can do that. Maybe. But for most people getting in and out of an investment with good timing is a matter of luck. And few people are lucky enough to do it very often. That's why most people are probably better off believing "you can't time the markets." It's like believing that you can't get away with cheating on your wife; it's not necessarily true, but you're probably better off thinking it is. [Ed. Note: Another proponent of inactivity is Chinese philosopher Lin Yutang. He is known as the philosopher of leisure and "letting go." His most famous quote usually angers Americans: "The busy man is never wise, and the wise man is never busy." What are we doing now? Glad you asked. Nothing much. We're just buying gold; we think the price will come back above $700. We just hope we live long enough to see it. For those too antsy to invest like a Taoist, Richard Russell notes a little known market timing indicator developed in the 1970s by a brilliant trader called Alphier, who identified market bottoms by symptoms of "prolonged liquidation." "Each week count how many days the S&P closed up and how many days it closed down," writes Russell. "If there is a day that the index is exactly unchanged, give that day the sign of the previous day. Forget about holidays or any day in which the market is closed. Each week go back over the past 14 weeks and count how many total days are up and how many are down. If, in the past 14 weeks there are at least 17 more down days than up days, you have a major bottom and a buy signal. "That 'formula' worked amazingly well in calling all the major market bottoms since 1932." And what about today? Russell points out that on Friday, June 16, 2006, gold had declined eight days in a row and closed down on 10 of 12 days, that is, it was lower on 83.3% of the previous 12 days. This, he notes, is "very impressive and it implies a downside panic even capitulation. "What I'm trying to measure is the degree of fear that has been generated in the gold picture, just as I tried to measure the degree of bullishness generated as gold was topping out on May 11. We'll see how this study works, although, as I said, I would have preferred a longer period of days." We have been touring Scotland for the last couple of days. The immediate reason for the trip is this: we were looking at boarding schools for Edward. We knew nothing about boarding schools since none of our six children has gone to one. And we know less about Scotland itself. Our trip began in Inverness, on the northern coast, a small town of brownstone buildings that lines the River Ness just before it opens up into the Moray Firth. It seems a dreary city. Whether it is dreary all year round as well or only on our account, we can't say. The weather has been overcast since we arrived on Friday. Gray sky. Gray-brown city. No good restaurants. No fashionable shops. No theaters worthy of the name. Of course, we were only there for a few hours. Maybe we missed them. Or maybe they just weren't there. We drove along the coast to Findhorn...and then Elgin. All we knew about Findhorn was that it was the site of hippie debauchery in the 1960s. Elizabeth reported that a neighbor from New York City had abandoned her husband in order to live in a hippie commune in Findhorn. Curious, we left the main road to have a look around. It is an old fishing village with a mobile-home park next to it. "Hmmm...hard to believe she left New York for this," we said to Elizabeth. "Well, I didn't know Anne very well," replied Elizabeth. "But what I heard was that she came to visit the place and liked it so much she never went back. That was the '60s, and they had what was called an 'open' marriage. They were both supposed to find fulfillment in their own way. She apparently found something here...God knows what, but their marriage didn't last long after." "Maybe she's still here," we noted. Why she would be there was a mystery to us. The old village was quaint, but quaint only goes so far. It was like a fishing village on the coast of Maine or Nova Scotia...with its own charm, but not much else. To the south of the village was a trailer park that advertised itself as a 'community." Here and there we saw relics that looked like they dated from the Age of Aquarius. But it seemed an unlikely end to the Brave New World that the hippies had imagined in the '60s. We looked around, but saw no other possibilities. And we had neither the time nor the interest to follow up. If that was where poor Anne ended up, well, too bad for her. We are making our way through Scotland one scone at a time. We stop for scones and tea for breakfast. Then again for afternoon tea. By the time dinnertime comes, we are thoroughly fed up with tea and scones. And with rain. It is raining again this morning, as it did yesterday morning and the morning before. "It's a shame you've had such bad weather," said the woman who greeted us when we arrived at Gordonstoun. "It's been bright and sunny for the past few weeks and only turned gray a few days ago. People down in London imagine that it is cold and windswept up here. Well, of course it is, up in the mountains. But here we are warmed by the Gulf Stream and it's very pleasant most of the time." Gordonstoun is a private school founded by the man who also founded the Outward Bound program. Students are taught not just math and science, but also how to get along with others, how to sail a boat, and how to climb a mountain. They even have their own fire department. When something catches fire in the town next door, they jump into their gear and go to put out the flames. A student from Spain showed us around. One-third of the students are foreign. One-third are Scottish. Another third are English. English is the common language. "What do you think of this place?" we asked our guide. "It's a bit remote. Don't you miss your family?" "Well, of course I did at first. Just like all the students. But after a while, I really liked it. I was only supposed to come for a year, but I've been here three years. It's great," replied our new friend. It sounded like the sort of place that might suit Edward. We ate with the students and found the food better than any institutional grub we had ever had...lots of choice...free. As much as you could eat. In fact, we were happy to go back for seconds. We noticed, as well, that the 300-odd students in the cafeteria were all well-behaved, friendly, and neatly dressed in their uniforms. How could you not like the place? And then toward the end, there was a telling incident. One young man dropped his tray of food. Instead of laughing at him and telling him what an idiot he was, which is what would have happened in our family, the other students rushed up to help him clean up.
He turned to Edward. "Do you think you'd like to come here?" he asked.
"Don't you think you'd be happy here? Don't you think you'd make friends?" the headmaster inquired. "I don't know...I just know I don't want to go to boarding school, " Edward said. Maybe we should have asked at Findhorn if they had an opening for a twelve-year-old. June 22, 2006 Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and Empire of Debt: The Rise Of An Epic Financial Crisis. Copyright © 2006 Bill Bonner |
