Ignoring Stupid Fears, Dealing With Legitimate Worries
March 30, 2011 by John Myers
A few weeks ago I called a friend that lives in Los Angeles. I spoke to his secretary and chided her, asking her if she had bought her iodide pills because of events in Japan.
Funny you should ask she said; her mother was on her way to pick up a bottle for both of them. Later I sat back and wondered: Why is it that we worry about such things?
I suspect tens of thousands of people along the West Coast fretted about radiation while they drank alcohol and smoked cigarettes.
So why shouldn’t we fear radiation from the crisis at the Japanese nuclear power plants? Simple, it doesn’t pass the common sense test. If there was a serious leak there would be a lot of dead Japanese. Also consider in August 1945 the United States exploded two nuclear bombs over Japan. Yet radiation did not spread to Hawaii let alone California.
In fact, if you live on the West Coast and you buy iodide pills off the Internet it could be counterfeit. In that case the remedy is worse than the risk.
Fear is nothing new. It is primal. With the 24-hour news cycle it can be infectious.
When the AIDS scare broke, I had a friend who had been involved in a one night fling with a woman years earlier. After it was announced that Rock Hudson was dying of AIDS there was rampant speculation that a plague was about to be unleashed. My friend was certain he had HIV. He called the local AIDS hotline and demanded a blood test. My friend explained his circumstances at which point the nurse on the hotline told him that the chances he would be killed in a car accident driving to get the test were higher than the likelihood he had the virus.
The list of what we don’t need to fear is almost endless. What I want to address are the things that we should be concerned about and what precautions we can take to protect ourselves.
The U.S. Economy And Stock And Bond Markets
Nothing from the Middle East to Japanese can derail the bull market in U.S. stocks. The Dow Jones Industrial Average stands above 12,000, pushed higher by the tidal wave of fresh money courtesy of Washington bailouts and Federal Reserve quantitative easing. New money in the absence of increased productivity does not create wealth.
President Barack Obama has created a buffer against the Great Deflation of 2008, yet fundamental problems still plague the U.S. economy.
The official government unemployment rate is running at close to 10 percent but the Bureau of Labor Statistics—the agency that accounts for people who have simply given up looking for work—puts the real unemployment rate closer to 16 percent.
The dearth of jobs means a frail recovery in consumer spending. Since that sector accounts for almost two-thirds of the nation’s gross domestic product, this is a problem for the immediate future.
It is possible that the Federal government and the Fed will continue to inject more money into the economy. But before too long, Washington will reach its breaking point; China and Japan will no longer purchase U.S. Treasury debt.
Tens of billions of dollars in Treasuries must be auctioned off weekly. These two nations alone hold more than $2 trillion in U.S. Treasury instruments that can be sold at a moment’s notice. Given the crisis in Japan, there is the possibility that even if Tokyo doesn’t sell Treasuries, it may stop making bids at Treasury auctions. Since the U.S. must sell this debt to finance itself the end result will be higher rates.
That will cripple the U.S. bond and stock markets. This is a real threat to your financial future, especially if you invested in U.S. paper instruments.
To reduce this threat you should have at least 20 percent of your investment funds in physical gold and silver, blue-chip resource stocks and physical cash. Use what proportions work best for you.
Your Personal Habits
It is ironic that the person that could hurt you most is yourself. I am not going to lecture you because there is no need for it. If you smoke, you know you should stop. If you drink more than moderately, you know you should cut back.
But there are other ways to take care of yourself. I used to be fanatical about exercise right up until I was in my early 40s. I took a decade off and the last year has been a tough comeback. But it has been worth it. I shed a few pounds doing simple things like walking every day. Now I can run three miles a day.
As important as the changes I have seen in my body have been the changes I feel in my mind.
You should be more active and try not to watch too much news. I have to for my work, but after a full day of CNN, Fox News and the BBC I feel incredibly tense. The media is good at selling fear. So too is our government.
I am not a fatalist but there is nothing I can do about an asteroid strike, terrorist attack or super-flu. Unless you want to remove yourself from society and live in a bunker, you will die of worry just thinking about such things.
I am not saying be unprepared. I take seriously what Bob Livingston says. My wife and I keep extra provisions such as water and food on hand. More importantly, I don’t take stupid risks. I don’t drink and drive, I do not travel on snow-covered roads and I won’t venture into the bad areas of the city.
If you treat your body and mind better and take fewer risks you will live a longer and happier life.
Yours in good times and bad,
Editor, Myers’ Energy & Gold Report
P.S. If you would like to read an interesting book on risk, I recommend you pick up a copy of The Black Swan: The Impact of the Highly Improbable, by Nassim Nicholas Taleb. It is available at Amazon.com by clicking here.