Investor attention to the bigger issues in the world can be fickle and, dare I say it, cyclical. Remember the mountains of newsprint dedicated to global debt immediately after the GFC?
There's no denying global debt is much higher today, but anno 2017 there's seldom an article about it in the media. Equally rare have become research reports on the matter. Economists have gone quiet on the subject. It's not even a genuine issue anymore among politicians, let alone a subject raised by central bankers or their written statements.
But we all know it'll come back eventually as the topic du jour, right?
UK-based asset manager Tim Price, whose columns and blog posts occasionally are re-published by FNArena, last year wrote and published a book about the subject. His chosen framework refers to Lewis Carroll's sequel to Alice in Wonderland. The 1871 novel, Through the Looking Glass, and What Alice Found There, describes an alternative world to which Alice has access by stepping through a mirror.
Most of the world today is governed by lies, delusions and faulty assumptions, finds author Price. It's a make-believe world in which we all wish our deep-rooted financial problems away. He does not pretend to have all the answers, nor does he make predictions about when exactly the curtain might fall on the false pretense that everything is OK, and under permanent control, while mountains of debt keep accumulating and the longer term fall-out from exceptionally low interest rates has yet to reveal itself.
He simply knows it is not sustainable, and everyone who today believes it is, or tries to convince us all there are no real problems, is simply making a mockery out of the truth. Then again, Price's book quotes Roman emperor Marcus Aurelius reminding us "Everything we hear is an opinion, not a fact. Everything we see is a perspective, not the truth".
In Price's prism of the modern world, we all are living life on the other side of the mirror, blissfully going through day-to-day motions inside a self-comforting cocoon, where lies and half-truths are bamboozling the global populace into a false sense of security. Price is not holding back in his criticism. From central bankers to economists, bankers, institutional investors, governments, financial media as well as ordinary tax payers; we are all guilty as charged and co-responsible for today's mess.
Surely, the endgame will be messy and painful? Consider the following quote from page 28: "I had this nightmare that the economy was run by micromanaging Econ professors, who worked for the big banks & had no real-world experience". Or this one from the movie Speed on page 147: A COP: "Anything else that'll stop the elevator from falling?" JACK: "The basement".
There are no guarantees the unsustainable won't end in a major big negative fashion, or that the system might generate a timely warning first. Price's book does offer suggestions as to how investors can prepare. Prudent value investing seems like a no-brainer in an unstable environment full of asset bubbles. Price also offers trend followers and gold as ultimate protectors of capital and safe havens.
None of the identified themes or proposed solutions are different from Price's financial markets diagnoses during the past nine years. Bundled together in ten chapters plus a combative The Modern Investor's Manifesto, Investing Through The Looking Glass remains a timeless reminder for those who do not want to ignore or forget.
Whenever you are ready.