Feb

19

After a tree dies and falls in a forest, there is an opportunity for greater sunlight and nutrients from old decaying matter to nurture new growth in the vacant space. New plants develop in the open space and often grow vigorously. Other plants that grow on the old branches are called epiphytes, generally lichen, algae, mosses, and orchids. Often their growth and stability are amazingly vibrant and fecund. A great example can be seen not in a natural rain forest, where they usually occur, but in the greenhouses of the Bronx Botanical Gardens.

The movement of stocks and markets after a disaster is often similarly vibrant. Take the Israeli market, the Tel Aviv 25, which after moving down to 778 in September 2006, in the aftermath of the war with Lebanon, moved above 1000 for the first time on Monday Feb 19.

As I write at 730 AM EST, the upward march of stocks after the end of a war seems to be a general phenomenon. And one of the first studies that I performed in business was on the buoyancy and above average growth of US stocks after the end of the Vietnam War with particular reference to the surge after World Wars I and II. The sources of that growth appear to be both economic and psychological.

A general study of the markets and individual sectors that grow best after disasters such as bankruptcies, hurricanes, and fires, as well as the much more common artificial disasters and squeezes which are the meat and potatoes of the "locals," would seem to be in order. There is no better way to start this than by reviewing the Wikipedia article on Epiphytes.

From Scott Brooks:

There is a synergistic rhythm to cycles of life and death, with life being dependent on death for the source of energy, nutrition, and general opportunity. That is why optimism should always rule the day, especially in the face of great adversity.

Hurricanes, fires, tornados, ice storm, and avalanches all change the landscape and create great opportunity for growth, regeneration, and life in general. The same thing could be said of war and man-made calamities. An unfortunate fact of life and human nature is that men do battle and battle creates great adversity, death, mayhem, and destruction. As much as we would all like to have world peace, it is simply not something that is attainable. Therefore, we have to look for the seed of opportunity that lies in the great adversity of that happening (an adversity, that I'd like to point out, is out of the control of anyone one person reading this).

Some of you may take what I'm saying to be harsh or callous or mean spirited. I would submit to you that you need to look at the facts of what I'm saying and then ask yourself "is anything he's saying not the truth?" Also, finding the seed of opportunity does not mean being immoral or unethical.

Was it a mistake for me to invest in the Israeli stock index a few days after Hezbollah attacked last year? I say no. The mistake was when I sold my position after six weeks for only about a 6% gain. I should have held it longer.

We also have to watch out for people that are "Life Bears." These people are always pessimistic. They can always find negative in anything that occurs and turn it into "the sky is falling." I believe that the global warming bunch is a great example of Life Bears. They see global warming as a way to force the rest of us to comply with their vision of negativity by forcing us to give up the one thing that can save us, progress via the Mind of Man. You see, if we follow their prescribed methodologies for solving the problem of global warming, we halt most of the progress that will likely solve the associated problems.

Keep in mind what I've said many times on this list, quoting Napoleon Hill, "the dominant thought that you hold in your mind will manifest itself in your life in some form of outward reality." The global warming crew holds a preponderance of negative thoughts in mind, and they are working fervently to make their view of negativity come true, so they can have the ultimate satisfaction of being able to say, "See, I told you so."

Even if their "solutions" cause more problems, it will still fulfill their vision of negativity, and they will take no responsibility for it. They will simply say, "See, you should have acted sooner and done more of what we said to do."

You see, Life Bears have to ignore facts in order to support their negative view. They look only for white swans and thus proclaim, "See, all swans are white." They ignore history in reference to global warming and cooling. They ignore the facts that state the earth and our sun go through cycles where temperatures and conditions change. Therefore, we need to prepare for those changes by finding the opportunities that are embedded within them.

And what better source of finding the embedded opportunities than the free market! Entrepreneurs using their keen minds and intellects to find a way to create great wealth and prosperity out of adversity. What we need to do is not curb carbon emissions; we need to unleash the Mind of Man. That is our only hope of solving adversities!


But the Life Bears cannot allow this to happen. They cannot allow an environment where the mind of man has the opportunity to roam freely and create solutions. Therefore, Life Bears have to stifle their mortal enemy, the Mind of Man. They stifle it by slowing it down, by creating a yoke like the Kyoto treaty that ties the Mind of Man to the wagon of Life Bears.

They have to tax it. By taking away an ever increasing portion of the wealth created by the Mind of Man, the Life Bears stifle a percentage of further growth (I wonder if the percentage that is stifled is equal to the marginal tax rate?), and on top of that, the Life Bears get funding to pay for the further spread of their poison propaganda. It is interesting to note that Life Bears are wholly and completely dependent on their mortal enemy, capitalism, for the funding of their very existence.

They have to regulate it. Life bears can't completely tax the free enterprise system. That would be the equivalent of a parasite killing its host. Therefore, since Life Bears need the existence of their mortal enemies, the Capitalist, they have to devise some methods of controlling them. So they regulate the Capitalist. Usually the more successful the Capitalist, the more they have to regulate them, as too much success is a black swan, and Life Bears can not allow the existence of a black swan. (Well, at least not the existence of one that they cannot ignore or control enough to deny the fact that it's black.)

So taking this back to Vic's original point of tree's, death, and life…

The death of a tree is no tragedy. Its death will release nutrients and allow sunlight to reach the ground, thus allowing the seeds that may have laid dormant for years to spring to life. New life will spring up all around it; and new life equals new opportunity. The death of a company, although seemingly tragic (Enron, Arthur Anderson, Global Crossing, Adelphia, Worldcom, etc.) is really just an opportunity in disguise.

It is an opportunity to release the nutrients of those involved in the collapse. That is to say the minds of man that had been stuck in a rut working for a steady paycheck and doing their job by in a reflexive, non-creative manner. It will release those employees who thought about going into business for themselves (because they had a great idea of some sort, or maybe just the desire to be free of the shackles of an 8 - 5 job), but feared the loss of a steady paycheck and the unknowns of entrepreneurship. Now they are given that opportunity.

The death of these companies allows new sunlight to get to the ground and new companies that may have laid dormant or been under-utilized to spring up and fill the void. Just like seeds that had no chance of competing against a giant oak tree for sunlight, new entrepreneurs that had no chance of competing against a giant company like Worldcom, now have the opportunity to step up and make a go of it.

But just as hard as the Capitalist is going to work to find "the seed of equal or greater opportunity," the Life Bears are working to undermine them (i.e. Sarbanes Oxley, The Kyoto Accord, etc.).

So Capitalist must be ever diligent and hard working and continue to have a never give up attitude. We must push forward even though we will be fought every step of the way by the Life Bears.

And we must be ever diligent with a simple understanding of 3 things:

First, The Life Bears will never go away. No matter how hard we try, they will always exist. Second, Capitalists have no, absolutely no use for Life Bears. We have no need for them whatsoever. But they will still be there. Therefore, we must find ways to minimize their impact. And we do that by doing what we do: Be capitalists! Finally, the Capitalist can take solace in this one simple fact: Life Bears do not exist without Capitalist. They're like incurable tapeworms. Since we can't get rid of them, we may as well resign ourselves the fact that they are going to act like the parasites that they are and suck a small amount of life out of us. So we may as well go about our business and do the best we can and smile at the fact the parasitic tapeworms like Life Bears are completely and wholly dependent on the largesse of wealth we create!

Steve Leslie writes:

To follow up on this theme, if one were to look at world plagues one would see similar events and how they set the stage for growth. One third of Europe was destroyed by the black plague that began in Southwest Asia and spread throughout Europe in the 1340s. It is estimated that at least 75 million people were killed by the disease. It was thought to return every generation with varying degrees of intensity up to the 1800s. The cause was a bacterium and it was spread by fleas. It was a horrid disease of acral necrosis which is a blackening of the skin caused by subdural hemorrhages.

Its effect was to profoundly and irrevocably change Europe's social structure. It was a serious blow to the Roman Catholic Church, Europe's predominant religious institution at the time, and resulted in widespread persecution of minorities such as Jews, Muslims, foreigners, beggars, and lepers. The uncertainty of daily survival created a general mood of morbidity influencing people to live for the moment, as illustrated by Giovanni Boccaccio in The Decameron (1353).

Historians postulate that the Great fire of London in 1666 may have ended the plague by killing off the black rats and fleas that infested them and carried the disease to their human counterparts.

The great and concomitant result of the plague:

The great population loss brought economic changes based on increased social mobility, as depopulation further eroded the peasants' already weakened obligations to remain on their traditional holdings. In Western Europe, the sudden scarcity of cheap labor provided an incentive for landlords to compete for peasants with wages and freedoms, an innovation that, some argue, represents the roots of capitalism, and the resulting social upheaval caused the Renaissance and even the Reformation. In many ways the Black Death improved the situation for surviving peasants. In Western Europe, because of the shortage of labor they were in more demand and had more power, and because of the reduced population, there was more fertile land available. However, the benefits would not be fully realized until 1470, nearly 120 years later, when overall population levels finally began to rise again.

On top of all this, the plague's great population reduction brought cheaper land prices, more food for the average peasant, and a relatively large increase in per capita income among the peasantry, if not immediately, in the coming century.


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