The nation’s newspapers and TV blabbermouths
have been in full-throated yelp against inactivity. In the
wake of the New Orleans inundation, they surf for sound
bites. In those crucial hours, local officials “did
nothing,” they say. Federal officials, too, including
the highest official, were nowhere to be seen, doing nothing.
Nothing. Nada. Zilch. The null category gets
no respect. The hollowness of it is repulsive. The emptiness
of it is unbearable. Even nature is said to abhor a vacuum.
The poor man who has nothing to say is a pariah. He is like
the investment advisor with nothing to recommend, save cash.
He will get no work as a hedge fund manager; he will not
drive a fancy car, nor live in a beach palace at the Hamptons.
And zero? For centuries the number couldn’t
even be found. Mathematicians didn’t know what to
make of a number that was not a number at all; but an absence
of numbers, a graphic display of nothing… a round,
And pity the poor renters. While everyone
else has been getting rich, the renters have been left behind,
stranded… like people who showed up too late at an
airline counter in Duluth just before a snow-storm, doomed
to spend a weekend there.
Imagine the conversations between husband
“You did nothing! This was the biggest
housing price boom in American history, and we missed it.
Now, we’ll never be able to afford to buy a decent
Few things are as damnable as inaction. In
politics, it is cause for recrimination. In marriage, even
the Catholics allow for annulment in case of non-consummation.
In finance, it is cause for regrets. In war, it is cause
for firing squads. In conversation, an absence of words
is embarrassing. When a man stares you in the face and says
nothing, you assume he is thinking something dreadful. Unless
he smiles; then you think he has lost his mind.
The other problem with inaction is that there
is never any excuse for it. Stalin’s generals, charged
with inaction during the early days of the German assault
on Moscow, might have explained that they were busy with
their mistresses, or attending a child’s birthday
party. Either excuse would be perfectly satisfactory to
a civilized man, for both were better than killing people
in order to defend the Soviet Union. But Stalin was scarcely
civilized. And while the Soviet Union was abominable, Hitler
seems to have offered something even worse. But how could
they know that?
And how could the poor husband know that house
prices would rise? Of course, he could not; but his wife
nevertheless holds him responsible, as if he not only saw
the train coming, but intentionally failed to get on board.
No, dear reader, inactivity is almost always
unpardonable. But here, nevertheless, we say a kind word
for it, maybe two. First, we point out that doing nothing
is usually the best course of action, especially in public
affairs and investments. Second, we deny the possibility
of ‘doing nothing’ in any case.
Since the entire world nurses a prejudice
against inaction, the burden of proof is clearly on us.
So, let us bend to our work like a field hand, knowing that
our labors will be many, our rewards few.
In public affairs, as in private ones, there
is a powerful compulsion to ‘do something.’
The problem on the Eastern Front was not really caused by
inaction, but by Hitler’s desire to ‘do something.’
After the invasion and capitulation of France; and after
the Battle of Britain, he found himself with time on his
hands. Western Europe was buttoned up, from Poland to Spain;
he was master of all and everyone. Only Britain held out.
But he had not the means to invade Britain, so his eyes
wandered across the map – as Napoleon’s had
done many years before - and saw Russia.
He would have been much better off staying
home. Then, Stalin’s generals could have continued
to bounce their mistresses on their knees, and hand out
candy at birthday parties. Inaction would have begotten
more inaction, in other words. And the world might have
been a better place.
And now we read in the news that the administration
and Congress have finally sprung to action on the bayous.
They are going to spend more than $50 billion! That the
money will be almost certainly squandered seems to trouble
no one. That every penny of the money could otherwise be
better spent by the people who earned it, bothers neither
conservative nor liberal. The impulse to ‘do something’
is so powerful, no one wants to stand against it.
But our beat here at The Daily Reckoning is
money. Are you ever better off doing nothing with your money?
The answer falls in our lap like a ripe cocktail hostess:
Warren Buffett holds billions in cash. He
is probably the best investor who has ever lived. If he
cannot find anything better to do with his money than to
leave it in cash – effectively doing nothing with
it – how can the average lumpeninvestor expect to
Is this the time to buy stocks? Probably not.
Stocks are still relatively expensive. The idea is to buy
low and sell high later. When stocks are high already, there
is no alternative; you must do nothing.
Is it time to buy bonds? Again, probably not.
Bonds are expensive, too; yields are low. Will they become
even more expensive? Will yields go even lower? Maybe. But
we cannot predict the future. All we can do is look at the
present and the past. We know, from past experience, that
bonds have become more expensive almost every year for the
last quarter of a century. At today’s prices, you
are not likely to make money in bonds, especially corporate
and junk bonds. It is better to do nothing.
But there is always real estate, isn’t
there? Since 2001, investors have made such rapid advances
in the property market they would have made Guderian or
Rommel envious. In the late summer of 1941, Guderian, the
leading proponent of panzer-led blitzkrieg warfare, was
racing towards Moscow. The man could not bear inaction;
he took to the offensive even against his Fuhrer’s
orders. On the other side, the Russians were full of action
themselves. Guderian faced Zhukov, who was beginning to
understand how to beat the panzers. You know what happened
next: Action produced reaction. Finally, the whole campaign
ended in a bloody mess.
But it is still sunshine for America’s
house buyers. Should you join them while the getting is
still good? Or should you do nothing? ‘Do nothing,’
is our advice. Most houses are too expensive. You will get
more for you money as a renter. Most likely, you will be
able to buy later…at better prices.
“You are either long or short,”
said our old friend Mark Hulbert, 20 years ago. “There
is no such thing as a hold.”
What Hulbert was describing was the impossibility
of inaction in the investment world. You may like to do
nothing, but you can’t. If you do not buy stocks,
you buy something else. ‘Nothing; cannot exist; it
has no meaning. If you have money, you must have it in some
form. You must be ‘long’ something. You may
be ‘long’ cash, as Buffett is, but that is just
as much a something as being ‘long’ property
The real question is not whether you will
do something or nothing, but: What will you do? When all
major asset classes are expensive, the sensible thing to
do is nothing. But since you can’t do nothing, our
advice is to do as little as possible.
The trouble with cash is that it is much more
something than nothing. Dollars are a gamble. They are IOUs
issued by the world’s biggest debtor. Despite nearly
a hundred years of decline, the dollar is still expensive
in our view. That is, they still buy something, but that
they will buy less in the future is practically assured.
Buffett hedges this gamble by buying foreign currencies.
But it is still a gamble.
A more perfect ‘nothing’ is gold.
It is a sort of anti-asset. It pays no interest. It issues
no press releases. It offers no guidance on quarterly earnings;
it has no earnings. It does no mergers, no acquisitions
and it never restructures. It hires no celebrity CEOs. It
offers no discounts. It makes no excuses. But it is the
thing that goes up when other assets, including dollars,
Gold is as close to ‘nothing’
as you can get. Buy it.
The Daily Reckoning
Editor's Note: Bill Bonner is the founder and
editor of The Daily Reckoning. He is also the author, with
Addison Wiggin, of The Wall Street Journal best seller Financial
Reckoning Day: Surviving the Soft Depression of the 21st
Century (John Wiley & Sons).
To order your copy of Financial Reckoning Day at a discount,
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