Financial Ecology

By Al Thomas

There have been very interesting studies of insect life that may parallel other aspects of the world.

In one study a small, very small, island in the Florida Keys was cataloged to determine the various species of bugs. Then the island was fumigated to kill every little creature. Years later the scientist returned to catalog the new bug inhabitants.

There were some of the old group, but it was found to be a new ecology. New species had developed. What was surprising was it was a balanced system. No single strong bug dominated. Everyone was getting along.

There is a basic universal law that I have subscribed to for many years: As Above, So Below”.

Now extrapolate.

If that works for the bug colony why will it not work for the financial community?

The experts in Washington and other “advanced” financial world capitals believe certain financial institutions are too big to fail. They insist on maintaining a false eco system that has outlived its usefulness, but should not be allowed to die or morph into a new “bug”.

The great minds have saved us from financial world capital implosion. At least that is what they have told us. What if Long Term Capital Management in 1998 or AIG recently had imploded? Would world banking be better or worse today? It is hard to believe it could be much worse. It might have been a great cleansing that was needed instead of keeping alive marginal banking operations.

As with animal and plant ecology the weak should be allowed to disappear. As a financial student I see new instruments and corporation types being created and others dying out because they were not able to feed in the current market ecology. Notice the Darwinian effect of financial instruments as a continuing process. Just as in nature. Survival of the fittest and survival of the conformists. New species will appear as old ones fade away.

Today one of our weakest “bugs” is the housing market. The federal government insists injecting money into home prices to keep them from falling further. Nature will prevail and prices will fall.

That is not a gloom and doom prediction. Everything in nature eventually balances out. The same will occur in the financial market. Balance will be restored.

That is what bull and bear markets are all about. Imagine a see-saw with a bull on one side a bear on the other. They go up and down on a regular pattern.

The smart investor understands the game and plays both sides of the see-saw.

Al Thomas’ book, “If It Doesn’t Go Up, Don’t Buy It!” has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know. Copyright 2010 Williamsburg Investment Co. All rights reserved.