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Investments

Going back to a working definition of Human Capital from Charles Hugh Smith's ebook, "An Unconventional Guide to Investing in Troubled Times":

"Human capital can be defined by what it is not: human capital generates all income which isn’t generated by purely financial investments such as stocks, rental property, savings and bonds. In essence, human capital is expressed as productive work: the combination of skills, knowledge and experience that generates income and value from providing services and making goods. ...

Trust is an integral component of human capital; an untrustworthy person with high skills has much lower human capital than a trustworthy person with the same skills. ...

Not all human capital investments serve the goal of generating income. For example, learning how to prepare healthy, tasty meals from real food is a skill that potentially pays enormous health benefits, even though it might never generate a dollar of income".

In the "Investment Options" article, we suggested taking stock of our own personal human capital by making a list of your own skills, knowledge and experience followed by a couple of questions about each listing. There may be better ways to do this, but any start is better than no start.

Read more: Thoughts on Human Capital

If the global financial system is increasingly and fatally unstable, what should an average investor do? Whenever the word “if” appears, it implies that there is a corresponding “if not” proposition and the possibility of an “if other” proposition.

The first thing to do is make some assessment as to whether you personally believe the global financial system is fatally unstable. If you think the system is stable or will soon stabilize, then you need read no further – just keep following whatever investment strategy has worked for you in the past.

No one knows what the future holds so no one can help you in this highly personal assessment. Remember YoYo – You're on Your own. Always remember YoYo.

Read more: Bring It Home

As Yogi Berra said, "When you come to a fork in the road, take it". That is exactly what we are going to do. It might be wise to just turn around and go back to where we came from but we can't - we burned all the bridges behind us.

We passed the point of no return when we amassed more debt than can be repaid (as individuals, localities, states, and nations). If it can't be repaid, it won't be repaid. Period. So which fork in the road we take is actually just deciding who will take the loss and how. Nobody wants it (the losses), so expect lots of conflict and turmoil with unpredictable outcome.

Read more: Who Will Eat The Losses?

Over a year ago I concluded that everything I know about investing is obsolete and useless. I had solid statistical proof that that was the case several years before, but could not bring myself to admit it is different this time. Things will never be like they used to be. Times have changed and what worked well for the past 30 years does not work at all any more.

I spent the past 18 months reading and studying thousands of papers, reports and analyst recommendations. I read wordy books, engaged in thousands of online and in-person conversations with smart people I respect and admire and spent agonizing days and nights trying to figure out how to invest my lifetime savings.

My conclusions are tentative, unsupported by any particular school of economic thought and uniquely mine. Act on them at your own risk. They are more far reaching than just how to invest. They are the basis for a new mindset and way of viewing wealth in general. Wealth and power go hand in hand, so it has social, political and and personal implications far beyond and removed from the world of investing.

Read more: Money Is Intangible in the Information Age

Financial, Human and Social Capital

Global financial markets and institutions appear increasingly unstable. The temptation is to expound on that, endlessly rehashing the problem. To do so is to avoid thinking about possible solutions. It is a logical extension of denying there is a problem to solve.

Rehashing the problem could be an attempt on my part to recruit a multitude of followers to my point of view before I act. Wasting time convincing others is a way to postpone and evade dealing with the problem itself. My best interest is served by getting out of a burning building, not convincing others it is on fire.

Read more: Investment Options

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