Preface

In my modest existence on this earth, I’ve lived through three wars, a half-dozen bear markets, and one bona fide stock market crash. Although I was too young to remember, I also lived through the Cuban Missile Crisis, in which our country was on the brink of war. President Kennedy was considering limited nuclear strikes on the Soviet Union, which seems, in retrospect, to dwarf all of our current crises when you give it some careful thought. And then there were the assassinations of President Kennedy, his brother Bobby, Martin Luther King, and the tumult that followed. I distinctly remember the look of fear in my father’s eyes—something I had never seen before—when he talked about how the conflagration on the West Side of Chicago following Dr. King’s murder might come down to our little hamlet south of the city. This social unrest would later find its way into my high school, where there was a minor race riot my freshman year. I can remember the doors of the washrooms being locked to prevent random beatings in my integrated school. At that time, the fear was in my eyes.

In our current time of crisis and conflict, our society is being violently propelled into a future with scintillating new challenges. There is this disequilibrium about, and every institution from the stock exchanges to the White House is trying to balance the scales again. It is as if some plague of locusts has descended upon our verdant, open fields of endless growth and ravaged our society—for the time being. The ecology of this situation is that our civilization will balance the disharmonies. On a personal level, though, what do we do? We have bills to pay, retirements to fund, houses to repair, and children to educate.

We still have a need to finance these items, the bountiful garden of our future. As the markets, governments, and armies work to right the balances in the external world, we need to find balance in our own life, a personal ecology that provides bread on our table and the sustenance for the days ahead. So we start by understanding our own needs, the material demands of living a life of our own free choosing.

There will always be bear markets. Excesses in capitalism will be rectified the way a forest or prairie is eventually returned to health after a fire. We will recover and prosper. We always have. There also will be opportunities to find the right investments for our short-term needs (over the next five years) and beyond. For example, the industrialized world is aging, benefiting from technology, and still relatively prosperous. Opportunities that spring from these facts of life are abundant, even in the worst of economic climates. Companies that make food, drugs, digital switches, medical devices, and biotechnology and that provide services to manage money will still be in business for decades to come. They are like Hermes, messengers of a new, healthier age, symbols of a material future filled with hope and promise of a new prosperity.

The Western world has been through crisis before, however, and survived. Feudalism, imperialism, fascism, communism—all were vanquished. Social and economic systems after these cataclysms were restructured and made stronger. World War II alone ended with an economic pact that aided all of Western Europe, Japan, and China. Now it may be the Third World’s turn for bolstering, a recognition that we need to enter the narrow gate of global charity and understanding.

We are obliged to remember that British economist John Maynard Keynes said that the Great Depression was about the failure of a discouraged people to take a risk. My contention is that if we understand risk, we have a fresh perspective on our lives, and failure becomes a keystone to learning. And an enlightened approach to risk over time makes us prosperous.

By showing you the ways of approaching risk in your investments, you will be able to stay focused and take a rational path. Whether it’s secure retirement or funding some short-term goals, The Bear-Proof Investor is my view on not eliminating risk or avoiding down markets, but knowing how to regard adversity as an opportunity and bravely embrace the future with hope and an eye on a sustainable prosperity.