Thanks for talking with us recently about the current market situation, and advising us to hold tight with our mutual funds. You showed us graphs depicting bear/bull cycles since the 1940s, and demonstrated that through that entire period, the bear markets were short, and buying mutuals during these periods was the best strategy for maximum return.

I asked whether you believed that the current Great Recession fit the pattern of boom and bust we’ve seen all our lives, or whether perhaps there was more to this one. You assured me (the word you used was “guarantee”) that we’re already past the worst of it, and we’ll be up and running with the bulls within a couple of years. You told me that smart people were staying in the market, and I looked like a smart person. Although you threw in a gratuitous “previous performance is not necessarily indicative of future performance”, your overall message was one of confidence and unswerving devotion to the current economic status quo.

I'm afraid I must tell you that I was disappointed with your arguments. You told us nothing that you would not have told us twenty years ago, which suggests that you have not really come to terms with the economic implications of our changing environment. I suspect that we cannot rely upon 20th century trends to dictate 21st century market behaviour.

Your graphs used carefully selected time periods to show upwards trends with cyclic bear/bull markets since the 1940s, but failed to deal with the 1930s or previous data. There are larger cycles than the 8-year bear/bull. Furthermore, there are aspects of the world which are NOT cyclic. How many times in Earth's history has a species mined and then squandered a billion years of stored solar power? Once so far.

You claimed that during every bear, people say that "this one's different", but they all follow the same pattern, and last roughly the same amount of time. But the causes of bear markets are as different as the things which can cause a market to lose confidence. Furthermore, when I mentioned a specific instance of a burst bubble that has yet to recover, twenty years later (the Nikkei in December 1989 was close to 40,000, but it's still under 8,000 now) you failed to engage with the issue of long-term economic problems, and merely said that it was Japan, and that I'm not invested in Japanese markets. Do you not believe that what can happen to Japan can happen to the West?

Thirty years ago we all thought we were going to die of nuclear war, but the real threats to world markets are not global nuclear war, but problems due to the unsustainability of our current economic model, disconnected as it is from its environmental basis. Every effort to keep the economy (and hence production and consumption) growing is a nail in our own coffins. Fiscal aid packages from governments to try to stimulate the economy are borrowing from the future to try to keep the present from changing. When I brought up the fact that growth is not infinitely sustainable (nor even is development), you naïvely talked instead about whether prices could keep rising essentially forever (sure they could - prices are merely an arbitrary marker of worth). You evidently misunderstand your own graphs, as if they show the price of eggs, rather than economic growth, the (temporary) fount of profit in today's market.

When scientists tell us about changes in global temperature, sea level, ocean acidity, biodiversity, and climate, they're not just talking to hear the sound of their own voices; they're giving us information about what needs to change in order to avoid a global version of what happened to Easter Island.

We sometimes make fun of those who proclaim the End of the World. Remember the Beyond the Fringe skit in which a group of monks, waiting for the end of the world, are once again disappointed when it fails to occur? Peter Cook cheers them up: “Well, it's not quite the conflagration I'd been banking on. Never mind, lads, same time tomorrow... we must get a winner one day.” It seems absurd to think that we could actually be doing any serious harm, just by being the most environmentally damaging species to come along since some clever bacteria invented oxygen-releasing photosynthesis.

Maybe you’re right that this particular bear market will be over quickly, but does that validate the economic model? Or does it merely show that vast aid packages are capable of temporarily keeping things from changing too fast? The environment is no longer capable of giving what it gave so freely in the past. Sticking to 20th century paradigms will not work for 21st century problems.

I’m afraid you no longer have my confidence.

Steve Hansen Smythe, March 2009