It seems to me that the greatest risk, beyond all others, and fortunately unlikely, would be combat with China. Were such a catastrophe to occur the decline would be much greater.

Combat with the USSR is a possible, but unlikely, as it is generally recognized, I believe that in both countries we each have an annihilating ability.

Next, also unlikely, is some form of civil war, pitting those with less against those with more. This is theoretically possible if a highly and aggressively conservative political party were to gain control of the government, leaving the unemployed and insufficiently salaried workers in desperation, with a “nothing to lose” group attitude, prompting civil discord-based rioting.

The inverse possibility is that of a far left, socialist party, enacting legislation resulting in a lack of profit-making potential for businesses. Without the prospect of profit there is no justification for those with capital to invest and without investment many businesses will fail.

Continuing and likely increasing inflation, and doing that which is necessary to curtail inflation, will result in it being more difficult to achieve and maintain profitability.

Difficult to assess, but easy to predict, is that by mid-century half the world’s population will be Muslim. If a significant segment of Muslims accepts Koranic preaching’s of convert or kill infidels, the results could be tragic.

The spread of contagious physical disease is clearly possible, with the economic outcome impossible to predict.

Racial unrest, reflecting in part, the failure of public education to provide the education necessary for other than menial job employment.

A possible increasing recognition that price/earnings ratios are the number of years, at current annual earning levels, required for the company to earn the current price of a publicly traded stock, resulting in the case of high P/E stocks, of a mass withdrawal of funds. This is probably unlikely, as available alternatives, having similar liquidity, are limited. Also, professional money managers are paid to keep funds productively employed.

Are these enough to give pause to the high level of optimism which seem to be infecting investors?

 

Arthur Lipper, Chairman                 arthurlipper@gmal.com
British Far East Holdings Ltd.

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