Awhile back I experienced my first hurricane. While the actual storm was pretty frightening, it was the aftermath that was the truly scary experience. I had never been in a situation before where basic things such as fresh water and electricity were unavailable. In my reality, when you flipped a switch, the lights came on and a cool drink of clean water was available everywhere.
Suddenly the items we took for granted became things to hoard. The lines to get gas were hours long, and several fights and at least one shooting occurred. People waited all day to get bags of ice from the red cross, the few grocery stores open were quickly cleaned out and the radio stations stopped the usual stream of top 40 hits to advertise medical emergencies. Of the entire experience, one small conversation stands out like a beacon to me, at the time altering the way I think and view life.
I was talking to a friend that lived in beach front property, usually the most desirable locations, but after the hurricane they were devastated. Once living in an exclusive condo with a view to die for, now he was temporarily homeless and practically begging for hand outs. The only difference between him and your everyday panhandler is that he had plenty of money sitting in his bank account.
He was describing to me the situation on the island, how the hurricane had packed the ground floor condos full of sand up to the ceilings. All the trappings of success were now buried and worthless. People with triple digit incomes staggered about starving. He told me, “Right now if you had a tuna sandwich, you could sell it for $100 down there.” A light bulb went off in my head at that moment and I realized an important truth.
No, it wasn’t to go take advantage of people by selling sandwiches at exorbitant prices. It was the sudden realization that money only represents goods we need, and if those goods are not available, it is worthless. The real value is in the actual goods.
I once read a book as a child about money, and I remember the book stating that money was invented as a way of making trade easier. If I had a chicken you wanted, but you didn’t have anything I wanted, you’d give me something to represent that trade. I could take that item, and trade it with someone else that did have something I wanted. The real value was in the actual goods.
Now we usually think of the accumulation of money as a fail safe means of security. If you have a fat bank account you are assured of having your basic needs satisfied. But as we are repeatedly seeing with all the recent natural disasters playing out across the globe, money is worth as much as kindling when the stores are gone.
A few days ago I was in my bank when I overheard a woman next to me putting all her assets into gold, saying that after “witnessing Japan” she wanted to make sure “she was covered”. I almost turned and asked her what she was going to do with all that gold locked away if we were suddenly hit by a catastrophic disaster. Would it really alleviate the hunger pains to know you were rich on paper? Somehow I don’t think so.
The idea of wealth would take a dramatic transformation, and value would transfer quickly to mundane things like gardens and chickens. The truly rich would be those with the knowledge and ability to produce goods.
In the best of times, money is a worthy asset to strive for. I am all for being thrifty, buying things to enhance your enjoyment of life and saving/investing. My hurricane experience, however, taught me that a truly balanced portfolio is one that takes all scenarios into account, and money is not the end all asset. Invest in self sustainability and you have a truly diversified portfolio, and any investment advisor will tell you that diversity is good.