About Liquidity (2005)

The bulletin was sent as a private communication to System Club members in 2005. It was published in the book “The System Club Letters” in 2008. This is the first time this article has appeared online.

About Liquidity (2005) – Ken McCarthy 

“There are few things more unbalancing to the mind than the act of suddenly winning or losing large sums of money.” – Henry Howard Harper, The Psychol­ogy of Speculation

One of the best educations I ever got was the time I spent working on Wall Street. It was the roaring 80s and the market seemed invulnerable. It wasn’t and I was right there when the whole thing melted down. It made an impression on me.

Punch bowls, bubbles, and musical chairs

Most of the time, I focus on the particulars of run­ning an Internet business and using the Internet to boost existing businesses.  Today, I’d like to talk a little bit about money in the broader sense.

First my biases. I am extremely conservative finan­cially. I am very positive about my ability to make money, but I am also very realistic about the vagaries of life.

The reality – as I see it – is that we are living in a period of extraordinary opportunity, especially for folks who know how to use the Internet to find and serve customers. One of the reasons I’ve poured so much ef­fort into teaching in the last few years is, quite literally: “Now’s the time.”  Now is the time to rack up cash – but keep in mind, it won’t always be this way.

We are currently experiencing a period of financial liquidity unlike anything ever seen before in the history of this country. Liquidity in this context simply means:  There is a ton of money around right now.  A TON.

Yes, we are good marketers and yes, we are good business people and yes, we work hard and yes, we have been clever, but we’re also profiting from the fact that the Central Banks of the world, especially our own, have been printing money like there is no tomorrow.

Well, there will be a tomorrow.  There always is. At some point, the punch bowl will be taken away and the party will be over (at least until the next time.)  If you’re old enough to have seen such a time, or you’ve read some history, you already know it’s not fun for the un­prepared.  So what do you do to prepare?

Suggestions for a happy landing

1. By all means, enjoy the party – especially the part that involves you aggressively making and salting away cash.

2.  But don’t assume the entire reason you’re doing well is because you are: a) a financial genius or b) graced by God.  The liquidity explosion has helped us all a lot by putting easy money in large quantities into our customers’ pockets.

3.  Don’t be in a mad race to jack up your lifestyle to keep pace with your rising income. I’m not saying live in a hut and wear a burlap sack, but be ruthless about living like a normal person, not a player on a roll. The best things in life really are free, something frighteningly easy to forget when you’re on a spending spree.

4. Don’t make big long term bets on things that de­pend on: 1) cheap oil and 2) consumers having easy money coming out of their ears.  I don’t have a crystal ball, but history says neither of these conditions are permanent.

5. Think musical chairs. In short, don’t be the guy who has so overextended himself on lifestyle enhance­ments and bubble investments that when the music stops, you’re one of the ones left without a chair.

You know the story of the Grasshopper and the Ant. And the Seven Years of Plenty and the Seven Years of Famine.  There’s a reason those stories have been around for a long, long time. Let’s prosper together throughout the ups and downs of the business cycle, not just on one sunny turn of the wheel. History shows that people with perspective end up being the biggest win­ners in the money game.

Ken McCarthy

P.S. This advice was originally sent by fax as a bulletin to every System Club member way back in 2005 when most advisors were telling their clients that the party would never end.

In contrast, graduates of the System Seminar and members of the System Club has received consistently realistic advice about what it takes to succeed in business, online and offline, in all kinds of economic climates.

P.P.S. Because of the demands of our other businesses (and our desire to have a little more time to enjoy life!), we’re no longer putting on the annual conference which ran from 1994 until 2011.  The best way to keep up with the System is to get and read the books we publish and join the System Club.

Further reading:

How to Join the System Club

The last live System Seminar

 

 

 

A realistic blueprint for financial independence
Get it right and strike it rich

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8 Responses to About Liquidity (2005)

  1. Ed September 25, 2011 at 8:54 pm #

    Great words Ken

    Love the bit about not living it large – as we say in London

    very wise

    Will check out your other stuff

    Thanks ed

  2. David Rothwell September 25, 2011 at 8:55 pm #

    After 5 wonderful years, I am already *so* missing System 2012.

    Thank you Ken for all the wonderful conferences, and the chance to meet and make so many great new friends…

  3. Rick September 26, 2011 at 12:36 am #

    Very sound advice, but so easy to forget.

  4. Alasdair September 26, 2011 at 12:44 am #

    Superb article. Thanks so much for talking sense when so many speak nonsense in the media and the rest of the world!

  5. Gauher Chaudhry September 26, 2011 at 2:45 am #

    Great article Ken. Keep them coming.

  6. Roger September 26, 2011 at 6:43 am #

    Ah, the things people never learn.

    I remember about 7-8 years ago mentioning that when my student loan was paid off (mandatory 10% of income over $14K at that point) it would effectively be the same as a $10K per year pay rise once tax, etc was taken into acocunt.

    One of the guys looked at me and said “why”, so I explained that I was making roughly 60K, and the tax rate was X, etc.

    And he looks at me and says “you mean if I didn’t have a boat loan, I would be 10K per year better off?”

    He’d never even thought of figuring out what the boat was costing him.

  7. Orestes September 26, 2011 at 12:02 pm #

    A great article full of wisdom…I´ll put it in my heart.

    Thanks Ken for giving us always the best advice!

  8. Walt Buckley September 30, 2011 at 8:10 am #

    I started with your Smart Beginners but due to time constraints and other business situation and the help of the us goverment (not really), (Really the oppsite)

    looking forward to returning to the fold.

    Walt Buckley
    wbuckley100@comcast.net

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