Don’t PLAN to “Borrow from the Future”

Don’t PLAN to “Borrow from the Future”

In today’s world we are too quick to “Borrow from the Future”. If you are old enough to have teenage kids, then you will understand that we live in an age of instant gratification… we are borrowing from the future on the grandest of scales.

I aim to assist all readers who visit my site, so I will be posting a series of PAUL’S 5 P’s blogs.

The purpose of the PAUL’S 5 P’s is to Prompt and Prod People to Prepare a Plan!

The original 5 P’s, of course, are supposed to be:


But I have re-defined this to be:



Don’t PLAN to “Borrow from the Future”

The idea of saving for some future date, and postponing our satisfaction, is dead.

We have become conditioned to see instant uploads of music or websites; we expect quick service when ordering a coffee; we anticipate immediate delivery when we go shopping online; we also (probably) want to buy our expensive toys like cars and even houses ‘today’ even if we have not saved enough. We have borrowed our way to the highest debt levels ever. Period.

Barack Obama put the USA into more debt than all the other presidents before him, combined.

China’s debt has increased fivefold in the decade since the last financial crisis.

This ‘instant’ mindset has permeated all levels of society. In truth, and throughout history, our tribes have often raided their neighbors for instant gratification – preferring to simply help themselves to the savings, harvests and even women, next door.

Note that all thieving, expanding, raiding empires have come to an end. Eventually, the cycle ends and reality dictates that you cannot eat your seed corn and expect to raid forever… those that PLAN ahead win the day.

This short-term thinking is happening today in the global corporate boardrooms. Executives are stealing from the future. As Bloomberg reports, borrowing (debt) has never been higher  – and the reasoning may seem understandable – due to manipulated interest rates that have never been lower; heck we even have crazy, negative, rates! When faced with a choice of saving at low interest returns, or investing into a booming market, the decision is easy!

So, what do we need to worry about?

Well, the fact is that we are ‘borrowing’ from the future with debt that has to be paid back. Corporate ‘instant gratification’ is alive and well, stock buy-backs (using debt) has the effect of improving earnings per share because the buy-back shares are taken out of the market. This increases executive bonuses because the stock rises. The underlying sales have not gone up as much. In fact, stock market valuations are at record levels in terms of Price:Sales ratios.

There is a link between rising stock markets (in the USA) and lower interest rates, that facilitated increased borrowing and speculation.

The amazing run up in the US stock market:

The equally amazing drop in the cost of money – making speculation easy and borrowing free:

Business, like the tide and the seasons, operates within cycles. Another way of thinking about this is that things go up and they go down – around a mean. The mean may be trending upwards or downwards for any given system, but essentially the wider fluctuations tend to cycle upwards and correct downwards, and are often prone to “overshoot” both on the upside and the downside.

Of course, I have no idea about the timing of any event that may seem inevitable. Most of what I read from some of the best in the investment and newsletter industry, indicates that there is most likely still some considerable upside ahead. Some are even calling this phase a “Melt Up”. While any “Melt-Down” may eventually be inevitable, that does not mean it’s immediate.

My job is only to coach you into the activity of thinking – about possibilities, and probabilities.

As the theme today is really about PLANNING, its best to spend some time thinking about what happens if what is currently observed simply reverts to what is “normal”.

So here are some more of those 5P’s:

PLAN: Borrowing from the future is what governments around the world are doing to social security plans.

PRICES: Borrowing from the future is what executives are doing to stock market valuations.

PRESUMPTION: Borrowing from the future presumes that things will continue to work forever as they do today.

POSTPONE: Borrowing from the future is what whole generations are doing by avoiding saving for that rainy day through postponement of gratification.

PLUNDER: Borrowing from the future with artificially low and negative interest rates is plundering the very core of capital market efficiency and true price discovery.

PAIN: Finally, please understand that while it feels good today, borrowing from the future is what will cause the greatest pain – in the future.


My advice to business owners

Please remember that nothing has really changed since the days when we took up our spears to raid our neighbors. At some point we experience a “correction” and the playing fields level again. Note that this may come to those that are greedy or those who are unprepared in equal measure. Don’t plan to harvest then fail to plan for the possibility of a raid…

Step back; Observe; Understand the current position; Plan for the big picture.

It is Prudent to pay down some debt; don’t expect the stock market Prices to march higher forever; Put away enough savings for a rainy day to get you and your business past any correction (and then double it).

PROSPERITY: Some of the greatest opportunities in the future will come from the Preparations you make that others failed to do.

I leave you with this gem:

‘The more things change the more they stay the same’, has never been more true.


Paul Manning is the Local Director of The North Coast Business Network and works with business owners in that network group, and one-on-one, to deliver rapid and lasting business improvement.


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