Short Term Gains And Long Term Disaster


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    William Henry Jackson Tamasopo River Canyon, San Luis Potosi, Mexico 1890 About a month ago, Japan’s giant GPIF pension fund announced it had started
    [See the full post at: Short Term Gains And Long Term Disaster]

    Dr. Diablo

    Interesting, so it’s okay if Norway buys Tokyo and Tokyo buys Oslo, but not if they invest in their own people and improve their own neighborhoods? That’s human nature for you. At least lately.

    So they’re investing in stocks which are clearly a bubble, but what makes you think sovereign bonds are safe? Perhaps they ARE being smart. Follow me on this: perhaps the most likely outcome, mathematically, is for sovereigns, currencies, to be defaulted, starting anywhere, but in Greece, in Japan, or the hollow shell of the rejected United States reserve currency. So if sovereigns have bailed out everyone, every bank, every lobbyist, every pal, contractor, and industry, who bails them out? Historically, I mean. Nobody. As Adam Smith noted as far back as 1776, sovereigns NEVER pay. NEVER. They always default. ALWAYS. They have shown some creative ways to do it, but when they can’t pay, they don’t. They have an army and their asset is the entire nation, what are you going to do? Repossess?

    So if sovereigns are the last gambit and are already past the point of no return, then you can imagine them defaulting or “restructuring” as they like to say. If their bonds aren’t AAA but voted most-likely-to-fail, where do you hide? Where can you hide if you’re a fund with $100B under management? Just where we see in Europe today, which is in danger of default: in the DAX. Or into the DOW.

    Why? Because if government bonds are the largest capital market, and they go worthless, at least stock is a part share of a going concern. And when you have a 40x size market flood into a 1x market, they can drive those “prices” very, very high. Just capital flows, looking for “safety”, such as it is.

    So is it really more dangerous to be in stocks? Or is the real danger today in bonds? And do the money managers already realize this and are moving OUT of the danger of “AAA” assets and INTO the “safety” of world stocks at 30 P/E?


    The pension funds are in collusion to keep bidding up certain stocks world wide!!!!
    That sound good for someone already drawing a pension.


    All backed by the full faith and credit of the most abundant resource in finance. Fiat currency. But, then with a dollar half life of around four years, what else can one do? Join the party or get real, I guess.

    Half-Life of the US Dollar


    Yes, jal,

    The PC terms for such things are “Public/Private Partnerships” and “Government Controlled Capitalism.”

    And, of course, the engineers of these “benevolent” structures are to be “justly” compensated,,,


    “justly” compensated,,,


    Thanks for the thoughts there, Doc,

    Maybe the real question might be, is the Equity Market right at this juncture, or is the Security Market? Granted, given what passes for markets these days.

    But, again, keep the “Half Life” of all currencies in mind. They are all nothing but tornados in search of a trailer park.


    Gravity is like a box of chocolates.
    That’s all I’ve got to say about that.


    Government sponsored Inflation of asset prices creates a dynamic which leads to more of the same. Where only those who support it can rise to political power and they then deliver, more. America was essentially founded upon this model, now much refined.

    I think China is going to be the tell as to how much further this dynamic can go. The mighty credit/money creation engine that is China has created many wealthy people at the top of the Party. Even those not benefiting spectacularly are now faced with the threat that winding down the party will destroy everything. So like here and everywhere each incremental decision is to increase liquidity so as to live another day and with each increase the threat of failure becomes more severe making the next accommodation more likely.

    V. Arnold

    Buy gold, every month, regardless the price, in what ever amount you can afford. Grains, grams or ounces.
    That is a long term strategy. Here, Burmese workers (not payed a lot) buy gold every pay day, in any amount they can afford, and it isn’t much at any given time. But over time it adds up.
    Cash is important and there should be a reserve; but if cash becomes inflated and worthless; gold is the only thing that will save you! Sure!

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