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The Modern Investor's Manifesto
Submitted by Tim Price via Sovereign Man blog,
“The stock market is filled with people who know the price of everything, but the value of nothing.” – Philip Fisher.
A personal perspective on some of the challenges facing today’s investor:
1. The Communist experiment of the planned economy did not work.
2. Not only did it not work, it impoverished millions.
3. Western central banks, their client governments, and agents in the economics “profession” seem unaware of this fact, or wilfully disregard it.
4. People respond to incentives. Everything else is detail.
5. Adam Smith’s invisible hand does work, if left well alone by the dead arm of bureaucracy.
6. In the aftermath of the breakdown of Bretton Woods, ‘developed’ governments have amassed unpayable mountains of debts.
7. A culture of entitlement has made these debt mountains higher.
8. These debts will never be repaid, except in devalued money.
9. The Fed has said as much – this is a secret hiding in plain sight.
10. The debt overhang will depress economic growth for the foreseeable future..
11. But a cult of economic ‘growth at any cost’ has infected the modern psyche.
12. In the real world, there are practical limits to growth. Beyond a certain level in any mature system, further growth is tantamount to either obesity, or cancer.
13. Pre-financial crisis economic growth throughout the western economies was illusory. It was established on the unstable sands of credit creation and borrowed from the future.
14. Until the stalemate is resolved, asset markets will reflect, and oscillate between, fears of deflation and inflation. Money may be made, but much more will be lost.
15. Free markets, if allowed to operate, would prefer that the system cleanse itself through a deflationary shock.
16. “Falling prices or price deflation are not the cause of economic and financial crises, but their consequences – and at the same time their cure.”
17. Indebted governments and effectively insolvent banks cannot afford that deflationary shock. It poses an existential threat to the finances of incumbent governments and the ongoing existence of the unreserved banking system.
18. As the parlous state of government finances becomes clearer, governments and the media have disingenuously blurred the distinction between tax avoidance and tax evasion.
19. Tax avoidance is an entirely legitimate and legal behaviour.
20. “No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores. The Inland Revenue is not slow, and quite rightly, to take every advantage which is open to it under the Taxing Statutes for the purposes of depleting the taxpayer’s pocket. And the taxpayer is in like manner entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue.”
21. If governments wish to make certain tax avoiding behaviour illegal, it is in their powers as lawmakers to do so.
22. The monetary policy response to this economic stalemate can only be to attempt to ignite inflation (and attempt to destroy savers and those on fixed incomes in the process).
23. “Money and credit growth can never make a nation prosperous. It may bring about a shift in income and wealth from some groups to other groups, but it inevitably tends to impair the prosperity of the whole nation.”
24. Base money creation is inherently inflationary.
25. “The most important thing to remember is that inflation is not an act of God, that inflation is not a catastrophe of the elements or a disease that comes like the plague. Inflation is a policy.”
26. It will become ‘true’ inflation as and when bank lending recovers and the velocity of money rises.
27. If inflationary pressure rises even as interest rates are kept artificially low, there is a risk of widespread currency collapse. The markets cannot be fooled.
28. In the meantime, markets are trapped in a ‘no man’s land’ of sub-par growth, artificially suppressed interest rates, and artificially boosted financial asset prices. The bull market will not last forever; the interest rate cycle will turn, whether central banks like it or not.
29. Actions have consequences.
30. Artificially low interest rates will give rise to malinvestments, notably in property. The dismal cycle will replay itself again.
31. Sensible entrepreneurial endeavour cannot occur in an economy where the cost of capital is a plaything of central bankers. Companies are hoarding capital for a reason. The so-called recovery is largely a function of government spin.
32. The price mechanism has been destroyed.
33. Sensible investment cannot occur where the term structure of interest rates and the so-called risk-free rate are also playthings of central bankers.
34. Monetary policy makers are trying to replace a bubble of inflated property prices with a new bubble of inflated property prices.
35. Higher notional property prices are not wealth.
36. Quantitative easing helps nobody beyond a narrow financial elite benefiting from notional gains in financial assets.
37. A policy of Zero Interest Rates ensures that saving is depressed.
38. Depressed savings ensure sub-optimal levels of investment.
39. Money is too important to be left to the State.
40. Dishonest money destroys capital, savings and the economic calculation of entrepreneurs.
41. The experience of the 1930s should have taught us that beggar-thy-neighbour economic policies do not work. “An eye for an eye only ends up making the whole world blind.”
42. Beggar-thy-neighbour competitive currency devaluations are being practised by just about everybody.
43. No unbacked paper currency has ever lasted. And no government attempts at wage and price controls have ever succeeded.
44. The tide of financial repression will rise.
45. The future is unclear but the failure of the current system seems certain.
46. Gold is an answer, but it is not the answer. The productive and purposeful endeavour of entrepreneurs is also an answer – but only at an appropriate price, if one can even be assessed in a system wherein financial calculation has been made impossible.
47. “An investment in knowledge pays the best interest.” But we are drowning in information and starved of knowledge.
48. Modern communications, efficient though they are, have destroyed patience and discipline. We crave immediate gratification and returns from our investments.
49. “The only useful thing banks have invented in 20 years is the ATM.”
50. “Wide diversification is only required when investors do not understand what they are doing” – or when the underlying investment landscape is fraught with unprecedented risks, and peppered with unexploded ordnance.
51. Nobody can say with certainty what is to come – central bankers least of all.
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52. Volume is shit.
Your move Michael Snyder.
WTF is this shit?
Nothing says "I've nothing to offer" more than a numbered list. Who communicates like this?
Nobody, that's who.
If you can't be bothered to come up with a narrative for your line of thinking, don't expect anyone to pay attention to your special form of genius.
Oh, wait. I see it's one of Simon's minions. Whatever.
agreed, this list is boring as shit
You read it? I wasn't going to read all that shit... fuck that...
I did read it. One of the better lists actually, besides I'm having a slow day and just woke up from a nap. I promise to skip the next list. Really.
53: The FED is the market.
From the Communist experiment of the central planned economy the common folk stealed, I witness it first hand,
from the Communist experiment of the central planned financial system only the HFT and wolves can steal.
Disclaimer: Born in Nicolae Ceausescu backyard.
We will see deflation first, then inflation later.
"We will see deflation first, then inflation later."
Deflation already came and went, between Sept 2008 and March 2009. You missed the boat. Inflation is already on the move and is going to continue to move up because of the Western drought that impacting food prices. The Fed is not going to stop printing. if there is any significant market correction the Fed will just QE moar.
The Fed and Communist style central planning in the US made companies like Vanguard possible. Let's see how an index fund does when you take the training wheels off!?
Venezuela suspends international mail deliveries in currency row | World news | theguardian.com
Fisher totally bailed-in that quote from Oscar Wilde.
Awesome quote though.
Vae Victis
Vae Victis
"Words are important; deeds are a reality." John Corzine
what is the value of a penthouse on One park lane or that other Central park address.
A good place to swan dive from when property prices do the same.
Gold is an answer, but it is not the answer.
Crypto currencies are the answer. :)
Tim Price is the pseudonym of an agent provocateur if I ever saw one. "Personal Observations" 1-51 not worth the TP they are written on.
If you like your cabin in the woods, you can keep your cabin in the woods.
52. Keep stocks in your portfolio but also a case of Spam in your basement.
15....
yeah... that would take over 60 years with harsh austerity measures... I'd like to see a politician sell that to the public.
Over here, for the elections next week, everybody here is discussing about who is offering the best incentives and that's who they'll vote for.
fuck the future.
and I'll vote for the one who is going to fuck it up the fastes of them all!
BURN ROME BURN!!!!!
I got the gold and silver, now let the system crash.
"Too long or too short" Procrustes
In a free market, Adam Smith's invisible hand would spank the $hit out of crony-capitalists, banksters, and their political minions.
Valar Morghulis
the idea of 'free markets' is a massive lie.
a market is defined not only by purhcasers and sellers. but by
1) who produces the goods sold, and the economics by which they are produced
2) who consumes the goods purchases and the economics by which they are consumed
3) who produces the commodity money (fiat or coined or ANY standard unit of account) by which the traders agree to trade with and the economic system by which that money is secured from destruction.
in simple barter this complexity is collapsed to a more simple set of relationships with the most simple being a market of people who simple trade what they consume and produce directly without 'money' but using their own surplus shortage and impulsive desire(or lack therof) as a standard by which they trade without a 3rd medium of account---money.
those markets are a fairy tale. and thus not even worth discussing. the modern (since roman times) mass markets necessitate money of one sort or another.
markets are complex sets of relationshisp between producers, consumers and buyers and sellers and the security forces that ensure the saftey of those who control the production and destruction of commodity money (or fiat or any type of money)
by the sheer introduction of money (whose production and destruction and secured ownership is protected and assured upon threat of violence ) ---------a market is no longer 'free'.
'free markets' are not only a fiction , but a construct introduced solely to simplify a deeply complex system for the purposes of benefiting one group , or another.
stop letting the frame of the concept fool you before you even begin debating its merrit. start by questioning the assumed dichotomies upon which juxtaposed opposites such as 'free versus regulated/fixed" are even introduced.
"Socialism is like a nude beach. Sounds pretty good until you actually get there." - Iowahawk
We are not starved of knowledge.
I believe that knowledge is exponential.
Understanding is incremental.
And enlightenment is either accidental or painful.
Because of the uncertainty in today's market and the direction events might take the subject of "value and worth" continues to garner a fair amount of interest and remains relevant. History is chucked full of distorted markets, debts unpaid, promises unfilled, and bubbles.
These "interesting times" play havoc with the value of things and what they are worth. Like some of the cruel games children play you don't want to find yourself without a chair or holding the "hot potato" when the game ends. Below is the full article sporting a minor facelift and update.
http://brucewilds.blogspot.com/2014/05/value-and-worth-constantly-change...
Bush: "Mission Accomplished" -- REAL Speech
http://www.youtube.com/watch?v=XzrJwzYBUkU (2:03)
I went through "the list" twice.
Curious that he (among others) forget about the abrogation of law re: property rights, property title and related fraud which brought down the financial system. MERS / Mortgage Electronic Registration Systems Inc. is a key component of these crimes.
Laws only apply to the "small people."