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"If They Only Knew How Little You Know"
Submitted by Bill Bonner via Dollar Collapse blog,
Pretend, for a minute, that you’re a money manager in today’s manipulated world. You understand that most of what’s happening is the result of governments and central banks forcing down interest rates and pumping up asset prices. You don’t trust this process but since “the markets are recovering” you’ve felt compelled to play along, putting your clients into a standard mix of stocks, bonds and cash.
But you’re not feeling the love. With stocks outperforming bonds and cash, your blended portfolios have failed to match the S&P 500 and your clients are asking snarky questions like “What exactly am I paying you for when I could do better by just buying an ETF?”
So finally, as equity prices march ever higher and governments around the world reiterate their promises of unlimited cheap money from here to eternity, you throw up your hands and give the clients what they want, loading up on growth stocks, especially from the hottest emerging markets.
Then, out of the blue, the dollar spikes, oil tanks and the world tips into chaos. US stocks have their worst week in three years, emerging markets collapse, and clients who last month demanded double-digit gains now start begging for reassurance that their savings won’t just melt away.
You, of course, have no idea what to tell them. Your training was all about markets and cash flows and how to analyze them. But today there are no markets. Instead of millions of more-or-less rational, self-interested producers and consumers, all you see when you look out the window is a handful of large, politically-motivated entities playing games with make-believe currency to get through the next election cycle or bonus period. Fundamentals like P/E ratios and dividend yields offer no insight into what might happen, and traditional asset allocation formulas, based as they are on the assumption of free capital flows and rational actors, give results that are random at best and exactly the opposite of what was intended at worst.
And this is just the first month in what might — if oil keeps falling and energy-company junk bonds blow up and the eurozone falls back into recession and Greece, Italy, Spain, and France elect anti-euro leaders and emerging market governments start defaulting and some other less obvious black swans all land at once — turn out to be 2008 all over again. You barely made it to 2010 with your career and sanity intact, and now here you are again, staring into the abyss and hoping the abyss doesn’t stare back.
OR, some central bank talking head might appear on TV with a promise of free money for every imprudent bank and insane oil driller, and the markets might resume their march into fantasy land. So here you sit on a Sunday morning wondering whether to sell everything and move your clients to 100% cash — as you wish you had done when the housing bubble started to burst in 2007 — or load up on high-beta growth stocks, trusting the Fed, ECB, and BoJ to pay off on the Greenspan put one more time.
The killer is that whatever you do, it’s strictly a guess. Financial fundamentals don’t matter, geopolitics doesn’t matter, and those cook-book financial planning guidelines are irrelevant. You’re flying blind with the fate of dozens of people in your hands, people who trust you and have no idea how little you know.
Sometime in the next 24 hours you’ll simply roll the dice with their futures. There must, you think, be an easier, more honest way to make a living.
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With the same (liar's) mouth the lies are exposed
http://www.philiacband.com/propaganda.html
Welcome to the Rule of Man
Ask a money manager to pretend for a moment that they know what's going on?
Why ask? That's what they do that 24/7/365.
The answer is, you are, and on and on and on.
This article assumes that money managers have a conscience, or actually care about their clients. Silly Wabbit...
They'll call it "Asset Re-allocation". From your pocket to theirs.
No, as one who actually fits the job description being described (and also a long term ZH reader), I can tell you that anyone who still refers to asset allocation and Modern Portfolio Theory, etc. (most of them)...is a donosaur who deserves what is coming.
The article really does do a good job of describing the challenges one faces.
I'm still in the business because A). I never really trusted Wall Street's BS, and B). I can think outside the box.
Thinking outside the box is great for awhile (aka alternative investments), but what happens when the box's taint gets opened (hello Pandora)?
Even a good money manager is challenged right now, and there are some of us left.
The article is discussing investment advisors, not money managers. There is a difference.
Money managers actually do care, for the most part, but they are pigeion-holed by "style boxes" and other limitations.
Investment advisors come in many shapes and sizes. Some of these (myself included), really do care. Some are even competent (hopefully myself). These are not as pigeion-holed, but are running out of options.
Try coming up with a plan for clients in this environment? Broken asset allocation model? Momentum trading? Technical analysis? Fundamental analysis (HAH!). Let's sit in cash while you still pay me? Alternative asset classes (knowing the misallocation of capital caused by ZIRP has skewed these beyond repair)? Fixed insurance solutions (simply awful) Shall I continue?
It ain't easy being green.......but someone has to do the job.
Can I aim a loaded crossbow at his head before asking?
I have been saying this for years.
Peak moral hazard.
More like Peak Insanities, since the political economy has been fundamentally based on ENFORCED FRAUDS for at least a Century, while getting worse at an exponential rate. "Moral hazard" is another of those euphemistical phrases that grossly underestimate the ways the ONLY connection between human laws and the laws of nature is the ability to back up violence. The social "successes" flowing from being able to back up legalized lies with legalized violence drives society as a whole to become criminally insane.
The phrase "moral hazard" is a superficial estimation of the degree to which civilization has become psychotic, because it was always controlled by lies backed by violence, while science and technology have been applied to make that become trillions of times worse, headed towards quadrillions of times ... The magnitudes of "moral hazard" present in globalized systems of electronic monkey money, backed by apes with atomic bombs, are too BIG to hazard any reasonable guesses about how BIG, since civilization is flowing along the path of least morality!
Professional money managers are a herd, stampeding into walls, after which they are going to bounce off over cliffs whose bottoms can not now be seen. The "moral hazard" of fundamentally fraudulent financial accounting systems is as great as their ability to deliberately ignore the basic laws of nature, in order to continue to operate through ENFORCED FRAUDS. The persistent and prolonged social successes based on being able to back up lies with violence have resulted in human civilizations being dominated by the maximum possible deceits and frauds, while professional money managers tend to not able to perceive that, because they operate INSIDE of those ENFORCED FRAUDS, in ways which they are barely beginning to face ... (and only because those are worsening at exponential rates, which are manifesting more blatantly obvious anomalies, which are getting harder and harder to continue to just deliberately ignore.)
The greatest source of "moral hazards" are that there are no short-term practical benefits that flow recognizing the degree to which the basic systems have become psychotically insane. The established systems continue to be based on the ability to back up lies with violence, which attitudes are already adapted to deliberately ignore more rational evidence and logical arguments, because those are irrelevant, EXCEPT when those are being selectively applied to become better at being dishonest and backing that up with violence.
Professional money managers were trained to maintain attitudes of evil deliberate ignorance towards the central social facts that money was measurement backed by murder. They made "money" within systems of debt slavery, backed by wars based on deceits, which were always headed towards generating numbers which would become debt insanities, and provoke death insanities. However, since they could never face those basic social facts, but rather had the typical kinds of careers that were previously successful on the basis of being professional liars and immaculate hypocrites, that could operate INSIDE ENFORCED FRAUDS, while deliberately ignoring those basic facts, they were courting "moral hazards" on an astronomically amplified scale, the same as the entire civilization they were INSIDE, that was a social pyramid system always based upon some people being able to control other people by backing up lies with violence. We are ALL collectively shooting the moon with the degrees of peak moral hazard tending toward peak social insanities!
The only things that have changed have been the advancing science and technology, making the established systems get worse, faster, at exponentially accelerating rates. However, since the foundations of having previously been able to make "money" were INSIDE ENFORCED FRAUDS, professional money managers were adapted to be able to operate INSIDE those systems, which always required them to become more insane, the more socially "successful" they wanted to become INSIDE those systems. They are married to the "moral hazard" built into the structure of the "money" systems being based upon ENFORCED FRAUDS.
Have a Xmas tip.
Find another job.
Yep, just get the hell out before the people with torches and pitchforks show up....
Those money managers would feel better if they asked their bosses to learn from the Chicago Fed and barricade up the ground floor windows of the building their working in with nice marble blocks. Video camaras on every corner would be a plus as well. And for God´s sake, don´t forget to ask the boss for some survival kits. Your going to need them when you have to escape from New York.
Just checked, stack still there and still has that nice ring to it!
Good luck.
But hasn't this really ALWAYS been the case ???
Exactly. Even in a "normal" market nobody has any idea whats going on. The only people who can get somewhat consistent returns are those who have inside info or cheat in some way.
Also, I suspect retirement fund managers get kickbacks for sending money to funds. Why else would people pay high fees for losing their money?
It's easier to just open the dresser drawer and see if the money is still in the sock.
I don't usually plug books but read When Money Dies. The US is in the acute stages of hyperinflation.
They tried to have hyperinflation, but everyone was too broke to pay for it.
You can only hyperinflate if it gets into general circulation, QEwhatever went into the pockets of a select few.
In hindsight, allowing the central banks to manipulate interest rates is going to look like it was a bad idea.
True enough. But letting the market decide will lead to no lending at all, more or less. Why? Because so few of us actually create wealth.
Ummmm....Lending (debt) IS THE problem. There is more debt than can be paid off....and you want even more?
In order to "decide," markets would first have to exist, and be devoid of .gov imbalances, the biggest of which has been 40 years of ever increasing debt to paper over all the fucking government "solutions" to previous fucking government "solutions."
Next.
A Nanny Moose,
I agree that there's too much debt. I just haven't seen a good case that we are going to "grow" without it.
"grow"
The growing is done, time to learn to live without growth or perish...
LOL. Yup.
Having to look at "The worst plastic surgery botch up" face, every time I scroll down to the comments.... C'mon, Tyler. Haven't we been through enough already??
My exact thoughts. I've had nightmares of that huge set of lips wrapped around my dick.
Ads are so bizarre these days, there's 1 talking about some health potion or other, and the picture is of a jar of some fermenting fluid or whatever with some cheese cloth on top of it, I have no clue the point they're trying to make.
I suspect a high percentage of financial advisors / wealth managers, etc, really don't see that much of the big picture. Perhaps the Fed's support role through money printing, but not the reason why. Like most people, I'm sure they just want to muddle through this turmoil until things get back to "normal".
I still speak with friends (who I know to be intelligent) who see no market manipulation of any kind. Blind but intelligent.
Antonyms: Intelligent and don't see any market manipulation. They are stupid or ignorant to the extreme but the FED openly manipulating the long term interest rate they are directly manipulating the
CAPE model that is the pricing model to all stocks. They do change the discounted value of all future earnings. Thus openly manipulating all markets.
I am certain I will never see "normal" again.
Frankly, I wouldn't know whether to shit or go blind. Sounds like some kind of a Karmic Curse rather than a job. I"m pretty sure Silver will still have quite a bit of buying power in five years; but beyond that it's all fog and darkness.
Karmic Curse (Lesson). Similar to a romance gone bad.
This should be on the 8 o'clock news
This should be on the Front page of every news paper in America
This is real news this is what a call spot on
thank you
'With stawks outperforming everything'.....if you say so.
Ignorance is not just strength—it is the most awesome force in the universe. Consider this: knowledge is always limited and specific, but ignorance is infinite and completely general.
Onward to Infinite Ignorance"---It's missing a little something as a campaign slogan, I think we'll have to tweak it a little.
Yes We Can is code for Onward to Infinite Ignorance.
Instead of having answers on math tests, I think we ought to have impressions. So you got a different impression of that problem than I got, so what? Can't we all be brothers?
Thinking you know something no one else knows is knowing that there are things that are known knowns, and there are unknown knowns and sometimes, no one knows what the difference is between their arse, and a hole in the ground.
NOW KNOW THIS!
https://www.youtube.com/watch?v=1VPiQMIwjvA
Air filled rubber tires, don't work very wwell when they are all flat, I wonder if the rad is exposed as well?
Well Bill Bonner...it seems like you really don't know anything either...afterall you have a blog called the "Dollar Collapse Blog!" Ohhhhh...I bet you are real popular these days with the people you have told to invest in gold, silver, and foreign currencies. Yeah, you KNOW what you are talking about...wink wink...
Yes, these are uncertain times! Yes, I do not know everything. I do my best and really work hard to find investments that make sense. I know a few things and try to stick to clear ideas, good risk/rewards and to not be greedy or stupid.
I go to zero hedge a little less every week...
Well Bill Bonner...it seems like you really don't know anything either...afterall you have a blog called the "Dollar Collapse Blog!" Ohhhhh...I bet you are real popular these days with the people you have told to invest in gold, silver, and foreign currencies. Yeah, you KNOW what you are talking about...wink wink...
Yes, these are uncertain times! Yes, I do not know everything. I do my best and really work hard to find investments that make sense. I know a few things and try to stick to clear ideas, good risk/rewards and to not be greedy or stupid.
I go to zero hedge a little less every week...
Alright Hot Shot. Why don't you give us your outlook and opinion?
Bill Boner is a GENIUS!
Love the sharp insight Mr. BONER!
they don't know Fukushhhh..... gonnagetchew. shhh...
this piece is full of crap. fund managers care only about their next bonus, not about opm-aum.
Epic.
Despite dour headlines, indices just today filled or breached the crazy Halloween Japan “Moar” Gap up (but NOT the QQQs !), which itself was a good distance beyond the Bullard and 10-YR flash crash lows of Oct 15.
Further, recall that finance ministers were trotted out almost daily to keep the horizontal ceiling pattern alive. With this being a Yellen press conference week, no way were Fed Heads going to front-run the statement, but with major commodity implosions, currency wars and forced selling evident, is there any doubt Ms. Y will use statement language or her Q&A to placate markets?
As algos often trace out a best/worst case path then end at an equilibrium point just prior to FOMC, it’s likely the 50/100 DMA touches were planned. Notice how volatile and difficult to short last week was, with retracements nearly to Unch even on big down days? Might have been the big boys executing a controlled distribution, avoiding panic while maximizing their profit-taking, and it’s likely they’d prefer to mosey on up toward 20 DMAs by Wed to see if Yellen hands out Yuletide pixie sticks for them to suck on like drooling toddlers.
Wouldn’t it be funny if, instead of candy, they got a shiny new anvil in their X-mas stockings?
"rule of man" huh, I'm gonna have to add it to my vocabulary.
"When things get serious, you have to lie"
Not just a slogan, a way of life.
"It's like being paid way too much money to feed a big scary beast that can turn on you at any time"
First said in a show business context, but I think it applies to a lot of financial jobs too.
When markets are not related to fundamentals and trades are conducted in nano seconds - who the F##k knows anything about the markets. Soon commodity trading will include water and air - there is no end to greed and manipulation. Now we also see a more blatant use of economic warfare to maintain the status quo. Only a 90% population die-off will provide any future for the human race. Its self destruct time. Push that damn red button.
Alas Babylon
/cue south park banker
.....and it's gone.
Here you go, GotGalt
https://www.youtube.com/watch?v=-DT7bX-B1Mg
…and this is something new? “A rising tide lifts all boats” and “when the tide goes out you can see who’s been swimming naked.”
Every f***ing money managing “genius” out there, including Warren, would be penniless without central bank intervention. When you know the Fed has your back, you can make all kinds of risky bets with other people’s money and look like a hero. When the party ends, and it always does, the angry, stupid investors want you fired and want their money back. “You said the markets only go up with the Fed intervening!” LMAO.
Soon fear will give way to panic. All those smart, soon to be millionaires, will head to the exits to prevent big losses and the exit will be mighty small. The wealthy will have their brokers get them out at each pop that occurs whenever the Fed reassures the markets with another big announcement.
The growth story is over. Everything is overbuilt and the foundation rests on vast quicksand covered by a mountain of debt. Obama will call Janet and demand she get the party restarted again, but it may not work this time. The Fed cannot raise rates ever; it is all a sham. More QE will bring more rage against the massive wealth inequality it has generated. Then the belligerent oligarchs will become more desperate; they will make a big mistake and provoke a war with Russia. It will be lights out. “It’s all Russia’s fault,” they will scream as the flee the country and the incoming missiles.
Few people really think about the economy to any great degree or even try to understand it. The study of economics is often baffling and confusing. Many economic theories exist but many are full of holes and conundrums. Much of how people react to a policy may have to do with timing and perception instead of reality. Economics is full of loops that feed back upon themselves and unexpected pitfalls based on expectations.
All this can become quite abstract. Economist often predict events that never tend to unfold as expected or planned. Many of the "modern monetary theories" in use today have not been proven over time, but reflect an attitude that we can control economic cycles better than in the past. The basis of the economy we have today is unsustainable and because it has been able to exist for so long does not mean it can continue. The fact the system muddles through does not guarantee that we will not suffer financial harm as individuals.
http://brucewilds.blogspot.com/2014/03/few-people-really-understand-economy.html
I love the old "in these challenging times, you must diversify your portfolio" What a crock of shit. It just burns my ass every time I hear a dumb ass money manager (more like money losing manager) says this crap. These people just have no shame. How on earth do you manage anything in a manipulated, corrupt market, like todays?
I love the old "in these challenging times, you must diversify your portfolio" What a crock of shit. It just burns my ass every time I hear a dumb ass money manager (more like money losing manager) says this crap. These people just have no shame. How on earth do you manage anything in a manipulated, corrupt market, like todays?
Balance out with shorts/puts and then... well pray.