Volumes have been written on behavioral finance and the seemingly “irrational” decisions investors tend to make to avoid straying from the herd. This article examines a current example coined “FOMO” (fear of missing out), in today’s texting parlance. Through a better understanding of the psychological dynamics of bubble mentality, we hope to help investment managers better grasp the complex role they must play when their concern for poor expected returns and higher levels of risk are pitted against their client’s fear of not keeping pace with the market.
"This is the peak – we have passed the peak of the bubble. It's now deflating. There is usually a little tiny roll over and then a huge crash. And the little tiny roll over is just starting right now. We are seeing it first in the top end (like luxury real estate), where the currency that was created by the central banks went to that 0.1% first. Within the next few years you are going to see probably the greatest crash in history. I have often said that the crisis of 2008 was just a speed bump on the way to the main event. We are in the process right now of seeing this unwind."
The Bank of Japan could announce a "massive stimulus program" as soon as September, according to the CIO of UBS Wealth Management which allocates $2 trillion in assets. "It is how much they do, and whether they can create that kind of shock and awe at this point in the cycle... They could announce a massive stimulus program both on the monetary and fiscal side. Right now, it looks like they are going to use more stimulus."
"I know that when we look at the overall U.S. population, it seems like things are getting better. But when you start breaking it down and you look at that core consumer that we serve on the lower economic scale that's out there, things have not gotten any better for her, and arguably, they're worse because rents are accelerating, healthcare is accelerating." - Dollar General CEO, Todd Vasos
'Stable' money was a chimera. It did not bring stability to the world economy. It did not counter the instability emanating from deposit banking. It actually added to the severity of booms and busts. To function efficiently, capitalism needs a foundation of sound money, not stable money.
Investors should check their ideologies and personal politics at the door. The fact is, that strong and enduring capital markets can only survive in truly capitalist economies, preferably with strong representative governments. With accretive capital formation in question, it occurs to us that the largest global capital markets have become little more than tools for Marx’s "ruling class" - in this case well-funded politicians and their patrons - to socialize the factors of production. Whether such a conclusion is good, bad or irrelevant to market performance is the focus of this report.
The person willing to pay top dollar is called the "marginal buyer". Most of us don't really think about him much, but he (or she) is very, very important. Why? Because the marginal buyer not only determines price levels, but also their stability and degree of volatility. The behavior of the marginal buyer, as well as the degree of competition for his/her "top dog" spot, sets the prices of nearly every asset class held by today's investors.
Far from maintaining economic stability and fostering prosperity, consumer price inflation targeting practically guarantees a pernicious wealth transfer year in and year out, a perpetual duping of unsuspecting employees and companies, and a permanent blind spot to hidden inflation.
A discussion of why any knee-jerk falling gold and silver price responses to more hollow “hawkish” Federal Reserve minutes or even to future too-little, too-late, actual small interest-rate increases should be completely disregarded.
"Zero interest rates and negative interest rates and Europe and Asia are a huge signal that we are almost at the point where central banks have lost their tools to perpetuate a sense of confidence, that things are cyclical.... If you were to apply the Bretton Woods model for valuing money today, gold would be up to $15,000 an ounce..."