“If you don’t own gold, you know neither history nor economics.” – Ray Dalio, Founder Bridgewater Associates
Individuals are long term investors only as long as the markets are rising.
In the same way that FDR had an existential political interest in generating inflation and preventing volatility in the US labor market, so does the US Executive branch today (regardless of what party holds the office) have an existential political interest in generating inflation and preventing volatility in the US capital markets. Transforming Wall Street into a political utility was an afterthought for FDR; today the relative importance of the labor markets and capital markets have completely switched positions. Today, the quote would be "markets are too important to be left to investors."
"Basically what happens is there is a part in the cycle where there is tension. And when you get to this phase of the cycle, there is tension between the haves and have-nots and also there's a frustration with government... We have a situation in which emotionally charged individuals, who may not be well informed in choosing leader, might select leaders who are not capable and are emotional themselves. If one group ends up fighting against another group, it is going to be bad."
China Proposes Unprecedented Nationalization Of Insolvent Companies: Banks Will Equitize Non-Performing LoansSubmitted by Tyler Durden on 03/10/2016 10:48 -0400
In one simple move, Beijing is about to "guarantee" trillions in insolvent Chinese debt.
"I want to just convey to investors, I think in the average investor, most everybody, do not compete against pros like ourselves or other people; do not making tactical asset allocation bets or moving around in the markets, because you will probably lose.... And also I think that gold at 5 percent of your portfolio, 5 percent or 10 percent of your portfolio, under the circumstances, would be also a prudent thing to do."
Moments after speaking with Bloomberg's Michael Schatzker, a speech which generated substantial headlines (and which we will cover shortly), Bridgewater's Ray Dalio took the podium at the University of Texas Board of Directors 20th Anniversary event.
It's been a rough stretch for the 2 and 20 crowd. And it just got rougher.
If central bankers think that "helicopter money" might be an option to combat deflationary pressures and sluggish economies, the right time to launch the choppers is before consumers realize they need them. As history shows, after that, it is too late.
While negative interest rates will make cash a bit less attractive (but not much), it won’t drive investors/savers to buy the sort of assets that will finance spending. And while QE will push asset prices somewhat higher, investors/savers will still want to save, lenders will still be cautious lenders, and cautious borrowers will remain cautious, so we will still have “pushing on a string.” As a result, Monetary Policy 3 will have to be directed at spenders more than at investors/savers.
"The Fed doesn't have a clue!" - We allege that not only because the Fed appears to admit as much, but also because our own analysis leads to no other conclusion. With Fed communication in what we believe is disarray, we expect the market to continue to cascade lower - think what happened in 2000. To understand what's unfolding we need to understand how the Fed is looking at the markets, and how the markets are looking at the Fed.
“If you run out of chips, you are out of the game.”
What’s a Keynesian monetary quack to do when the economy and markets fail to remain “on message” within a few weeks of grandiose declarations that this time, printing truckloads of money has somehow “worked”, in defiance of centuries of experience, and in blatant violation of sound theory? In the weeks since the largely meaningless December rate hike, numerous armchair central planners, many of whom seem to be pining for even more monetary insanity than the actual planners, have begun to berate the Fed for inadvertently summoning that great bugaboo of modern-day money cranks, the “ghost of 1937”.
The financial engineering that has been made possible by zero percent interest rates is no longer available to paper over weak corporate results in the U.S. Our economy is addicted to QE and zero rates, and without those supports, we will spiral back into recession. This is the reality that the mainstream tried mightily to ignore the past several years. But the chickens are coming home to roost, and they have a great many eggs to lay. In the end, stimulus does not create actual growth, but merely the illusion of it.
These are the cheapest hedges in case central bank puts fail to deliver...