In all the annals of investing, few seemingly innocuous phrases incorporate as much by way of grave implication as those four words, “a shift to banknotes”. 2008 was bad. With central bank policy now at the outer reaches of the possible and even of the theoretical, the outlook is certainly uncertain. Not wishing to participate in the terminal stages of a momentum-driven bubble is not bearish so much as simply sane.
"I was having lunch with a very dear friend of mine yesterday, who is also a very successful financial planner and advisor, who stunned me with an obvious question: 'Has the dumb money become the smart money?'"
"Some highly respected market commentators, most recently Ray Dalio from Bridgewater, have raised the possibility that Fed rate hikes risk a 1937-like slump. It is indeed a dilemma but likely already too late to avert another crisis.... In that respect it is probably too late already. We believe that the die is now cast, the cake is baked and coming out of the oven, and the financially fattened goose is well and truly cooked!"
There is a much larger structural risk for markets and investors than HFT and the whole Flash Boys brouhaha, it’s just totally under the radar and hasn’t surfaced yet. Investors may not know better yet, but they will soon, one way or another. Tomorrow a handful of governments will influence aggregate political behaviors by triggering small communications that Big Data tells them will be voluntarily magnified by individual citizens, snowballing into outsized, long-lasting, and untraceable “popular” actions. Tomorrow a handful of hedge funds will influence aggregate market behaviors by triggering small trades that Big Data tells them will be voluntarily magnified by individual traders, snowballing into outsized, long-lasting, and untraceable “market” actions. Tomorrow Big Data will be primarily an instrument of social control, with a powerful and ubiquitous impact on all citizens and all investors.
While Bridgewater's Ray Dalio "hopes that The Fed will be very cautious about tightening," Saxobank CIO Steen Jakobsen explains in this brief clip that The Fed "is wrong, always wrong," and will likely raise rates in June no matter what. The Fed is boxed in, Jakobsen notes, and despite the weak macro data, changing direction now is unlikely - leaving the market surprised as it recognizes that "this is a margin call on assets," seemingly confirming Dalio's conclusion that, "inadequate attention is being paid to the risks of a downturn in which central bankers' abilities to ease are significantly impaired."
"To make money in the markets, you have to think independently and be humble. You have to be an independent thinker because you can’t make money agreeing with the consensus view, which is already embedded in the price. Yet whenever you’re betting against the consensus, there’s a significant probability you’re going to be wrong, so you have to be humble."
Meet The Extreme Super Rich: A List Of The 80 People Who Own As Much As The World’s Poorest 3.6 BillionSubmitted by Tyler Durden on 01/28/2015 16:31 -0400
"Eighty people hold the same amount of wealth as the world’s 3.6 billion poorest people, according to an analysis just released from Oxfam. The report from the global anti-poverty organization finds that since 2009, the wealth of those 80 richest has doubled in nominal terms — while the wealth of the poorest 50 percent of the world’s population has fallen." There you have it. The reason the wealth of the richest has doubled since 2009, is because “it’s not a recession, it’s a robbery.” Central bank and government policy has done this, it is no accident.
With less than two hours until the ECB unveils its first official quantitative easing program, the markets appear to be in a unchanged daze. Well, not all markets: the Japanese bond market overnight suffered its worst sell off in months on a jump in volume, although for context this means the 10Year dropping from 0.25% to 0.32%. Whether this is a hint of the "sell the news" that may follow Draghi's announcement is unclear, although Europe has seen comparable weakness across its bond space as well and the US 10 Year has sold off all the way to 1.91%, which is impressive considering it was trading under 1.80% just a few days ago. Stocks for now are largely unchanged with futures barely budging and tracking the USDJPY which after rising above 118 again overnight, has seen active selling ever since the close of the Japanese session.
Is the world's biggest hedge fund going all-in on HFT and Dark Pools? We ask because Ray Dalio's Westport, CT-based Bridgewater, which at last check manages around $160 billion between its Pure Alpha and All Weather fund products, and which according to preliminary data had a solid performance in 2014, has just hired Jose Marques, the former global head of the quant and algo-heavy electronic trading at Deutsche Bank, to become Bridgewater's new head of trading.
From Bill Gross: "I’ll leave the specific forecasting for a few weeks’ time and sum it up in a few quick sentences for now: Beware the Ides of March, or the Ides of any month in 2015 for that matter. When the year is done, there will be minus signs in front of returns for many asset classes. The good times are over.... Be cautious and content with low positive returns in 2015. The time for risk taking has passed."
Every year, David Collum writes a detailed "Year in Review" synopsis full of keen perspective and plenty of wit. This year's is no exception. "I have not seen a year in which so many risks - some truly existential - piled up so quickly. Each risk has its own, often unknown, probability of morphing into a destructive force. It feels like we’re in the final throes of a geopolitical Game of Tetris as financial and political authorities race to place the pieces correctly. But the acceleration is palpable. The proximate trigger for pain and ultimately a collapse can be small, as anyone who’s ever stepped barefoot on a Lego knows..."
As an investor, it is simply your job to step away from your "emotions" for a moment and look objectively at the market around you. Is it currently dominated by "greed" or "fear?" Your long-term returns will depend greatly not only on how you answer that question, but to manage the inherent risk. “The investor’s chief problem – and even his worst enemy – is likely to be himself.” - Benjamin Graham
If we're in a gold bear market, then answer these questions...
Thanks to The Federal Reserve's extreme monetary policy, "the prospective return of asset classes is very narrow," warns Bridgewater's Ray Dalio, with expected returns for equities of "only about 4 percent." This is a problem, he explains in this brief clip, as monetary policy relies on that transmission mechanism of apparent wealth creation to keep the dream alive. In Europe and Japan there is no "spread", Dalio notes, and in the US it is miniscule - which means monetary policy is practically ineffective. While he believes in the short-term, the US economy can maintain stability (not commenting on the market per se), his "biggest concern is when the next downturn comes in 1-2 years," the central bank must be on the 'tighter' side of market expectations to be capable of providing its life-giving elixir once again. Simply put, Dalio sums up "there is always a downturn" - something that no Wall Street economist is expecting.
If you were raised in a religious household, or were sent to a Catholic school, you have heard of the seven deadly sins. These transgressions -- wrath, greed, sloth, pride, lust, envy and gluttony -- are human tendencies that, if not overcome, can lead to other sins and a path straight to the netherworld. In the investing world, these same seven deadly sins apply. These "behaviors," just like in life, lead to poor investing outcomes. Therefore, to be a better investor, we must recognize these "moral transgressions" and learn how to overcome them.