As a result of this, the financial sector remains rife with fraud and impossible to accurately value (how can you value a business that is lying about its balance sheet?).
The media is lying about the economy. They have been for years. Even the BLS now admits that its methodologies are either inefficient (read: DON’T work) or outright wrong.
These men are masters of the capital markets. They are voting with their feet and pulling their capital out of them. Given that their personal compensation is closely linked to assets under management and profit sharing, this decision is akin to the choice to forego additional wealth that could be made quite easily (none of these individuals would have trouble raising several billion more in capital) rather than trying to find opportunities in a challenging market.
This system works as long as debt continues to stay cheap. However, in the last 12 months the Fed has definitively crossed the point of no return with its policies. It is not just a matter of timing before this debt bubble bursts.
Collectively, the world’s Central Banks have put more than $10 trillion into the financial system since 2008. To put that number into perspective, it’s equal to roughly 15% of global GDP.
Most people believe that when inflation hits, prices have to go higher. This is true, but higher prices can be manifested in multiple ways. Firms usually do not simply raise prices in nominal terms as price elasticity can kill revenues because it would hurt sales.
Someday, and I cannot say when, Gold will catch its next leg up. When it does, we’ll finally see the market action that a $10+ trillion expansion in Central Bank balance sheets warrants.
The biggest problem facing investors today is that “the rules” of the game change almost every year. What I mean is that any basic rule investors took for granted could be thrown out the window. Indeed, in the last five years we’ve seen:
All I can say with certainty is that stocks are in a dangerous position. They’ve been in one for a while now and the higher they go the more dangerous it becomes.
