Here is a great editorial by Jim Grant of Grant's Interest Rate Observer. I encourage everyone to read it.
http://online.wsj.com/article_email/SB121642367125066615-lMyQjAxMDI4MTI2MzQyMjMzWj.html
He addresses a question that I have been asking myself over and over again. Why does it seem that no one cares about what's going on with the current financial mess? The silence is deafening to me. I think there are a lot of possible reasons:
1. The bull market in equities over the past 20 years has conditioned people to believe that all bad news is good news ( to buy stocks ). The violent rallies that we see in financial and consumer stocks whenever the boys in Washington give us the A-OK sign is evident of this. The fear of missing the next big rally is far greater than the fear of losing money.
It's fascinating to me to hear how little people know about their own investments. It's as if all is well provided it's in a mutual fund. News flash folks, mutual fund managers do not get paid to make you money. They get paid to beat their bench mark. How many are aware that the S&P 500 has been flat over the past 10 years? So what you ask? Well if you have invested in large cap mutual funds chances are you have lost money due to fees over this period of time.
2. The housing bubble made everyone that owned a house feel rich. Although housing stopped rising in 2005/2006 people still vividly remember the euphoria of perceived equity going up 10%+ per annum. When did owning a home become one of Americans sovereign rights?
3. Wall Street has created such a complex ponzi scheme with their structured finance products that you need to be a PH.D to understand it. Scratch that, I know a PH.D that has a degree in structured finance that would readily admit to no understand all of these products. If he can't understand what the risk is how do we expect our government officials to understand it? I read recently that a reporter had called someone at the MPLS fed to get a comment about a derivative product written against US Treasuries and the Fed official didn't even know that product existed. Seriously???? This same story has been told over and over again.
4. I think the biggest obstacle to solving these problems is admitting that the US simply living beyond our means. We have unbelievably large unfunded entitlement programs ( Medicare, Social Security, etc. ), ever increasing deficit spending, and ongoing costly wars going on. We will not be able to continue this course without a severe lowering of our standard of living.
I could go on and on....
http://online.wsj.com/article_email/SB121642367125066615-lMyQjAxMDI4MTI2MzQyMjMzWj.html
He addresses a question that I have been asking myself over and over again. Why does it seem that no one cares about what's going on with the current financial mess? The silence is deafening to me. I think there are a lot of possible reasons:
1. The bull market in equities over the past 20 years has conditioned people to believe that all bad news is good news ( to buy stocks ). The violent rallies that we see in financial and consumer stocks whenever the boys in Washington give us the A-OK sign is evident of this. The fear of missing the next big rally is far greater than the fear of losing money.
It's fascinating to me to hear how little people know about their own investments. It's as if all is well provided it's in a mutual fund. News flash folks, mutual fund managers do not get paid to make you money. They get paid to beat their bench mark. How many are aware that the S&P 500 has been flat over the past 10 years? So what you ask? Well if you have invested in large cap mutual funds chances are you have lost money due to fees over this period of time.
2. The housing bubble made everyone that owned a house feel rich. Although housing stopped rising in 2005/2006 people still vividly remember the euphoria of perceived equity going up 10%+ per annum. When did owning a home become one of Americans sovereign rights?
3. Wall Street has created such a complex ponzi scheme with their structured finance products that you need to be a PH.D to understand it. Scratch that, I know a PH.D that has a degree in structured finance that would readily admit to no understand all of these products. If he can't understand what the risk is how do we expect our government officials to understand it? I read recently that a reporter had called someone at the MPLS fed to get a comment about a derivative product written against US Treasuries and the Fed official didn't even know that product existed. Seriously???? This same story has been told over and over again.
4. I think the biggest obstacle to solving these problems is admitting that the US simply living beyond our means. We have unbelievably large unfunded entitlement programs ( Medicare, Social Security, etc. ), ever increasing deficit spending, and ongoing costly wars going on. We will not be able to continue this course without a severe lowering of our standard of living.
I could go on and on....
3 comments:
Krops, I've noticed that you are a real closet optimist when it comes to the economy.
Here is what I think, the people don't just WANT a new bubble to invest in, they DEMAND it! We've got to keep this fake economy going because it's a lot more fun than the real one.
Thanks for posting the links to Grant's op-ed. I'd missed it..haven't been keeping up w/ the WSJ as closely as I should be.
I'm increasingly impressed w/ Grant..I've got to start reading the one of his books that I ordered a while ago ("The Trouble With Prosperity")
keep blogging Krops!
Talking my book: Why not infrastructure? I am not a global traveler, but I have been told by many that we are falling behind other developed nations. Airports. Roads. Rail systems. And yes, WATER infrastructure. Pipes, pumps, canals, reservoirs and desal plants.
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