Chris, your logic is predicated on the premise that the Treasury bond market isn’t manipulated by the fed – that it responds to solely to market forces that would be driven by your logic alone.

This is clearly not the case. You can think of treasuries with little or even negative yield as a hedge against the early stages of quantitative easing. In the long run, the capital gains will not offset the destruction of the FRN’s buying power.

A well hedged portfolio needs, not only precious metals, but stocks, treasuries and cash (Not that I ever take my own advise!, but most people couldn’t sleep if they acted like I do.).

How has the “sky is falling” betting scenario worked out for you these past 3 years? I suspect you bought gold. Doing well but I can assure you not for the reasons you suspect.

I guess the market must be very stupid since you have determined it’s value is basically worthless.

I am on record as declaring this year as being in a “sweet spot” for investing. Am also calling for a nasty bout of deflation next year which will cause all the gold fanatics to question their decision. In the end though inflationists win out and a massive hyper-inflation period will cause all assets to rise. I make this absurd argument based on all historic data points going back centuries. Will this time be different? On a risk/reward basis I stay with the odds maker.

Buster,
Just responding to fallingman’s assertion that I have a mental defect. You might consider it a “low blow”, but had I not responded the way I did, I would be in fact declared an idiot.

As for the market’s rise, I never confuse the difference between the state of the economy and the market’s ability to levitate. It might seem to be at odds but in fact it makes perfect sense. Until we have a major collapse, earnings alone drive the market. With labor costs extremely low, lean employment, and the consumer continuing to buy into the service sector all is well. In fact corporations have never seen such huge capital reserves. We are not talking about an unusual spike in the market before the “big fall”. In three plus years earnings and stock prices have doubled. Surely you must admit your theory on an immediate, any day now, crash scenario is wrong. I did and have adjusted to the new reality. I don’t ignore the mounting pressures of debt implosion but I believe it is very transparent. In fact too transparent. Any hint of news breaking events are pounced on by the press. It is very rare that a crash happens with no warnings.

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Concerning that huge corporate surplus, let me repeat this: They will never, ever get to use it because there is no place $2 trillion can sit these days that will escape the deflationary Day of Reckoning that is coming. Meanwhile, cash-hoarding companies can do with their money what the rest of us are doing — i.e., earn “safe” yields that have been manipulated to the vanishing point. Just wait till short-term rates go negative and it costs the companies 25 (or more) basis points merely to leave all that money sitting somewhere. Europe is already at that point. RA

Rick,
I didn’t make the point about corporate surplus to suggest that will help the economy. It just goes to show how individuals are struggling to hold onto surplus cash while corporate america has never been more flush. It also shows how corporations survive and thrive in bad times. They will not get hit as bad as the rest of us, nor will they stay under as long.

Apparently, in order to prevent crocodiles attacking humans in some places it is necessary to shoot one every now & again. This is found to keep the crocs predatory instinct in check & allow for peaceful co-existence.
Human beings, being predatory & posessing an unhealthy tendancy to push things to the extreme particularly when it comes to issues of greed & power, seem to need similar ‘prodding’ to keep the balance of power within acceptable limits for society to function in it’s present, effectively lawless other than that of the jungle, ‘order’ of things.
There have been many publicised suicides in Greece lately as a result of overzelous tax inspectors, & this has led to some quite violent retalliation.
If the austerity (just on the part of those outside the club, that is) is somehow prevented by the peasants then the Banksters will take their money back through devaluation & inflation. Just like when a large union wins a wage battle….the currency drops to allow for the extra expense to the corporatists. The markets may well rally on the back of this inflationary alternative solution.

You might ask, “If they’re so worried, why they don’t just buy gold?”

That would be a good point: gold is also a good hedge against financial turmoil, but where stocks are fairly priced in terms of earnings, they are overpriced in terms of their likely future prospects, so gold is overpriced by nearly 3 to 1 in current purchasing power, but is probably under-priced in terms of the prospect of fiat money’s future buying power.

Each hedge has its advantages and disadvantages and there’s no way to predict with certainty which will perform best to preserve wealth. Even cash and treasury bonds can be considered hedges against possible scenarios.

Wealth managers buying any of these asset classes are not, thereby, proving themselves to be idiots or criminals (though some may well be); they could be anyone – even someone as rational as yourself.

Your angry tirades are fun to read though; but I would suggest that they be aimed at the idiotic and- or self serving crooked support by these captains of finance for state economic and financial interventions – not necessarily for their investment/speculative decisions.