Monday, August 17, 2009

Global Risk Aversion Is The Real Deal

Never underestimate Bloomberg News when it comes to reporting whats really relevant today. These guys should be given a medal every day for their reporting of the true facts. Depressing as it may sound, it is so far beyond realistic.

I am waiting for the day when the WSJ fesses up to its journalistic incompetence and comes clean to the fact they were waving the pom poms all the way through the credit mess. At each stop applauding Greenspan, then Bernanke for their brilliance in monetary policy. The WSJ Editorial Board should be smoked like a salmon for even mentioning that Bernanke should be given another term.

www.bloomberg.com/apps/news?pid=20601109&sid=aGIATunT3Aao

This article is truly one of the best written ones I have read over the last 6 months or so. It has all of the depressingly realistic facts right there in front of your eyes.

Stocks for a long. long, long, long time (99 years) outperformed bonds, but the last 9 years, bonds have clobbered equities, this is going to be the new norm for the next decade and beyond. So much that even myself is 100% invested in fixed income. I will never ever again buy a stock equity fund. Forget about performance, I just don't trust equities anymore, its one giant epic ponzy scheme run by Goldman, Morgan, CSFB, and others.

No most of the contrarians will say, this is definitely a sign that equities will come back, but just read the article, and realize that pension funds are huge in the marketplace, most of them are:

1-Underfunded
2-Badly Managed
3-Poor Performers
4-Changing Demographics
5-More Government Scrutiny

They have to do the right thing.

"Equity losses have hit the pension industry just as liabilities increase. The number of people worldwide 65 and older may jump to 1.3 billion by 2040 from 506 million last year. Their proportion of the total population will double to 14 percent in the same period, according to a June report from the U.S. Census Bureau".

Quite simply, pension fund managers don't want the risk and or volatility inherent in stock investing.

The shift out of equities is a global phenomenon, a shift out of risk into safety. Which generally is not good for either asset class. as more and more money flows into bonds, it just manifests government spending to absurd levels. Not only that most pension funds have not even gotten to the point where the actual rebalancing needs to take place.

Equities are going to influential, but their utter dominance is over.

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