Random Observations & Rising Risks

I have spent to last few days reviewing, writing, and discussing the economy, markets and investing.  While my opinions have been unfavorable amongst the “stock bulls” over the last several months many of the issues I have been discussing, the “risks”, are now coming to fruition.  My analysis is often misconstrued to mean “get out of stocks and hide in cash” which could not be further from the truth.  As investors, and primarily savers, our job is simply this: 

“The allocation of capital with the least amount of risk to achieve a rate of return equal to the rate of inflation over time in order to preserve the future purchasing power parity of our savings.”

Wall Street, however, has distorted that investing responsibility by turning the financial markets into a casino by chiding unwitting individuals to heavily speculate with their savings in a game they have little chance of winning over the long term. 

This is why I view my job, as lonely and as unfavorable as it is, to point out the risks that could possibly lead to large drawdowns of allocated capital.  “Risk” is not a function of how much you will make when the market rises but rather how much you will “lose” when things don’t work out as planned.  The mainstream market analysts and economists are always optimistic with “your” money because as long as you are invested “they” make money.  Being in “cash” is not optimal for Wall Street because it reduces fees and commissions.  This is why you are told to “buy and hold” and “invest for the long term” yet there is not ONE successful hedge fund manager, trader or investor that has ever followed those rules.  Why is that? 

This leads me to a couple of rising “risks” that I have been discussing in the past and watching develop. 

Resurgence Of The Eurozone Crisis

There is a widespread belief that in 2012 the ECB (European Central Bank), and it’s head Mario Draghi, effectively solved the Eurozone crisis with Draghi’s famous “do anything” speech.  Unfortunately, all the speech did was tell financial institutions that no matter how much risk they took buying bonds of broke governments the ECB stood ready to bail them out if there was a default.   This is exactly what happened and borrowing rates fell for the most bankrupt of countries in the Eurozone.  However, nothing in terms of real financial reform, deficit reductions or spending cuts were implemented.   The reality is the Eurozone, in its entirety due to a spreading recession, is in its worst financial condition ever.

2013-04-21 13:45:47

Source: http://silveristhenew.com/2013/04/21/random-observations-rising-risks/