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Tuesday, February 09, 2016

The Man With The Golden Keyboard: Follow Up

Credit Suisse compared today's environment to the period after the Great Depression.

 pic/caption: Business Insider

Is any one of the idiots running for president even making a pretense of addressing the situation I talked about yesterday? This article is from this morning, and once more the meme of "disaster for savers" (read: retired folks) is invoked.

Business Insider
CREDIT SUISSE: Markets will be lousy for the next decade, and it is a disaster for savers
Matt Turner
Feb. 9, 2016, 11:42 AM

Here's the upshot: After an initial multiyear recovery in stock and bond prices after a crisis (the rally we saw through last year) comes a long stretch of lousy returns.

Wilmot said that would be "disastrous" for savers and posed a serious threat to the fund-management industry.

Consider this part of the "easy money has been made" meme...

Wilmot said:

This is not an attractive prospect for savers, or fund managers. Efficient diversification will not be enough to earn good returns; even very well established track records will provide a less reliable guide to future performance; and bond managers will probably have to stray far from their comfort zone to deliver even modestly positive real returns.

For savers, particularly retiring baby boomers, ultra-low yields are little short of disastrous, especially given that a 100% allocation to bonds or annuities is the default option for retirees. More generally, the prospect of a decade or more of zero real returns on "safe" bonds poses a huge structural challenge to the fund management industry. Up until now, the investor response has been to move up the risk spectrum within fixed income, by increasing exposure to riskier credit and more illiquid investments, but this approach may be nearing its limits...

The Fed is going to announce something tomorrow. If they are going to goose the market casinos, I'll get back in for a while. Otherwise, they have lost their reason to exist, and I had better get my book finished and hope somebody wants to buy it.


Why do I call it the Golden Keyboard?
As I was writing, I was smacked into a memory of The Man With The Golden Arm, the scourge of heroin addiction, the deaths due to the present day mixing of heroin and fentanyl, and I saw a very quick peek into the future of our society where we are between the panics in Needle Park and the highs of our militaristic weapon society's heroin/fentanyl wars.


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