All correlations have gone to one. There is no place for hedge fund managers to hide. Zero rates and baby boomers not going to come back and invest in stocks or real estate. It’s never been this hard to make money trading. The new normal is a lack of normal and will be with us for a long time.
“It’s much better to sell investment advice than take it.” Stansberry: the US needs a balanced budget amendment, sound money and limits to taxation. Citizens should have an affirmative right to keep 80% of their income and this should be written into constitution. A 10% tithe is enough for God, so the government should be content with taking a maximum of 20%. The unemployment rate for returning veterans is approaching 30%. This is not good.
Late bloomers require experimentation and life experience to perfect their craft. In the beginning they look the same as non-bloomers, but what separates them is persistence. Hedge funds resemble early bloomers, they have to perform each quarter or they lose their investors. So there are no late bloomers in the hedge fund world.
Path dependency is when you go down a one way road and there is no turning back. One example is having a baby, when you are 8.5 months pregnant there is no turning back to not having a baby. That is path dependency. Another example has to do with debt, once you buy a home you have to make mortgage payments. If your mortgage is underwater, you probably can’t sell the home or your choices are to keep paying the mortgage or walk away. This is also path dependency. The nations of the world have borrowed so much money that in many cases there is no turning back. The choices will be defaulting on the debt or printing more currency and debauching their currency. Essentially the choice is between a short swift recession or a long and drawn out depression. Neither is very appealing.
Forecasters suck. Most forecasts are wrong. Always couch your forecasts in probabilities that way you are always right no matter what happens. Avoid making forecasts whenever possible.
Making predictions is tough, but when the planets line up, something is bound to happen. Debt, civic decay and global disorder, these are the things to watch out for in 2012. Hedge fund managers that are on the ball are going to thrive on the volatility in 2012, but those that fall asleep at the wheel are going to suffer.
Debt to GDP of 90% is the point of no return and almost all developed counties have exceeded this level, and the off balance sheet entitlement promises are four to six times greater than the official numbers.
“Those who remain unconvinced that rising debt levels pose a risk to growth should ask themselves why, historically, levels of debt of more than 90 percent of GDP are relatively rare and those exceeding 120 percent are extremely rare. Is it because generations of politicians failed to realize that they could have kept spending without risk?” Rogoff & Reinhart
Occupy Wall Street is only the beginning. The middle class is being wiped out. Is having 15% of the population on food stamps a sign of recovery? 50% of American workers don’t pay federal income tax, but 50% of American workers make less than 25K per year. They still face numerous state and city taxes and fees as it gets harder to put food on the table, tempers flare.
Inflation is exported from the developed world as money is printed and more debt is issued to continue running trade deficits. Food prices continue to rise and the poor of the developing world struggle to feed their families. Food riots ensue. Despite a global slow down, oil prices continue to remain high as oil production rates are falling. Since the developed economies of the world run on oil, tensions over oil supplies rise to a boiling point.
The times are a changing.
Time traveling with Ron Paul: what if we could redo the last eight years with Ron Paul as president? There would be no Fed. The US would have saved $1T in Iraq. US citizens would pay less in taxes and keep more of the money that they worked for. The US would not be spending billions imprisoning non-violent drug users.
How WWII ended the Great Depression and why current policies are doing the exact opposite.