tag:blogger.com,1999:blog-11027528911364475.post6760616807340174177..comments2024-02-18T21:10:05.205-08:00Comments on EconomPic: Investing in a Low Return Environment... It's All RelativeJakehttp://www.blogger.com/profile/07946497592651234440noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-11027528911364475.post-85201353877896413722010-04-17T22:23:18.062-07:002010-04-17T22:23:18.062-07:00hooligan- that is exactly why i brought up the fol...hooligan- that is exactly why i brought up the following:<br /><br />"As a result, the question for all investors should be how comfortable you are taking risk to get a return ON your capital and not just a return OF your capital?"Jakehttps://www.blogger.com/profile/07946497592651234440noreply@blogger.comtag:blogger.com,1999:blog-11027528911364475.post-77917324828510487112010-04-17T13:48:31.067-07:002010-04-17T13:48:31.067-07:00it is the intention of the Fed and it is right to ...it is the intention of the Fed and it is right to look at returns on a relative basis as well as am absolute basis. Two things though. One, whilst it is exactly right to say that the Fed's intention is to force investors out of cash/short bonds and into high risk assets, it is not true to say that relative returns are worth pursuing when all the returns are likely to be negative and it is just a question of how negative. Rather like the fund manager saying they beat an index that fell 50%; who cares? The better question to ask is how the link between savings and investment performs when the market is broken and the Fed has flooded the cash market and manipulated the long bond rate. I dont think the Fed has any more prescience than a bag lady, so the moral hazard here is also clear. The Fed's actions prevent the rational allocation of capital and prevent savings being turned to investment. The result is the path to the third lost decade that Japan has followed. Remember when the Nikkei peaked at 39,000 in 1991, compared to 11,000 now? This is the true cost of a central bank distortion of the link betwen savings and investment whilst the Governmnet crowds out the private sector and you have debt saturation.hooligannoreply@blogger.comtag:blogger.com,1999:blog-11027528911364475.post-54426267238857305532010-04-13T16:48:47.728-07:002010-04-13T16:48:47.728-07:00Insightful and thought-provoking; thanks!
I guess...Insightful and thought-provoking; thanks!<br /><br />I guess this is exactly the intention of the Fed.Jim Ficketthttp://www.clearonmoney.comnoreply@blogger.com