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September 29, 2014

I have been asked recently why I stopped writing on my blog. There are three reasons: First to give you all a break from my uplifting writing. Second, because I appear to have been wrong about our central bank’s ability to keep the economy afloat. And third, doesn’t it seem our society is on information overload? Everyone has an opinion and everyone thinks their opinion is the only one that counts.

It seems to me that the most difficult task these days is to be in the investment business. Maybe better stated, it is most difficult to be responsible for investment portfolios. Certainly the financial markets all seem to have been rallying for the last four to five years, which would seem like the perfect time to be an investor, but I still have zero confidence that these markets are real. One of the key issues facing investors is the question of whether one believes the Federal Reserve will actually control the consequences of all the unparalleled monetary policy they have implemented over the past several years to stimulate our economy. In the midst of an investment discussion I was reminded recently that the prevailing opinion of the experts is that the central bank’s policies were both necessary and under control. Hence our Fed both saved the day and would continue to dial in the policy controls to lead us out of our economic doldrums.

This is the real reason I have nothing new to write: I have already stated my opinions and really have nothing new to offer. Our current economy is no economy at all, but simply a product of excessive liquidity created mostly by our central banks (and of course compounded by our government’s debt). Moreover, this current liquidity experiment has been almost entirely forced into the financial markets, creating bubbles in nearly every asset class. The condition of our current financial markets is the product of excess supply (excess printing). We will not know how this plays out in the long term until one day we are looking back on our economy and determining whether the liquidity experiment was a success or not. My lack of conversion to the Fed philosophy stems from their lack of seeing that they created the bubble that caused our 2008 melt-down in the first place. They have a proven track record and it is not good, particularly if you look at their long-term effects.

What happens if we ultimately find the Fed is actually clueless? Obviously there will be a loss of confidence; mostly a loss of confidence in the dollar and any other fiat money system.

  1. Robert Cameron permalink
    September 29, 2014 8:12 pm

    I fear you are correct. However, I continue to invest in the market via stocks, bonds and mutual funds. I also own real estate and a variable annuity.

    I worked in a system that provided me a pension and a small Social Security check. My spouse worked in a system that provided her a small pension and a Social Security benefit.

    We have Medicare. We have CAHP Anthem Blue Cross as a supplement to that.

    We have long term care insurance. We live frugally and within our means. We give to charity and financially assist family members.

    My point being, what else can or should we do? These systems are all we have. We play by the rules set by others and hope for the best outcome.

    Other than doing that, what should we do to protect ourselves? Write about that please. We respect your thoughts.

  2. Pat Hurton permalink
    September 29, 2014 8:21 pm

    Thanks Jon. I agree with you. Guess we’ll have to wait and see what happens.

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