We are living in the midst of anarchy and madness in capital markets. From an investment perspective most asset prices today are utterly unattractive. Candy coating this truth serves no one in the long run. As long-term risk manager Jeremy Grantham pointed out in his quarterly newsletter this week, reckless monetary policy is striving (and in some cases succeeding) to “bully investors into buying risky assets which are doomed to crash”. The only question is when not if.
Those who are the most clueless and least disciplined are having their moment of glory now. Those with the most understanding, wisdom and skill are having their version of a bear market. Valuable capital managers know that earning lower returns for a period of time while speculative madness reigns is the price we must pay in order to avoid inevitable losses and be able to buy when valuable prices finally resurface. There are no short cuts to be had. There is no liposuction, radical, miracle, quick-fix trick to lasting financial health. It must be earned and maintained through unflinching daily discipline and care. Those who cannot avoid emotional impulses and stick to rational rules are destined to suffer. If it were otherwise, everyone would be financially secure. In truth, most countries and families are broke, most business managers fail within 5 years.
Financial media has been losing ratings and eyeballs for years now as they repeatedly pump one losing investment idea and guru after another to the harm and horror of their followers. The strategy of late has been assuring viewers that “traders” are able to “play” world markets to profit through all market conditions. In reality this too is just another marketing mantra aimed to keep viewers intrigued. Any trader with a valuable discipline that has succeeded for decades is today horrified and frustrated by the random, artificial wacko of present conditions. Globalization has assured that no place on earth is disconnected or protected from the chaos engulfing global markets. Very few people have sufficient excess reserves and time to withstand the next cyclical declines of this ongoing secular bear market. Most pensions cannot afford it either. And yet lose again they will. It is critical to understand that capital can go many places, but it will only endure where it is protected and treated with respect.
CNBC’s Rick Santelli comments on the “wall of weakness” surrounding market participants and offers insight on weakness in Europe and what it means to the rest of the world. Here is a direct clip.