Juggling Dynamite

Just before introducing Sri-Kumar, host Tom Keene noted that Sri-Kumar was a favorite guest requested by viewers, and then added “because most of our viewers are less bullish than our Wall Street guests”.  Now there’s a shocker!!

“Quantitative Easing will never cause an economic recovery”. Ah…it’s great when independent analysts sneak past the bull police to speak some truth on business television. Very rare occurrence today.

Komal Sri-Kumar, president and founder of Sri-Kumar Global Strategies, discusses the U.S. and global economy. Here is a direct video link.

But wait it got even more entertaining when in the second segment, they added in long-always-fund-flogger Oppenheimerfunds Investment Strategist Brian Levitt who explained that toxic investment conditions notwithstanding, “investors can’t go to cash”.  Here is a direct link to the second segment video.

The truth is that Brian and his ilk can’t have people holding cash because that suggests their clients won’t just buy always and hold always and that means investment management manglement fees will drop like a stone. Can’t have people being defensive with their life savings now.  How will the finance sector survive on lower fees! Perish the thought!!  Sri-Kumar lands a few more devastating blows of investment reality in the final minute of the discussion.  Worth watching…Good fun first thing on a Tuesday am.

My partner and I founded our independent, investment counsel company in 2003 in order to provide a fiduciary, financial advice and savings management service, that was devoted to the best interests of clients above all else. Our service model was, and remains, extremely rare in the business today. IEX (founded by another Cdn) followed a similar vision in creating a brand new exchange model. They explain why in this video.

Thanks to 8 years of low rates and lax lending, backed by government underwriting, realty prices in places like Canada, Australia, New Zealand, parts of the US, and Britain have boomed.   For those who know history and the classic earmarks of financial leverage taken to excess however, this movie is a familiar sequel.

It is always just a question of what final trigger will start the bust dominoes falling.  In Australia, NZ and Canada, recent rule changes to try and dampen run away foreign money laundering through property markets may well be the tipping point.  In Britain, it appears that the June 23 Brexit vote may have done the trick.  However long this takes to complete, the losers here will be property owners who bought high with too much debt, but also real estate ‘investors’ in a myriad of ‘hot’ property funds, ETFs, REITs, pensions, lenders, government underwriting agencies and ultimately of course, tax payers who will end up footing the bill for bailout funds.  Leverage on leverage on illiquid assets, with too little cash:  recipe for financial carnage.   See Contagion worries rise over property fund suspensions:

Eight companies, including Standard Life, Henderson and M&G, barred investors from selling out of their property funds amid fears about falling commercial real estate values following Britain’s vote to leave the EU.

Many of those investment companies, however, operate separate products that are also invested in the funds now closed to investor redemptions, and could block investors from pulling their money…

A prominent UK fund manager, speaking on condition of anonymity, said: “When you start getting daily trading funds-of-funds investing in daily trading funds that are invested in illiquid assets, that seems to be layering up potential liquidity risks. “[Investors need to] consider the impact on funds that are caught with material investments in the gated property funds.”