Are you anchored to the absurd? Are you ready for a complete rethink?

Since 2000, growth has become increasingly dependent on explosive growth in Federal Debt.

GDP Minus Annual Federal Debt, is turning down again.

While anchoring is a very understandable behaviour or condition, it can place investors in a highly dangerous situation of overconfidence.

Open eyes are now essential for investment success, as passive strategies may have very little prospect of good returns on a forward looking basis.

A complete rethink is needed, and here is a guide to changing to a more productive investment mindset.

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The chart above shows US economic history since leaving the gold standard in the early 1970s. A closer look shows that since 2000, growth has become increasingly dependent on explosive growth in Federal Debt.

federal debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

What is disturbing is that the yellow line above, GDP Minus Annual Federal Debt, is turning down again. Can Federal Debt accelerate from here to keep growth going? It may need to. However this could lead to an explosion of debt interest payments, which are also accelerating with debt and higher interest rates.

 

 

 

 

 

 

https://econimica.blogspot.com/2017/11/how-federal-reserve-destroyed.html

These “non conventional” economic emergency policies seem to have provided a short term solution. The chart below suggests investors are in general more comfortable with financial markets than ever before, as measured by the S&P 500 to VIX ratio, as described in the link below.

Review And Outlook S&P / VIX

 

 

 

 

 

 

Q3 2017 Review And Outlook

However, the commitment to passive investment strategies in these conditions is based on a new kind of economic experiment. While anchoring is a very understandable behaviour or condition, it can place investors in a highly dangerous situation of overconfidence and even blindness if, in reality, it is based on fragile and unsustainable foundations. Worse still, the chart below indicates that long term expected returns are now the lowest ever for standard investment allocations with little prospect of any return.

Stock/Bond Passive Allocation Strategies Are Nonsense!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Open eyes are now essential for investment success, as passive strategies may have very little prospect of good returns on a forward looking basis.

A complete rethink is needed, and here is a guide to changing to a more productive investment mindset.

Investment Management: Why You Need A Complete Rethink. (short version with links)

 

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