Bernanke/U.S. Debt, Silly? - You Decide

Bernanke/U.S. Debt, Silly? - You Decide

Bernanke/U.S. Debt

An article today titled 'Bernanke delivers blunt warning on U.S. debt' says Fed Chairman Beranke warned Congress Wednesday that the United States could soon face a debt crisis like the one in Greece, and declared that the central bank will not help legislators by printing money to pay for the ballooning federal debt.  I believe importantly, Bernanke also is reported as saying:

·           "It's not something that is 10 years away. It affects the markets currently.  It is possible that bond markets will become worried about the sustainability [of yearly deficits over $1 trillion], and we may find ourselves facing higher interest rates even today".  Bernanke also:

·           "We're not going to monetize the debt";

·           Congress needs to start making plans to bring down the deficit"; and,

·           "It is very, very important for Congress and administration to come to some kind of program, some kind of plan that will credibly show how the United States government is going to bring itself back to a sustainable position."

Summarized this way, I believe equity investors ought to think carefully for themselves and about the investment advice they receive.  This is the senior U.S. Fed Chairman talking, not some 'newsletter writer or commentator'.  Conclusion:  I've said it before and now say it again:  As I see it America is analogous to a ten mile long Titanic traveling at 100 miles an hour in a straight line between a series of very hard rocks and a very hard place toward an enormous iceberg - while all the while its Captain has a disorganized, argumentative crew (elected by the same passengers that elected the Captain) who spend serious amounts of time worrying about whether the bidet in Stateroom 1372 ought to be changed, and whether the rip in the oriental carpet in the main Ballroom ought to be repaired or replaced - all the while apparently thinking 'nothing can happen to the Titanic' because its 'too big to be seriously harmed, and it is inconceivable it might sink'.

Economists and analysts (click here to see an example today of the latter) continuously make predictions for the equity markets and economic recovery based on very recent (last 50 year) economic and equity market cycles.  If they took a longer-term view those same economists and analysts would also see 'Nero fiddling while Rome burned', and the more recent downgrade in world power terms of the British Empire - to site only two of a long litany of historic 'World Power' downgrades and replacements.  I recommend you ask yourself - what about America makes it different and not susceptible to the same thing happening to it?  Again, think carefully about Chairman Bernanke's comments to Congress - and act accordingly.

I strongly recommend you click here and read Bernanke's comments and the comments of others (including Alan Greenspan) as set out in the article in their entirety and in context.

I again ask you to take the time to write to me if you think I am either being extreme in my views or just plain wrong.  Aside from giving me food for thought, your views might influence my own investment strategy - which currently is extremely defensive in circumstances where I can't reconcile what I see as a serious disconnect between the behavior of the U.S. equity markets and ongoing economic and analyst prognostications on one hand, and my own conclusions that things economic are going to get worse before they get better on the other.

Silly? - You Decide

An article this morning says (U.S. Vice-President Joe) 'Biden to announce retirement savings safeguards' that would protect workers:

·           from conflicts of interest on the part of financial advisers who manage their 401(k)s and individual retirement accounts; and,

·           would require retirement investment advisers and money managers to base investment advice on objective computer models certified by independent experts.

If there is any truth to this, I find it astonishing on two counts.  First, that anyone could conceive 'conflict of interest' on the part of financial advisors could somehow be screened in a meaningful way.  Second, that anyone could envision 'independent experts' developing 'objective computer models' on which to base meaningful and broadly balanced investment advice.  The case of the latter, presumably if that could be done it would have been long ago, and investment advisors would either be doing some other job or be unemployed.