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Penalizing Prudence

PENALIZING PRUDENCE

“Economy, prudence, and a simple life are the sure masters of need, and will often accomplish that which, their opposites, with a fortune at hand, will fail to do.” – Clara Barton

“Affairs are easier of entrance than of exit; and it is but common prudence to see our way out before we venture in.” – Aesop

One of my conceits, of which there are many, is the belief that because I have entered the third trimester of my life, I am now in possession of great volumes of wisdom and perspective. Thankfully Mrs. Cog is always nearby to efficiently and surgically remove any such thoughts of grandeur and omnipotence. That said, at some point during the flight of life, even birds of prey eventually turn their thoughts to the comfort of a nearby nest rather than their next fearless fight.

Even the most reckless among us begins elevating to greater importance the preservation of resources rather than mindless squandering, especially when we are closer to the end than the beginning. This is a good thing, by the way. It adds balance to the socioeconomic system, both personally and collectively, as well as countering the self-destructive tendencies of those obsessed with endless consumption.

There’s a reason we’re no longer referred to as ‘citizens’ in mainstream media or political speech, but rather the more personal-responsibility-evading ‘consumer’. If given even a minimum of thought, one quickly realizes this subtly propagandized term (consumer) is a significant, but not the only, component of the obvious agenda to infantilize the US (and global) population.

Like the one year old who eats, sleeps, plays, defecates, eats, sleeps, plays……with no personal responsibility other than to be self-indulgent and consume food and attention, we are being reduced (distilled down might be a better term) to our most base impulses. I suspect most people, if told this to their face, would not react well to my observation, assuming instead I was being critical of them personally.

…click on the above link to read the rest of the article…

For Heaven’s Sake: Hedge!

For Heaven’s Sake: Hedge!

If you’re not positioned defensively by now, you’re nuts

Q: How do you make a small fortune on Wall Street?

A: Start with a large fortune.

~ old investing adage

Last fall, I wrote an article titled Defying Gravity that warned of the absurd price levels that stocks and bonds had risen to.

The piece first looked at the unbroken multi-year march upward in prices through the myriad money-printing cycles of the world’s central banks, as well as the near-extinction of bearish investors on Wall Street — which it then contrasted with the vast gap between valuations and the underlying weak economic data, deteriorating chart technicals, and evidence that the “smart money” was exiting the market. The takeaway? Prudence strongly recommended moving to cash and hedging one’s open market positions.

Less than a month later, the stock market abruptly dropped by 7%. Those who didn’t seek safety in advance were left licking their wounds, panicked not knowing if the painful down-draft was over.

Fortunately for them, the Federal Reserve jawboned it’s willingness to step in further if needed, the ECB announced a trillion-Euro stimulus program, the Bank of Japan waded into domestic and foreign markets as a buyer of last resort, and China’s central bank continued its staggering balance sheet expansion. Collectively, this put a floor on the markets, which soon climbed back to record highs.

Where We Are Now

So here we are roughly six months later, and the same warning bells are ringing — just louder this time.

Yes, stocks recovered from their brief October swoon, and yes, they are at — or very close to — their all-time highs. Indeed, everything is so awesome that investor sentiment has never been more positive. If you worry that having too many people on the same side of the boat is a sign of complacency and over-confidence, the following chart should frighten you:

…click on the above link to read the rest of the article…

 

 

Olduvai IV: Courage
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Olduvai II: Exodus
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