News & Analysis
Advisers Emphasize Calm as Global Depression Gathers
Advisor's Top Job: Helping Clients Stay Cool, Survey Says ... In hot markets, it's crucial for advisors to do plenty of hand-holding and other work, say most financial advisors polled by Russell Investments ... The latest quarterly survey of advisors by Russell Investments found that helping clients keep their cool when markets heat up was the most important role for FAs, the company said Thursday. – Advisor One
Dominant Social Theme: The euro is collapsing, the dollar reserve system is failing, China is deflating and NATO military actions continue to expand. Investors should simply ignore the "noise" and concentrate on the soundness of their portfolio allocations, which have been made with the help of true investment professionals.
Free-Market Analysis: It used to be that stock drummers were more than happy to share a hot tip with their clients. Today, more than half (55%) of advisors say the most valuable service they provide to clients in or near retirement "is helping the client maintain perspective and think clearly about events and trends," according to a survey by Russell Investments.
These are not happy times for investment advisers. While it is true that stock markets have not entirely collapsed following the financial crisis of 2008, the headier estimates of equity advancements have been discarded. With the US in a permanent slump and Europe headed into an ever greater depression, only Asia (and China in particular) are holding up the world's economy.
When China has what will likely be some sort of hard landing, it is hard to see how the world can avoid a generalized depression of the sort that afflicted it in the 1930s. Advisers and their clients are spectacularly unprepared for this sort of occurrence as neither group unfortunately seems to have the psychological fortitude or the mental capacity to accept the increasingly grim reality of the 21st Century.
The projections of "Dow 20,000," so popular in the late 1990s and early 2000s, have shrunken to a whisper, replaced by campaigns that promote the effectiveness of financial advice regardless of the markets. Charles Schwab, which makes hefty fees as a custodian of assets, is rolling out one such campaign starting this week, a multimedia marketing campaign for advisers, according to Advisor One.
"The campaign will include sharable, digital banners with the tagline 'RIA-Stands for You. Discover the difference with a registered investment advisor,' and an affiliated website, RIAStandsForYou.org."
It is easy to see why advisers may be in need of promotional support. While the advent of the personal computer and putative advancements in Modern Portfolio Theory contributed to the theoretical arsenal of financial advisers, the fundamental weakness of the financial industry continues to be its refusal to recognize that modern money itself is flawed. This has led to all sorts of conclusions that have simply not held up in the 21st Century from an investment standpoint.
The fundamental one has to do with the creation of currency. Almost no modern advisers will admit that central banks fix the price of "money" – or that money itself in the 21st Century, delinked from an underlying asset, is suspect. This gives rise to terrible misjudgments in the industry, mostly having to do with not comprehending the business cycle, which is controlled by the inflationary afflatus of the central banking mechanism.
Central banks inevitably print too much money in good times and bad. They are virtual inflation manufacturers, though the rhetoric that surrounds them has to do with "controlling" inflation. Inevitably, there are said to be central banking "hawks" and "doves" – with the hawks wanting a severely restrictive monetary policy and the doves wanting a looser one. This obscures the real issue, of course, which is that there would not be modern monetary inflation without central banking.
The business cycle itself is generated by this overprinting of money. First central bankers print money to inflate staggering economies and then, when economies inevitably "overheat," central bankers print even more money to cushion the inevitable bust.
Over time this distorts the free-market price mechanism so grievously that people cannot tell a healthy business from one propped up by government subsidies and central banking favoritism. When this happens, economies basically freeze up. No one hires or sets aside funds for expansion because the free market itself is being held captive by an elaborate contraption of regulations, tax distortions and monetary favoritism that makes capital formation impossible.
Most Western financial advisers doubtless missed much of the runup of gold and silver, advising their clients to hold paper assets while precious metals valuations grew tenfold during the fiat-money collapse of the early 2000s.
Financial advisers, even independent ones, serve as distribution arms for financial product companies. These financial product companies, some of them massive indeed, are the logical outcome of a central banking economy that has reorganized the investment industry around paper-based securities (and now electronic digits).
Central banking blows up economies regularly, and during economic contractions the middle class becomes increasingly unprosperous while more and more wealth is centralized in the hands of great Anglosphere banking families. These families then use their wealth to create dominant social themes – fear-based promotions featuring scarcity memes – that are intended to push Western middle classes into surrendering wealth and power to the globalist solutions (UN, IMF, WHO, etc.) that the familial elites have already prepared.
One of the dominant social themes that was remarkable successful in America during the late 20th Century was the idea that various forces were conspiring to erode middle class wealth. The only way to address this potential ruination was through "investing" in a menu of pre-prepared investment solutions featuring rigid, fragile and highly controlled "public" money pools.
Of course, the available solutions such as mutual funds and limited partnerships never work very well because the central banking business cycle itself precludes their ongoing viability. Every few years, what passes for money itself becomes unstable, stock markets deflate and public investment structures themselves lose altitude and in some cases crash. Regulation only makes the structures more rigid.
Over time, the constant inflations and deflations caused by central banking give rise to entirely dysfunctional economies. Stock markets are decimated; credit freezes; economies seize up. This happened in 2008, when central banks around the world rushed in to inject something between US$20 and US$50 trillion to prevent an entire liquidation of the global fiat-money financial system.
People still don't understand that the dollar-reserve system of the 20th Century likely ended in 2008. And today the ruination has continued and even expanded. Central banks are again, in a concerted effort, printing yet more money to liquefy a system that basically doesn't exist anymore. It is impossible to maintain a monetary system for a lengthy period of time that is divorced from an underlying asset such as gold and silver.
Most financial advisers, unfortunately, are not much more sophisticated when it comes to money than their clients. Financial advisers may manage lots of money, but this does not mean they understand the underlying history of money or what money actually is today. Additionally, their clients may have made a great deal of "money" but this doesn't mean they understand it any better.
Financial advisers, even the best of them, are caught up in the modern investment meme. It is one that mandates "allocation" across a personal portfolio, with distribution in numerous types of paper assets – and a determined refusal to consider an overweighting in physical assets even during an appropriate time in the business cycle.
Advisers, in fact, do not realize that they are ultimately in the employ of the great banking families that want to create one-world government and are doing so through the boom/bust mechanism of central banking. They would consider such a statement to be "conspiratorial" and reject it outright.
Thus it is that Western financial advisers remain in the grip of this merciless system, trying futilely to protect their clients from the worst of its depredations by advising aggressive allocation of assets using the somewhat flawed applications of Modern Portfolio Theory. Unfortunately, this doesn't protect their clients from the overall deflation that central banking causes on a regular basis.
The collapse of the dollar-reserve system has made the advisers' job that much harder. Most advisers believe that the cyclical nature of the fiat-money system – which they have experienced historically – will eventually lift asset valuations once again. They seemingly do not understand that there has probably been a terminal dollar-reserve blow-off and that the cyclicality they count on may not occur in ways they and their clients expect.
This is why there is so much emphasis on "keeping clients cool and calm" in the industry today. Both advisers and their clients (having failed to understand the underlying malevolence of the system) are like children holding hands and looking up at the night sky with awe and wonder as a large meteor bears down upon them.
Conclusion: They mistake the distant glow for the promise of better times.
Posted by Ann Marie on 09/23/11 09:59 PM
So, what do you suggest?
There are many who aptly identify the problems.
What is the solution for the individual?
What, for instance am I going to do with my gold bar at the grocery store when the dollar becomes worthless?
I have not read anything by anyone who 'follows it through' What is going to happen to me if all these dire predictions come true?
(I have no debt, own my home, live on work and rents, have money in the bank and own a lot. Thinking about building a home for income. What do you think?)
Posted by retakingdem0cracy on 09/22/11 07:54 PM
This blog had an interesting take on one of the reasons central banking fails: an ignorance of behavioral economics (aka the Free Market).
Click to view link
Posted by Reader on 09/22/11 06:12 AM
Like this, for example,...
Click to view link
Posted by Reader on 09/22/11 06:09 AM
Things are not good in the world if US and Europe are in a depression.
My implication is that the world remains strong. And all problems can be fixed.
Posted by Reader on 09/22/11 03:22 AM
I'm sorry to say but there is no global depression. There is ONLY a Global Boom of +7% growth ESPECIALLY if one EXCLUDES Italy, France, England, Germany and the United States. But why take my word on it? It's all in the public record.
Reply from The Daily Bell
So things are "good' in the world if one excludes the US and Europe. Thanks.
Posted by amanfromMars on 09/21/11 08:16 AM
"So it is not surprising that Brokers whose livelihoods depend on this scheme, preach the Bankers' sermons on investing."
What is the bankers reason and excuse for no imaginative lending and stove-piping spending in redundant silos?
No Future See? Zero Daily Bell Ringing Trade Vision?
Posted by David Widmer on 09/20/11 11:17 PM
I am wondering if many of DB's readers, including DB, have read "Aftershock", by David Wiedemer, Robert Wiedemer, and Cindy Spitzer? If not, I would recommend their books, "America's Bubble Economy", "Aftershock", and "Aftershock, 2nd Edition". They mince no words! We are in for some very rough sledding!
Posted by josejoe on 09/20/11 02:07 PM
and the beat goes on!!
Posted by amanfromMars on 09/20/11 01:12 PM
There is a major fundamental re-assessment of the violent nature and wanton destruction of reality, as is presented by communications and media, whenever a fabulously fabricated tale, spun to create and support some hot breaking news with other crazy working revolutionary views is always more preferable to ones laying false trails which always leading scrutiny and administration to look back on dodgy deals done underhand/off the books.
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Click to view link
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"Advisers and their clients are spectacularly unprepared for this sort of occurrence as neither group unfortunately seems to have the psychological fortitude or the mental capacity to accept the increasingly grim reality of the 21st Century." ... . Quite perfectly accurately analysed, DB Staff
It is Pirate Waters the System must cross for Nirvana and Seventh Heaven, which makes it worth all travel and support with Immaculate Props and Pro Partners, for Delusional Madness abounds in All Lands with outdated controls.
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Posted by Avatar on 09/20/11 12:32 PM
The entire debt-based economy relies on "confidence" and trust in the system. Runs on banks quickly cause an implosion. Retraction of credit causes an implosion. So it is not surprising that Brokers whose livelihoods depend on this scheme, preach the Bankers' sermons on investing.
Posted by philitarian on 09/20/11 11:16 AM
DB: "Financial advisers, even the best of them, are caught up in the modern investment meme. It is one that mandates "allocation" across a personal portfolio, with distribution in numerous types of paper assets - and a determined refusal to consider an overweighting in physical assets even during an appropriate time in the business cycle."
I couldn't help but think of this South Park episode clip.
"We can put that check into a money-market mutual fund and invest the earnings in foreign-currency accounts with compounding interest aaand.. ITS GONE."
Click to view link
Posted by rossbcan on 09/20/11 10:01 AM
DB: "was the idea that various forces were conspiring to erode middle class wealth."
... and, indeed, they were. This meme was fostered by the very forces that were, in actual fact, conspiring. They created and defined "the problem" and, only allowed a restricted set of "solutions" all of which were to their advantage and, OUR collective detriment. Problem, Reaction, "Solution", collectively manipulating us by knowing the REAL "rules" relating action to consequence in the area of mankind while completely subverting and misrepresenting this knowledge via centrally controlled media and public education (indoctrination).
This is not an uncommon strategy of criminals, blame shifting to other parties, to defer proof of their crimes and avoid dealing with feelings of guilt. It was called "projection" by Freud and Jung also did work in this area:
Click to view link
Take the lack of gold IRA options as articulated by Frank. This was not an "omission" by financial service "providers", it was the outright prevention of defensive investment options which would have allowed those who chose it to mitigate some of the predations of large financial interests.
Posted by rossbcan on 09/20/11 09:29 AM
"precious metals valuations grew tenfold"
... in terms of fiat. Metals, being real, remained relatively stable in REAL "value", influenced by laws of supply and demand. Fiat faux "value", went DOWN because supply (QEX) went and continues to go exponentially up, meaning "value" and thus demand must go down.
Posted by rossbcan on 09/20/11 09:20 AM
"It is easy to see why advisers may be in need of promotional support."
The more they advertise and propagandize, the bigger the "elephant in the room" they are attempting to distract us from.
Ross / 2011
Posted by rossbcan on 09/20/11 09:13 AM
"Advisers Emphasize Calm as Global Depression Gathers"
Translation to RealSpeak:
Stay still, don't resist as we extract another "pound of flesh" from the productive, peace and civilization. All is well (for them, they think).
Posted by Frank on 09/20/11 07:50 AM
One point missed in this article is how US government specified IRA's accounts (at least for accounts that we had) would not even permit me to invest in actual gold, silver or even in stocks of gold/silver mining companies.
We tried on more than one occasion to begin investing in gold or silver years ago and we were repeatedly told by the people who ran our IRA accounts they had no IRA investment options for us along that line because the government considered such options too risky.
I know that some companies did design programs to allow those options, but the investment companies chosen to handle our IRAs by our employers were not allowed to offer those options.
Why make it so hard for millions of Americans to invest in gold & silver? I now feel that the real reason was because if lots of people did it, it would make it harder for central bankers to confiscate their wealth via the boom/bust cycles they create. How many more "millionaires" would there be today & ready to retire if IRAs had commonly been permitted to invest at least 10% of people's money into gold & silver over the years?
Reply from The Daily Bell
Good point, thanks. We did mention, generally, that the US financial industry had missed the runup of gold and silver when we wrote the following:
"Most Western financial advisers doubtless missed much of the runup of gold and silver, advising their clients to hold paper assets while precious metals valuations grew tenfold during the fiat-money collapse of the early 2000s."
We try to mention this often, and have in a number of other articles, because it is absolutely ludicrous that investment advisers would miss such an important investment item within the context of the business cycle.
Posted by Reader on 09/20/11 06:40 AM
The image of a meteor falling and smashing down hard on the western Economies is definitely BAD NEWS all around...
Most likely, and preferably, a metaphor of ROUGH and BRUTAL SEAS for an extended period of time will be the actual case.
No one should expect smooth sailing until at least 2016 at the earliest - 2015 being the Sovereign Debt Big Bang.