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Correlation is a measure of risk.
Every asset and every dollar that is in custody in a bank, unless specific legal arrangements are made, is re-lent, and as we saw with MF Global and with Lehman, ultimately it is the customer or the investor who bears the counterparty risk.
However, in the current environment, gold can produce tremendous real capitl because it’s an asset that doesn’t produce any cash flow. The other is over-the-counter credit derivatives, which caital basically grossly under-reserved insurance. This copy is for your personal, non-commercial use only. They even thought they owned U. Rather than enable a quick but extremely painful deleveraging, Western governments are trying to delay it by borrowing significant amounts to supplement economic activity.
As with any emergency, this requires a tremendous amount of leadership. The level of interconnectedness, the level of misapplied incentives is again unprecedented in history.
You can’t get a fair price; they’re unique, whereas gold is ubiquitous. Despite the fact that JPMorgan Chase was lauded as the most capable risk-management institution, it is facing potentially very large losses.
Interview With Simon Mikhailovich – Barron’s
But I try to diversify. It creates perverse incentives because it breaks the price mechanism, which is the most important signal in a free-market economy. But the liquidation is what governments don’t want to allow.
It’s absolutely disgraceful that ‘s consequences haven’t been the same as, let’s say, savings and loans in the s. The benefit of land and of paintings and other stores of value is that they are not financial assets and they do preserve value over an extended period. To understand why, read on. But they are not liquid during times of disruption. The new firm focused on distressed CDO investing. If you were offered a game of chance where when you win, you win, and when you lose, you are given another chance to throw the dice, then, of course, everybody would play that game and essentially that is where the financial system is.
Central banks all have gold reserves, and they’ve been increasing them. The price of gold never rises. But you have to consider the Philadelphia problem.
Russia, Argentina, Brazil—it didn’t extinguish life in those countries. When you combine the government policies with the level of interconnectedness in markets, it creates a recipe for disaster.
Armageddon is a physical end of the world, financial disruption is financial disruption. That raises another problem with financial technology—re-hypothecation—where banks make money by lending out collateral.
Human history ultimately is the history of ebbs and flows of wealth, and the ability to preserve wealth over time requires a very proactive approach. Too big to fail is now too bigger to fail. But there may come a moment when it doesn’t work, and then what’s a safe haven? So the creditworthiness is getting worse and the cost of funding is getting better. It’s the means of production. The effectiveness wears off over time, you need to take more and more to achieve less and less, and capitak they stop working.
Eidesis Capital LLC
A spokesman explained that the main reason is to protect against a crisis scenario. That caputal distortions, misallocation of capiatl, and mismanagement of risk, and we are seeing it time and time again. Secular changes that disrupt technologies are traditionally very, very difficult, and many will lose. A compromise will only delay the problem, because it’s a problem of excessive indebtedness and you can’t solve a balance-sheet problem without solving it, except by delaying it.
Unquestionably, things were done that were illegal in many cases, certainly grossly negligent.
Simon A Mikhailovich | Financial Sense
Mikhailovich, who emigrated to the U. Investors should look for alternative sources of uncorrelated assets or assets whose value is less correlated, as opposed to simply looking at the price of those assets. The idea is to position oneself to survive financially and potentially enhance one’s position. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at or visit www.
They increased productivity and they created oversupply, and that excess supply needs to be liquidated. That is a very intelligent way to allocate part of your portfolio to this sort of reserves. You may not like the price, but it ejdesis never going to be a rip-off.
This financial system is completely unsustainable. All Rights Reserved This copy is for your personal, non-commercial use only.