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Saturday, August 9, 2014

Hard Assets: the Antithesis of paper gambling.



Buying paper assets has become a form of gambling.  From the stock market to junk bonds to bit coins to options courses to   fantasy football to outright online gambling industries.

We are a nation addicted to gambling.  It's fun to rip off the greater fool.  It means you're sharper than the moron who followed you into the pool.   Gambling is a zero sum game.  The only problem is the house always wins in the end.


Meanwhile, if you're lucky enough to win for a while you can take that to mean you're shrewd, sharp: a winner.  Which has become the modern substitute for being studious and knowledgeable: two modern American words for "sucker."



The antithesis of gambling is the Hard Asset Market.  This is a market of Real Things whose value is based on Historical Importance and Beauty.   You have to study quite a bit to recognize either.

Sure, there are scammers, frauds, counterfeiters in these markets too.  But all these can be avoided with study.  And when you buy, you are investing, not gambling.

You are investing in what the Greeks called Techne: Excellence that is the apex of Human Achievement.  You are investing in what is interesting and valuable about being a human being.


Extremes in Risk Appetite and “Risk-On” Asset Allocation

One measure of risk appetite is junk bond yields, which as Lance Roberts shows in this chart, have reached multi-year lows:
Junk Bonds - CHS
Money managers’ appetite for the “risk-on” asset class of equities is similarly lofty:
Previous readings near the current level preceded major stock market declines—though high readings have been the norm for the past few years without presaging a major drop.

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