Wall Street Mulls Suicide By Tactical Allocation

Not Going Tactical Could Pose Real Business Risks, Advisors Fear … Following the twin market implosions of the past decade—first tech, then real estate—many retail financial advisors are looking for more tactical, meaning active, asset allocation solutions for client portfolios to dampen volatility, improve total returns and avoid market catastrophes. At least some of them fear that if they don’t dramatically change the way they allocate client portfolios, moving away from traditional buy-and-hold investing strategies, they could lose clients. So say a handful of advisors and an investing expert. Things could get especially bad if another bear market hits, says Ron Carson, founder and CEO of Carson Wealth Management Group. “[Investors] are hanging on by a thread right now, and I don’t think they’re going to forgive.” – Registered Rep

Dominant Social Theme: We need to show you new ways of investing, though we don’t want to.

Free-Market Analysis: Is it time for Wall Street to fall on the ceremonial sword of tactical asset allocation? In the long-term, this is the only strategy that works, but for the last ten years – as for much of the rest of last century – Wall Street has proven impervious to its blandishments and even conspired to withhold the strategy from investors.

The reason is simple. To suggest tactical asset allocation (and to explain it properly) one actually has to grapple with some of the fundamental issues of the modern, Western monetary economy. The big firms that most Wall Street and “independent” brokers work for would rather chew their own (figurative) arms off than engage in these discussions.

Yes, the idea of explaining that modern central banks are a kind of Ponzi scheme that collapse every 15 or 20 years and that gold and silver are historically valid money metals is not the kind of palaver that Wall Street’s bosses want to engage in.

Of course, they should engage in it because every couple of decades millions of people who have bought into the Wall Street investment paradigm are stripped of their hard-earned assets – assets that are not going to return to people in their 60s or 70s.

Of course, the defenders of the Wall Street paradigm will explain that brokers are not wedded to stocks but when the stock market is sputtering, fixed income instruments are recommended. There is only trouble with this sort of strategy – in a REAL money metals bull such as what we have today, bonds likely don’t perform much better than stocks.

Corporate bonds aren’t apt to perform well because companies generally are in the doldrums. As far as Treasuries go, well … savvy Wall Streeters know darn well that central banks will keep interest low during a bad “bear” market. Thus money becomes cheap, devaluing the bonds that people are holding if they want to sell them. (And many may have to sell because of hard times.)

In looking over the wreckage of the modern financial industry, one must almost inescapably come to a conclusion that a kind of crime has been committed. For a decade now, US stock markets have moved down, sideways and occasionally up. But the carnage is much worse than has been reported.

Stock market averages are summaries of overall performance and not representative of individual stocks. Mutual funds and other formally regulated entities have been savaged by the bull market in money metals – just as they were degraded back in the 1970s.

To argue that Wall Street’s collective memory does not extend back some 40 years is a non-starter, in our view. The collective brain-trust that inhabits Wall Street knows exactly how the modern economy works. It’s their business to know.

“They” knew back in the early 2000s what was going to happen. If a bunch of disorganized bloggers could predict it, so could Wall Street’s top brains. In fact, knowing what was going on, Wall Street collectively made the decision to HIDE it.

How did they do this? The way they always do. They kept talking up the regular investments – stocks, bonds and even real estate. They kept referring to Modern Portfolio Theory and to the benefits of “buy and hold.” The persuasiveness of Wall Street’s money salesmen collectively cost American consumers trillions.

People listened to their brokers and held down, down, down … Down until many of them were wiped out. And still they held! They were told that if they held on long enough the market would “come back.” This was just a lie, and continues to be a lie. Consumer-driven stock markets are probably NOT coming back, or not for many more years, because the business cycle won’t allow it.

This is another kind of crime committed by Wall Street. The determination not to provide consumers with the valid essentials of Austrian economics leaves people defenseless. The additional layers of regulatory supervision give people the idea that investing is essentially riskless. Maybe a few percentage points may be lost but they’ll make it up in the long run.

But as we have pointed out in the past, US consumers in particular have been subject to a kind of “Dreamtime.” Central banking itself producers this Dreamtime because the over-printing of money-from-nothing creates euphorias that can last for years, even decades (on and off). People get the idea that the good times will never end, and that they financial geniuses because their decisions are working out.

In reality, in our humble view (and we know this is not a mainstream perception) it is all a cold-blooded hustle. A vicious deception. The gray-suited technocratic thugs that push this sort of financial, money-from-nothing crack are ruining households and bankrupting families with the same malicious efficiency as that wielded by a bloody shooting war.

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