I Don’t Want To Watch This

Fed chairman Bernanke’s financial repression has, in part, been intended to force investors to hold higher-risk assets in order to obtain any kind of return. Bloomberg reports that this pressure, like the lottery, has been getting traction amongst those who can least afford it.  “It’s a conversation coming up with clients more and more,” says financial adviser Gary Schatsky, president of ObjectiveAdvice.com in New York City. “People who are incredibly risk averse seem willing to throw risk out the window because they’re not getting high rates of return on conservative investments. I have people who’ve been comfortable with 30 percent in equities. All of a sudden they want to put 60 percent and 70 percent in equities. I’m looking at them asking if this is the same person I’m dealing with. Their response isn’t that there’s a great opportunity in equities markets — it’s that there are no other opportunities.”

Of course there are other opportunities – cash and patience, or even that most hated asset class (long Treasuries).  But no. Sad to say, this will result in a great deal of pain as risky assets are repriced when the global recession is finally acknowledged. I just hope that there is a day of reckoning sometime for these irresponsible economists. Unfortunately doubtful as government and academia are the last homes of the defined benefits retirement plan, leaving the pain of collapsing 401K plans for the rest of us. As my skydiving friend says “Don’t be the guy.”

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