A Perilous Denial

It is difficult to get a man to understand something,
when his salary depends on his not understanding it

–Upton Sinclair

Charley Merrill closed down the firm in 1928 and recommended that clients sell their stocks. Statesman-like, for sure, but brokers, managers, partners and back office clerks took an unasked for vacation until he re-opened Merrill Lynch in 1933. There is no question today of a voluntary closing of Merrill Lynch, or any other securities firm that I’m aware of. It would certainly be catastrophic for thousands of employees, but it might be a lot easier than the pain in store for the industry and its clients for the balance of this decade.

Yesterday, the Fed did what the market had hoped for by not raising rates, and the response was a twenty minute rally to complete the corrective advance underway since the recent lows-followed by a full retracement of the day’s action and a negative close. As I write this, the futures are down hugely in pre-opening action and the global markets are in a free fall. The idea that the Central Banks of the developing world could stay the long overdue correction of the excesses in debt creation by creating ever more debt has been a Chimera, shortly to be discredited by everyone but bankers and brokers.

Long time readers of this blog know that I do not make recommendations. I write these pieces to frame reality for myself. So, this is what I’m telling myself this morning:

Over the balance of this decade, losses of as much as 90% will be seen in the following asset classes:

U.S. Stocks
European Nation Stocks
Asian Nation Stocks
Emerging Nation Stocks
Corporate Bonds
Municipal Bonds
Commercial Paper
Sovereign Debt
Commercial Real Estate
Residential Real Estate
Iron Ore
Scrap Metal
Almost any tradable asset

What am I holding? Cash.

I won’t mind being wrong. I won’t mind at all. But I don’t expect to be wrong.



No one should consider any part of this presentation as a recommendation to buy or sell any securities whatsoever.

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