Just a short post noting that Marc's 50% prediction is in line with what we suggest is a possible valuation adjustment in our July 17th comments on Paul Krugman's Blog - Prophecies of Maestrodamus.
Not a hard one to figure out as it is really just "present value mathematics" whereby if long 30 year bond rates double, then their market value dips by 50%. Very straightforward mathematics that no amount of economic theory nor policy measures can override as it is simply a hard conceptual constraint. Mathematics cannot be persuaded, legislated nor negotiated with - and that should come as no surprise to anyone.
Down the line, looks to be a scary turbulent road ahead.
We will post more comments from this blog later on.
PLATINUM WEALTH PARTNERS
Just a few months back, you may recall, along with Jim Rogers, we raised concerns about Facebook and generally the whole social media industry, referring to it as a generational fad and having difficulty seeing how a sustainable business model could be developed. Moreover, whether such tools or derivatives could find useful and profitable transitions into business markets. Guess what? Looks like the markets are tuning into Mr Rogers and ourselves as VC (Venture Capital) funding has plummeted to 2% this past quarter.
As one insider notes; what a business - "thinking about how to make people click ads" And that pretty well sums up the industry's "Critical Success Factor" and how you build any sort of Sustainable Competitive Advantage around it, remains a puzzle.
Anyway we still believe that the big ticket, high margin objects just simply requires good ole face to face contact - a little of that human touch!
PLATINUM WEALTH PARTNERS
Still we could attribute much of our current mess to too many who believe they know - then later we find that even simple notions were somehow forgotten. Or a fog had set in. (- R. S. McNamara).
Despite what may be economic headlines today, Greenspan's legacy may be his contribution to our current low interest rate trap - that has lasted for much too long. Getting out of it could trigger a massive deflation of financial assets - causing an unprecedented ASSET VALUE WRITE-DOWN. Evaporating years of value in moments.
A mere 2% rise in rates, for example, could deflate financial assets by as much as 50% - wiping out the equity boxes of financial intermediaries and banks , while creating massive unfunded pension and insurance fund liabilities on the basis of marked to market accounting calculations. =ing HUGE liquidity CRUNCH.
Moreover, the total value of US federal debt could grow substantively with a mathematical pen stroke, which has little to do with deficits or economic theory and activity. And I don’t even want think about what could happen if rates should revert to levels over their historic mean; it would be devastating.
So it seems that the Maestro knew how get us into this trap, but did not know how to get us out of it - but then again "who knows?" And as far as we know, he's still on first...
41% (est) Market Share