Zero Sum Game - Chasing Yield
We have been beating this drum for awhile and agree; from John Mauldin's Outside the Box at InvestorsInsight:
The global search for yield has become an exercise in what Thoreau would have called "circle-sailing," and what others would correctly describe as investors chasing their own tails.
The problem is that like the dog who finally catches his own tail, bites down on it and yelps in pain, investors who are able to invest in strategies offering higher returns often end up regretting the risks in which they have sunk their teeth.
Because the cruel logic of investing in today's financial markets means that there is more money chasing the same prize but only a limited amount of prize money to be awarded. The global economy is really a zero sum game.
The central banks can go on creating money from nothing, but they can't do so forever (despite what they tell you on CNBC). In HCM's opinion, we are nowhere near the kind of comeuppance that will lead to catastrophic market losses.
But we are also nowhere near the kind of economic equilibrium that would bode well for sustained, healthy economic growth. The game can continue for awhile but it can't continue indefinitely.
The global search for yield has become an exercise in what Thoreau would have called "circle-sailing," and what others would correctly describe as investors chasing their own tails.
The problem is that like the dog who finally catches his own tail, bites down on it and yelps in pain, investors who are able to invest in strategies offering higher returns often end up regretting the risks in which they have sunk their teeth.
Because the cruel logic of investing in today's financial markets means that there is more money chasing the same prize but only a limited amount of prize money to be awarded. The global economy is really a zero sum game.
The central banks can go on creating money from nothing, but they can't do so forever (despite what they tell you on CNBC). In HCM's opinion, we are nowhere near the kind of comeuppance that will lead to catastrophic market losses.
But we are also nowhere near the kind of economic equilibrium that would bode well for sustained, healthy economic growth. The game can continue for awhile but it can't continue indefinitely.
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