Paul Brodsky’s Advice To Investors: “Get Angry”

Paul Brodsky is mainly angry at fiduciaries who are climbing on the stock market bandwagon although stocks cannot realistically be said to offer good or even fair value right now. From Brodsky, of Macro Allocation Inc., via

Get Angry

Wall Street looks a lot like Lake Wobegone, where the women are strong, the men good looking, and all children are above average. We have always been happy warriors, but it is difficult not to resent the passive nature of investing foisted upon the markets by economic policies that backstop and boost asset prices beyond reason, which in turn diminishes the value of investment intelligence and experience. Passivity implies the markets will always produce positive real returns and real economic growth over all time horizons. It is an illogical and preposterous notion, and yet it is the zeitgeist – all above average.

Fertility rates among wealthy and educated cohorts in advanced economies – from which the investor class is comprised – have already begun to decline, as has the demand for manufacturing output among the working class in most advanced economies. Not a good situation. This reality begs fundamental questions: “are increasingly digital, indebted societies being served well by analog economies” (no) and “why is growth the unquestioned objective of policy makers and political economists” (because growth is necessary to sustain nominal asset and liability prices, which in turn is necessary to avoid credit deflation, goods and service price deflation, and bank and portfolio insolvency)?

The counterfactual to this practical yet insidious economic framework would be an economy that actually economizes, that works naturally to drive prices lower and the purchasing power value of savings higher. Since savings are ostensibly obtained through production, the incentive of workers would be to produce at a competitive global wage scale. Economic right sizing would not be feared and economies would shrink to profitability. Deflation would not be feared either; in fact it would be welcomed. Workers would actually benefit from increasing productivity, innovation and automation. They would be more productive, have more stable income and more leisure time, and be able to save for the future at a positive risk-free real rate of return. Alternatively, rentiers would not be able to reduce the value of production and increase the value of assets by issuing unreserved credit. Alas, such an economy no longer exists.

To continue reading: Paul Brodsky’s Advice To Investors: “Get Angry”


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