If we think
that today was just another day in the world of modern finance, we are fools. I
don’t care who we are, when men and women lose the ability to connect the dots
of history – not last week’s news events but those spanning decades and
centuries – then we become so ignorant that our very freedoms can be taken from
us. And our arrogance brought on by the illusion of what debt has produced,
fuels our destructive demise.
When future generations
look back on this time, years from now, they will wonder how we could have been
so clueless of history’s repeated warnings.
Fortunately, individuals from all levels of the world of money are
becoming increasing willing to honestly address our current juncture. Don’t be
duped or ill prepared. Pride and ignorance go hand in hand, and history shows
the combination to be highly destructive.
When we are
told, “Today's action from the central banks is another strong dose of medicine
that will help cure what ails the credit markets,” we go back to our day-to-day
lives, thankful for the legions of specialists who take care of our
finances. Knowing that the Federal
Reserve is working aggressively on the credit crisis, which “showed up out of
nowhere” last summer, makes us think that our lives will soon return to normal.
How comforting.
But, those who
understand human behavior and basic finance and economics know that when a
crisis starts, the first thing to ask is, “How did we get here,” not “How much
money do we need to print this time?” The Federal Reserve’s job is to “foster the stability, integrity, and efficiency of the
nation’s monetary, financial, and payment systems.” Yet they continue to take
on lower and lower quality assets as collateral for larger and larger loans,
all the while hoping to “restore investor confidence.”
Market pricing dysfunction has not resulted from a lack of “liquidity.” The dysfunction comes rather from a lack of confidence in the system brought about by years of accumulated debts, spent to delay today’s problems until tomorrow. Lower quality collateral has been covered up with complexity and now threatens the very foundations of our markets. Unfortunately, few in leadership have the guts to stop this mad game with many harmful side effects. Today’s actions will only speed up the destructive forces already in play.
Because the Federal Reserve’s new short term “lending facilities,” which have poured hundreds of billions into the global banking system since December 2007, have a great deal in common with the events that led to the world’s first central bank in 1694, I have decided to release our February 2007 newsletter – A New World Order: Explorers, Speculators & Debt Managers. This newsletter is linked next to this pdf on our Weekly page. After you have read that piece, review the chart developed by David Kotok, of Cumberland Advisors, which is linked to the right of our February 2007 newsletter.
The chart
reflects the various assets that comprise the reserves of the Federal Reserve
Bank, and how the Fed’s reserves have changed since the “credit crunch” started
last summer. In other words, the balance sheet of the bank that continues to
promise billions and billions more to the banking community, with assets that
have become increasingly harder to sell pledged as collateral, is already
deteriorated quite a bit.
Now I ask, “Does
the decline of the blue area – marked ‘Securities’ – which represent US Treasuries,
lend credence to the Fed’s mission statement of fostering ‘stability?’ If their
holdings of US Treasuries are being replaced with ‘Securities lent to Dealers:
Off Balance Sheet,’ do you think they are taking higher or lower quality
collateral?” You know the answer, and no amount of linguistic gymnastics is
going to change this fact. Or put another way, “If this was an investment you
were considering, would you feel more confident about placing your funds with
an entity that is taking on riskier assets than it was last summer?”
If you are
thinking and reading a great deal today, in an attempt to protect your own
finances during this historical period of change, I encourage you to join our readers,
who come from all levels of the financial industry and many countries around
the world. The next few months stand a high probability of producing more
losses for investors than anything we have seen since the NASDAQ collapsed in
the fall and spring of 2001. Don’t lose hundreds
of thousands or hundreds of millions trusting in what the “experts” tell us
about the emperor’s triple-A rating.
If we are
attempting to reduce our risk and place the odds in our favor during this
highly deceptive time, critical thinking and individual responsibility are
still our best allies.
Feel free to
send a copy of anything you find on the free part of our website to anyone you
know in any country around the world.
Best Wishes,
President
Best Minds Inc., a
Registered Investment Advisor
2548 Lillian Miller
Suite 110
Denton, Texas 76210
Phone - (972) 488 -3080
Alt - (800) 488 -2084
Fax - (972) 488 –3079
Best Minds, Inc is
a registered investment advisor that looks to the best minds in the world of
finance and economics to seek a direction for our clients. To be a true
advocate to our clients, we have found it necessary to go well beyond the norms
in financial planning today. We are avid readers. In our study of the markets,
we research general history, financial and economic history, fundamental and
technical analysis, and mass and individual psychology.