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Top Bis Economist - Pension Funds Risk Drifting Into 'danger'

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http://uk.reuters.com/article/2014/06/29/uk-cenbank-bis-rates-idUKKBN0F40CS20140629

Pension funds and other long-term investors are taking ever bigger risks and could be laying the ground for renewed turmoil when money gets more expensive, one of the world's leading economists told Reuters.

As memories of the financial crisis fade and market confidence soars, policymakers have warned that investors desperate for any return on ultra-cheap money could be creating yet another bubble to go bust.

Now the chief economist of the body bringing together global central bankers has warned that while banks are still repairing the damage of the last crisis, pension funds have cast off their risk aversion in the hunt for profit.

"Things look and feel great but we are storing up a possibly more painful and more destructive reversal," said Hyun Song Shin of the Bank for International Settlements (BIS).

"The one thing that is different between now and 2006/2007 is that the protagonists ... are no longer ... the banks. This risk taking is happening through other market players. Long-term investors are also joining in."

Things look great.....

We all know that when the next crisis happens we'll get the same panicked response.

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People seem to be chasing returns in the stock market that aren't there any more according to Marc Andreessen (venture capitalist at Andreessen Horowitz and founder of Netscape).

There are no growth stocks, which means there's no growth. Stock market returns have been weak for 15 years, which is exactly what you'd expect if you took all the growth out. Everyone is upset the stock market isn't performing

http://www.vox.com/2014/6/26/5837638/the-ipo-is-dying-marc-andreessen-explains-why

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Everyone is upset the stock market isn't performing - I'm not, couldn't give a to$$ about it :D

Perhaps I would give a toss if house prices wer;t so high I could take out a pension.

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Pension funds and other long-term investors are taking ever bigger risks and could be laying the ground for renewed turmoil when money gets more expensive

One reason why people ought to not moan so much about rates falling further still on savings accounts. Sure sign to me money is set to get more expensive, and go further. Not a time to be chasing yield, imo, as has been occurring for years.

Musical chairs from those assets back to cash, and only a very few sellers sell back to cash at 90% of peak value, the rest 80, 70, 50, and many left holding assets worth only a sliver of peak value.

I'm not too bothered about low savings rates on ISAs ect. 0% rates on cash-deposits will be fine, when everything else is heavily losing value.

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People seem to be chasing returns in the stock market that aren't there any more according to Marc Andreessen (venture capitalist at Andreessen Horowitz and founder of Netscape).

http://www.vox.com/2014/6/26/5837638/the-ipo-is-dying-marc-andreessen-explains-whyNYSE Margin Debt Rose Slightly in May; Leading Indicator for a Market Correction?

http://www.advisorperspectives.com/dshort/updates/NYSE-Margin-Debt-and-the-SPX.php

'The astonishing surge in leverage in late 1999 peaked in March 2000, the same month that the S&P 500 hit its all-time daily high, although the highest monthly close for that year was five months later in August. A similar surge began in 2006, peaking in July 2007, three months before the market peak.

The latest data puts margin debt in its second month of decline following a record high.'

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One reason why people ought to not moan so much about rates falling further still on savings accounts. Sure sign to me money is set to get more expensive, and go further. Not a time to be chasing yield, imo, as has been occurring for years.

Musical chairs from those assets back to cash, and only a very few sellers sell back to cash at 90% of peak value, the rest 80, 70, 50, and many left holding assets worth only a sliver of peak value.

I've been in cash for over a year waiting for this pig to roll over!

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People seem to be chasing returns in the stock market that aren't there any more according to Marc Andreessen (venture capitalist at Andreessen Horowitz and founder of Netscape).

What a load of ******* (your quote)!

There are plenty of growth companies. The trick for the investor is to identify them! It's not everyone's cup of tea: a company expected to grow commands a high price, which is liable to tumble badly if the company disappoints and the market ceases to see growth.

Of course, if you can see growth before the market notices it, you can pick up a big winner at a much cheaper price. That's the business of - among others - Venture Capitalists.

As for IPOs, there have been an amazing number in the past few months, not to mention in the pipeline. People were saying the disappointment with Saga would kill them off, but since Saga we've had several - for example Zoopla and TSB. And I shall probably invest in the forthcoming SSP IPO, unless they seem to be overpricing it Saga-style.

Where there is a valid message is that there isn't the growth over the economy as a whole to sustain unrealistic expectations. That's a demographic inevitability: if you'd asked me 30 years ago I'd've told you back then that the pension promises to my generation would collapse before we could take advantage of them[1].

[1] No, I couldn't have told you how the collapse would happen. Just that there was too much Ponzi in the system, especially considering the the then-latent demographic change. Turns out the collapse [1] started with the Equitable (thought to be the safest of all providers back in the '80s) and then [2]manifested in falling annuity rates that have - since immediately before the Equitable collapse - chopped 70% off what a given pension pot will buy you at age 65, while [3] spreading zombiedom widely through the economy as today's PTB keep the plates spinning on final salary schemes. The state pension remains a time-bomb for a future government and the current triple-lock is as corrupt as anything from the Barbara Castle era and has a whole lot less excuse!

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http://uk.reuters.com/article/2014/06/29/uk-cenbank-bis-rates-idUKKBN0F40CS20140629

Things look great.....

We all know that when the next crisis happens we'll get the same panicked response.

Except this time, the banks will be better positioned. Pump and dump.

Gen-population only have a memory that lasts about a week.

Look at them all lining up on MSE trying to comply and crossing their fingers they will get mortgages under new MMR regimes.

Then the banks can go into their more natural full-conniving Ramsay Snow mode (- I've been watching some Game of Thrones GoT scenes on youtube.) on the VI complacently holding massively overvalued assets. Crash them, then loads of new volume lending to new participant buyers, for big profits. Who is smarter, and more powerful, in the longer run? The banks, or the other investor groups who've stepped into to fill the void.

"The one thing that is different between now and 2006/2007 is that the protagonists ... are no longer ... the banks. This risk taking is happening through other market players. Long-term investors are also joining in."

Even a massive stimulus program and an "easy money" policy that led to negative T-bill rates in 1933 did not prevent deflation.

- Extraordinary easy money and stability in the commodity markets are important factors working to that end [making for prosperity]. - Wall Street Journal (April 1930)
- ...fundamental credit conditions have undergone a marked change for ease not only in this country but all over the world. - New York Times (April 1930)
- "An outstanding development is the sharp drop in interest rates, marking the end of a period of credit strain and bringing rates to the lowest point in several years. In its bearing on general business conditions the advent of really cheap money has been widely heralded, and rightly so, as the most important and promising feature in the general situation. That cheap money is a tonic for the recuperation of business has been proven by long experience.'" - New York Times (April 1930) - quoting April bulletin of the National City Bank.
- "Money rates declined rapidly to the lowest levels since early 1925, the April 1 review of the Federal Reserve Bank of New York states, and accompanying this ease in money, the bond market in March made a vigorous recovery." - New York Times (April 1930)
- "The Federal Reserve policy of cheapening credit through the purchase of government bonds has been unable to make a dent in the conservatism of borrower or bank lender, in short, every anti-deflationary effort has yet to provide positive results"” (Editorial, Barron’s, July 11, 1932)

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The law of diminishing returns. As markets become more expensive so the monthly QE handouts from the world's 4 biggest central banks (Fed, BoJ, ECB and PBoC) buy less and less.

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