{"id":44302,"date":"2019-02-14T07:32:47","date_gmt":"2019-02-14T07:32:47","guid":{"rendered":"https:\/\/www.taxresearch.org.uk\/Blog\/?p=44302"},"modified":"2019-02-14T09:23:17","modified_gmt":"2019-02-14T09:23:17","slug":"that-hit-a-nerve","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2019\/02\/14\/that-hit-a-nerve\/","title":{"rendered":"That hit a nerve"},"content":{"rendered":"

I wrote a blog post yesterday asking 'Where's the debt?<\/a>' that pointed out that much of the world's riskly debt is pension balance sheets and this represents\u00a0real risk in the event if another global financial crisis, which I think likely.<\/p>\n

It seems this hit a nerve. Large numbers of those claiming to understand financial markets\u00a0have turned up here for the first time saying that either a) there is no risk or b) I do not understand the markets or c) the risk has been priced into portfolios or d) this time its different, with some variations on the theme and an\u00a0emphasis on (b).<\/p>\n

So, for the record, there is risk. Marco Fante has noted it, here<\/a>.<\/p>\n

And I do not claim to be a market expert: I just use my sense to work out there is very real risk based on a) systemic issues b) experience c) knowledge of economic modelling and d) risk aversion that I think pension funds should share. This also means that I very, very much\u00a0doubt that the risk has been priced appropriately.<\/p>\n

Whilst noting that this time it is not different, and it never has been: markets crash. And they will again. I think fairly soon.<\/p>\n

In other words, I have no faith whatsoever in the models that fund managers use that work on the basis, very largely of the known knowns, with a modest weighting for the known unknowns. I work on the basis of guessing the unknown unknowns using heuristics that have by and large worked well for me, and could for others.<\/p>\n

And if you want to know what that heuristic says right now, the actual answer is hold cash, even though you will lose in the short term.<\/p>\n

But I'll be derided again for saying so.<\/p>\n

But I'm safe in knowing that I have seen pre-crash hubris from so-called professional fund managers many times now. And there was a rash of it on the comments page of this blog yesterday.<\/p>\n

PS My favourite comment was the one that suggested there could not be <\/em>risk in investment\u00a0grade bonds. If that was not such a poor joke given the record in 2008 I might have laughed.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

I wrote a blog post yesterday asking ‘Where’s the debt?’ that pointed out that much of the world’s riskly debt is pension balance sheets and
 Read the full article…<\/em><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[35],"tags":[],"class_list":["post-44302","post","type-post","status-publish","format-standard","hentry","category-economics"],"_links":{"self":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/44302","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/comments?post=44302"}],"version-history":[{"count":0,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/44302\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/media?parent=44302"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/categories?post=44302"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/tags?post=44302"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}