Update for July 10, 2014 - Newsletter (Who Owns Your Equities? -6)
So, what is the solution (for America’s poor pension fund managers?). It is to hope that your firm’s guardian angel delivers, and today you might be right. Central banks around the world have been buying up equities (despite the terrible outlook for them because of a slow motion collapse of the global economy) to a great extent. The global equity market is worth about $ 65 trillion according to Global Research with central banks and the like looking like they have slowly acquired about 20% of this gargantuan figure. The dividend amounts are not going to be small either, with 2.5% of $ 13 trillion giving a nice return of something like $ 330 billion. (Pay a lot of executive bonuses with that one!). This is informed money at its highest level in my view, and it means that while we can see large up and down swings from time to time as nervous nellies in the futures markets run hither and yon, the overall trend remains higher: much higher. A significantly higher stock market will result in significant gains for pensions, of that there is no doubt. The only question is whether it will be enough. I doubt this (ever the optimist that I am!) as insufficient funds have been invested in equities over the years (we need the compounding there as well).
However, the attempt is being made, and we are seeing equities around the world with what seems to be a very solid bid underneath them. We might say that the powers-that-be are probably quite concerned at the prospects of some sort of general “rising” of the population if there is a series of pension funds which go bankrupt. This is not out of the question if there is a surge in retirement demands from the elderly who are then told that “there is little there for you”. This could easily spread if there is the feeling that the middle aged workers who might be considering what to do in retirement suddenly have to consider that there might not be that much for them either. Is this why the various US security agencies have been stocking up on war related materiel so that order can be maintained in such an instance? It is a possibility and given that money/actions speaks louder then words we cannot exclude it.
However, if I may digress for a moment I think it is probably because the US knows what it has done overseas and is doing (ie with various NGOs in Russia which are designed to topple the government there) today. If the US (as is very likely) was behind the uprisings in EuroMaidan in Kiev, Ukraine recently, then there may be a fear in Washington that what goes around comes around. To avoid a home grown NGO getting a grip on any sort of power in the USA would mean that a brutal police presence will have to be built up with officers who are not afraid to use the weapons and authority which they have seemingly acquired at extremely short notice. Of course, if there IS a major financial disturbance which spills over to the streets ... .