In response to an FT 'Markets Insight' by Ray Dallio on 25th January 2016, entitled 'Pay attention to long term debt cycle'
Despite making some good observations about cycles, and his recognition that the economy is like an alcoholic, Mr Dallio wants the patient to carry on drinking in the hope he'll be able to cut down and 'drink like a gentlemen', when his circumstances change for the better. Addiction doesn't work like that.
Then there's the inevitable 'talking your own book' angle to this. On that score Mr Dallio is not alone - the outpourings of 'Davos Drivel' have been particularly touching this year - Kleenex can expect record sales this quarter. To that, my response is: Aw diddums...it must be difficult running an 'all weather portfolio' that needs a sun lamp and air-conditioning from the Fed.
We can expect a lot more of this pleading. For those readers who are not familiar with the language I can reveal that the pleadings are being communicated in 'Moanish' - one of a group of languages from the 'Fork-Tongued Family'. The variety being used here is known as 'RichWhinger', a relatively obscure dialect that is spoken by less than 0.01% of the population. Allow me to offer a translation:
Dear Dr Y
After 7 years of dealing from the same deck I am sure that you have noticed that those of us on this side of the table have done rather well. I was rather concerned then, when last month you opened a fresh deck. The card you subsequently dealt me was, how shall I put this...less than encouraging. I'm sure that you realise that we are in the middle of a very important hand - the pot is enormous, and it would be terribly inconvenient if I lost this one. You will also be aware that I am playing with other people's chips, and if my cards continue to be disappointing I'm afraid that I may need to cash in and leave the casino - which would be a regrettable turn of events for the reputation of your establishment, and of the game itself.
Please go back to the previous deck.
A concerned customer
P.S. Please remember that this is an election year. Your friend Hills is perfectly aware that the direction of the NYSE 3 months before the election has an 80% success rate at predicting the winner - an upward trend predicts the incumbent party. As you know, if it goes the other way, poker will be a thing of the past, and we'll all be forced to play trumps instead.
P.P.S. My next card needs to be a diamond - to complete a flush. Nothing else will do I'm afraid.
The bit that Mr Dallio doesn't seem to get is that the tide has turned. If he really understood the cycles he talks about, I think he'd know that. Wall Street may think that Janet Yellen can succeed where King Canute failed and hold back the tide...but those that do have missed the point of the story - Canute was trying to communicate the utter absurdity of the divine power of kings. Central Bankers actually seem to believe their own hype. But they are not just clueless...when it comes to the debt crisis that is on its way, they are powerless too. No amount of pleading will change that.