Category: simonblack

November 14, 2014
Santiago, Chile

Years ago, an elderly, frail Japanese martial arts master once boasted a 200-0 record against his opponents.

He claimed to have a unique power that allowed him to inflict serious injury on people without actually laying a finger on them.

Was it Chi? Magic? None of the above. It was a total scam. But that didn’t matter.

You see, the legend of the master’s powers turned out to be far more powerful than reality.

His core following of students believed in the master so much that they would fling themselves across the dojo whenever he raised his pinky finger.

And anyone who saw the display would become transfixed by the perception of the mater’s extraordinary abilities. It was an incredible case of mass delusion.

Everyone believed it, including the master himself. He was so confident in his skills that he put up a $5,000 challenge that he could beat any fighter in the world.

A mixed martial arts champion accepted the wager, and the result wasn’t pretty.

As you can see in the video, the master is quickly knocked to the ground with a broken nose and a pool of blood. Observers scramble to find a doctor to come to his aid.

You can almost hear the sound of reality quickly taking hold from the gasps of his students. No one could bring themselves to believe that the master had been so quickly beaten.

To an outsider, it seems so obvious that this guy is a phony (just watch the video). But mass delusion is an incredibly powerful force.

We see the same effects in the West today—mass delusions everywhere.

People seem to believe their governments are almighty beings capable of performing magic—water into wine, debt into wealth.

Here are some of the biggest myths we see in the system today:

1. The dollar will continue to be the dominant currency.

This is a total farce. Grumblings grow louder around the world to establish a new non-dollar financial system, and China has taken the lead to make this a reality.

2. The US is still the dominant military power in the world.

If you measure by the quality of trained personnel, this is true. But what good is all of that military power if you can’t afford to do anything with it?

3. The police exist to protect the people.

Wrong again. With so much civil asset forfeiture taking place at the point of a gun (federally funded assault rifles), it’s clear they’re far more concerned about protecting those that maintain the status quo than protecting you.

4. Elections make a difference

Completely false. Most Western governments borrow money to pay interest on the money they’ve already borrowed.

In the US, they spend so much on mandatory entitlements and interest they could eliminate almost the entire government and still not run a balanced budget.

At that level of desperation, it matters not who’s in power.

5. Your bank is safe

Your bank might HAVE a safe. But if you look at objective data, many banks in the West have incredibly thin levels of capital and liquidity—the exact opposite of what a safe bank is supposed to have.

Oh yeah, they’re backed by poorly capitalized deposit insurance funds, which are guaranteed by insolvent governments.

And bear in mind that even if your bank is reasonably capitalized, you are still guaranteed to lose money on a tax adjusted, inflation adjusted basis if you you’re holding your savings there.

6. You have to go to college in order to get ahead

Quite the opposite—going to college in many cases can get you behind; just ask any 36-year old still paying down that $100,000 student loan debt.

The world is a big place full of opportunity. Skills and experience matter more than pieces of paper.

Here’s a better option, especially for young people: head overseas, and become an apprentice to a successful, knowledgeable individual that you respect.

Any young person who thinks that going to college is a good idea should just ask any of their unemployed friends saddled with $100,000 of debt if it was worth it.

7. I saw it on TV so it must be true.

Ufff. The mainstream media exist to paint a distorted version of reality so that people are kept placated, docile and largely clueless about what really goes on in the world.

8. Debt doesn’t matter because we owe it to ourselves

Whoever first said this must have a lot of whips and chains in his closet because he seems to enjoy pain.

If we owe the debt to ‘ourselves,’ that means that we will need to default on ourselves.

This means no more Social Security, Medicare, etc. It means causing the US Federal Reserve to become insolvent and spark a currency crisis. It means causing the collapse of every bank in the country.

Sure, no biggie.

9. The United States is the Land of the Free

Draconian surveillance efforts on its citizens. Punitive taxes, fines and regulation. Rising police state. Telling people what they can or can’t put in their bodies, how to grow their food, who to adore, who to hate. Preventing them to collect their own rainwater and live off the grid.

The list goes on and on. And so do the myths. Are there any more that you see? Let us know here, or on our Facebook page.

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November 14, 2014
Santiago, Chile

What’s the biggest lure of elections? That people have the ability to change things by voting someone else in power. At least in theory.

I try not to get too caught up in US politics these days, because that’s one of my favorite parts about going international—I don’t have to get sucked into it all on a regular basis.

US politics tends to affect you wherever you go, so more often than I’d like to I do end up check in on what’s happening.

If you’ve been following the election, I’m sure you know that the Republicans won a majority of the Senate and Obama responded by saying, “I hear you”, but now I’m just going to use Executive Orders to get things done.

That seems a bit anti-climactic wouldn’t you say? All that time and money spent campaigning, all those people interrupting their normal days to go vote—just to be in the same situation as before? For ‘change’ to be hollow?

People in Hong Kong have been asking themselves: is it democracy if the Chinese Communist Party chooses all the candidates?

Along the same lines, in the US when the opposition party takes control of the legislature and the president responds by saying that’s nice, but I’m going to go ahead with whatever I want to do anyway—is that democracy?

To me, this is the kind of thing you’d expect in a volatile third-world country that is pretending to be a democracy in order to receive international support.

It’s not real. Putting your vote in there doesn’t make a difference.

In fact, more than that, voting for politicians demonstrates that you accept the system. You might have your gripes with it, but you still have faith that it is fair and that it works.

It’s like coming home every night to an abusive spouse. You can say, it’s a good system at heart. I can make it change.

But in reality, that’s not going to happen. And by sticking around, you will just go down with it.

In the same way people are duped in every election cycle—“If we can just get the right guy in power…”

It doesn’t matter. The new guy just turns into the last guy. Because the whole system is broken.

As we said earlier this week, the US government debt has increased from $2.8 trillion to $18 trillion in 25 years. The Federal Reserve’s balance sheet has expanded from $285 billion to $4.5 trillion in the same time.

The US is borrowing money just to pay interest on the money it has already borrowed. This is the point of no return. It is arithmetically impossible for the US to ever repay its gigantic debt, since it just keeps adding on to it year after year.

To even start considering it, the US would first have to live within its means by balancing the budget—which would mean eliminating expenses for the military, Social Security and Medicare, which already consume more than 100% of the government’s tax revenue.

Of course, no politician is ever going to do that. So it really doesn’t matter who is in power.

Therefore a far more powerful way to vote is with your life actions.

Vote with your money by trading your dollars for productive assets, land, and precious metals. By doing that, you’re consciously deciding not to be involved in this corrupt debt-based system.

An even larger vote is by deciding to leave. By voting with your feet.

Opting out means that you no longer endorse the system, and that you are establishing your preferences by selecting one that is better. One that treats its citizens better and has more to offer you.

Demonstrating your opinion through your actions is far more powerful than expressing it on a piece of paper.

Is a single vote enough to make a difference?

In the electoral system definitely not. You’ve seen that yourself just this past week.

However, when it comes to voting with your money and your feet by leaving the country, you definitely can make a difference—first of all for yourself.

At once, you can gain greater freedom, richer experiences, and multitudes of opportunity. A better life and positive change? That’s what the point of voting is, isn’t it?

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November 12, 2014
Santiago, Chile

Thousands of years ago whenever the Pharaohs of Ancient Egypt passed away, they were buried with all of their gold in a specially constructed tomb.

The idea was to ward off thieves with booby traps and other perils so that these perceived demigods could enjoy their riches for eternity.

It worked. In the case of Tutankhamen, his gold was untouched by both thieves and desperate government tax collectors for thousands of years.

In the Pharaohs’ day, gold was money. Today, it might be even more important than ever.

As advanced as our modern civilization may be, we’ve been playing with fire for more than a century. Every single experiment with unbacked paper money throughout history failed.

And though today’s economists like to think that ‘this time is different,’ our own experiment with paper money will share the same fate.

It’s already moving in that direction. The bubble in fiat currency is now so large that it has simultaneously created all-time highs in nearly every major financial asset class, particularly stocks and bonds.

Bear in mind that these are not tangible assets, but rather ‘paper assets’—nothing more than claims on promises made by others (stockbrokerages, politicians, etc.)

So in other words, the explosion in the supply of paper money has created dangerous bubbles in paper assets. Funny how that works.

And at this point there are no good options remaining to gracefully end the experiment.

Any direction that central bankers go risks inflation, deflation, hyperinflation, or the collapse of financial markets.

If they print, they create inflation. If they don’t print they get deflation.

If they print too much they get hyperinflation. And if they so much as utter the wrong word then financial markets go into a panic.

The situation has become so bizarre that we’re now seeing negative interest rates across Europe.

Central bankers are conspicuously trying to whip up confidence in their poorly capitalized banking systems.

And wealthy emerging markets are moving to build their own financial infrastructure that no longer depends on the West.

This is clearly a system on the slide. And it’s not the first time this has happened.

Throughout history there have always been major shifts in the global financial system.

Reserve currencies change. The way people engage in commerce changes. The rules of the game change.

This time is no different. And we’re currently experiencing the early stages of yet another historic shift.

No one can say for certain what the next iteration of the financial system will look like. But there are a few things we can say for sure-

Today, the US dollar, US government, and US central bank form the cornerstones of the global financial system.

But that game is quickly drawing to a close.

The rest of the world is sick and tired of the US arrogantly dictating rules for everyone else to follow.

They’re sick and tired of the US going deeply into debt and pawning its bonds off to everyone else as ‘risk free’.

So it’s a safe bet that in the future, US paper money and debt is not going to be anywhere near as important as they are today.

We’ll also likely see a new system where banks are far less relevant.

All the technology and all of the resources already exist today to effectively eliminate the need for banks.

Decentralized crypto-currencies and transaction platforms already exist. You no longer need to hold your cash at a bank when you can simply store it in the blockchain.

(This may sound esoteric, but consider that most currency is already stored in digital form. Your bank balance doesn’t really exist except in the digital world.)

You no longer need to apply for a home mortgage or bank loan when entire networks of peer-to-peer lending platforms exist.

For every function that a bank serves, there is technology today that does it better, faster, and cheaper.

It’s time for these financial dinosaurs to hit the historical dustbin.

Again, this is a normal trend of history. The horse and buggy went away a long time ago due to changes in technology. So will fiat currency and conventional banking.

Nothing is going to change immediately. But as Hemingway said, this trend will unfold gradually, then suddenly.

So it does make sense for now to consider your options now, particularly real assets like productive land, operating businesses, and yes, gold.

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November 12, 2014
Santiago, Chile

At USD $1160, a lot of gold owners are looking at the paper price right now and panicking.

The conventional wisdom is that, because it takes fewer pieces of paper to buy an ounce, gold is a bad ‘investment’.

This isn’t the right idea. It shouldn’t be viewed as an investment at all.

Gold isn’t something that you buy with paper currency hoping to sell it later on down the road for even more paper currency.

Rather, the entire point of gold is to trade paper currency for something that can hold its value over the long-term, yet is still liquid, divisible, and universally recognizable.

There are almost zero assets that fit the bill. Gold is one of the few.

Gold is real. It has its own challenges (including counterfeit, manipulation, etc.) that make it far from perfect. But it’s physical, tangible, and cannot be conjured out of thin air by central bankers.

What’s more, it’s one of the only -private- forms of money remaining, and it’s a great way to transport a substantial amount of savings abroad without anyone knowing.

I’ve long been an advocate of moving a portion of one’s savings overseas.

After all, what’s the sense of leaving 100% of your assets within a country ruled by a morally and financially bankrupt government that treats you like a dairy cow?

Moving some of your gold abroad to a jurisdiction that prides itself on maintaining a high level of financial security and privacy protects you against legal thievery your government might commit against you.

Sure, it’s a risk that might never come to fruition. But you won’t be worse off for having stashed some of your gold away privately in a safe, stable jurisdiction.

Consider these three to start:

Singapore

Singapore is currently the world’s top destination for gold storage.

It’s one of the safest places on the planet. There’s practically zero crime. Corruption isn’t an issue, as it’s one of the most transparent places in the world.

Prices for gold storage are incredibly competitive, and with recent legislation that eliminated import duties and taxes on investment-grade gold, premiums are dropping.

(Investment grade precious metals include gold Maple Leaf, Buffalo, Kangaroo, and Panda coins. US Eagles and South African Krugerrands are not tax-exempt as their purity is too low. Silver Eagles, however, qualify for tax exemption.)

Singapore is also home to The Safe House (www.thesafehouse.sg), hands down one of the most advanced precious metals storage facilities in the world.

(Note: I am a director of The Safe House’s parent company, though I have no share ownership.)

Switzerland

Switzerland is the most traditional privacy and financial storage destination. It has many decades behind it as THE place for offshore finance.

And while the Swiss banking industry has suffered a severe blow in recent years from intense pressure from the US, its sophistication, level of service and professionalism in all things related to finance and money is still unparalleled.

It’s a great place for offshore precious metals storage. In fact, all the major online gold services outsource their physical storage to companies such as ViaMat in Switzerland.

ViaMat doesn’t do business with US customers anymore, but there’s a private secure storage option in either Basel or Lugano, called CasaForte (www.casaforte.ch).

Austria

Austria is a very “gold oriented” society. Walk around Vienna and ask the average person what the price of gold is and they’ll likely be able to tell you.
You see it everywhere in town, there is no shortage of places to buy and sell gold, including at just about every single bank in the country.
Furthermore, the Austrian government is not hemorrhaging cash like the United States or Spain. As a result of these factors, the likelihood of a drastic policy change on gold ownership is low.
Bank safety deposit boxes are plentiful, but there is a private facility in Vienna called Das Safe (www.dassafe.com) that I find to be much better.

The reason is because Das Safe is one of the only places in the country (and Europe) where you can store your precious metals anonymously.

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November 12, 2014
Santiago, Chile

When Wolfgang Amadeus Mozart first came to Prague on 11 January 1787, he was an absolute sensation.

His smash hit opera Le nozze di Figaro had been released in the city a few months prior, and the people were absolutely wild about it.

So this time, in 1787, he came to town to conduct the opera himself. This was like the Beatles coming to America for the first time; it was huge.

Mozart was greeted with such adoration, and was hosted at party after party across the city, that he recounted his first day in the city as one of the happiest of his life.

In the month that he was there he also composed Six German Dances and signed a contract with Pasquale Bondini for a new opera for the autumn season—Don Giovanni.

Not much of a slacker, was he?

Despite how immensely productive and popular the legendary composer was, there is much debate about how much money he actually made.

A tragic tale, helped along by the movie Amadeus, has been spun that he died penniless and unaware of the immense impact he’d had on the world of music.

Undoubtedly he might not have ever imagined that he would remain a household name more than two centuries after his death. But there is reason to believe that his financial situation was not nearly as dire as it has been made out to be.

While his annual income is generally estimated to have fluctuated between 800 and 3,800 Austrian florins—when you take into account his earnings from teaching, performance and publication, it is more likely that he was averaging 3,000 to 4,000 florins a year.

That seems to make sense, considering that his German contemporary, Ludwig van Beethoven insisted on being paid no less than 4,000 florins.

Wanting to maintain a certain level of lifestyle in the city, he clearly elaborated what his price was, and two princes and an archduke stepped in to make up his salary, which they committed to pay for life.

At 0.945g of gold per florin, these two celebrated musicians’ wages of 4,000 florins come out to be nearly $150,000.

Incredibly, if Mozart or Beethoven could have been teleported into our modern time, their salaries would buy them a perfectly comfortable lifestyle.

Fiat currency, however, has an entirely different tune.

With each passing day, as production of money increases, your purchasing power declines. And in the end, all you’re left with is just paper.

Try spending that 200 years from now.

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November 11, 2014
Santiago, Chile

This past week Brazil announced that it will be building a 3,500-mile fiber-optic cable to Portugal in order to avoid the grip of the NSA.

What’s more, they announced that not a penny of the $185 million expected to be spent on the project will go to American firms, simply because they don’t want to take any chances that the US government will tap the system.

It’s incredible how far now individuals, corporations, and even governments are willing to go to protect themselves from the government of the Land of the Free.

The German government, especially upset by the discovery of US spying within its borders, has come up with a range of unique methods to block out prying ears.

They have even gone so far as to play classical music loudly over official meetings so as to obfuscate the conversation for any outside listeners.

They’ve also seriously contemplated the idea of returning back to typewriters to eliminate the possibilities of computer surveillance.

More practically, the government of Brazil has banned the use of Microsoft technologies in all government offices, something that was also done in China earlier this year.

The Red, White, and Blue Scare has now replaced the Red Scare of the Cold War era. And it comes at serious cost.

From Brazil’s rejection of American IT products alone, it is estimated that American firms will lose out on over $35 billion in revenue over the next two years.

Thus, as the foundation of the country’s moral high-ground begins to falter, so does its economic strength.

The irony should not be lost on anyone; on a day when Americans celebrate their veterans’ courage in fighting against the forces of tyranny in the world, we find yet another example of where the rest of the world sees the source of tyranny today.

It’s amazing how much things have changed.

In the past, the world trusted America with so much responsibility.

The US dollar was the world’s reserve currency. The US banking system formed the foundation of the global banking system. US technology became the backbone of the global Internet.

But the US government has been abusing this trust for decades.

Today the rest of the world realizes they no longer need to rely on the US as they once did.

And in light of so much abuse and mistrust, they’re eagerly creating their own solutions.

Just imagine—if Brazil is building its own fiber optic cable to avoid the NSA, it stands to reason that they would create their own alternatives in the financial system to directly compete with the IMF and the US dollar.

Oh wait, they’re already doing that too. Fool me twice, shame on me.

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November 10, 2014
Santiago, Chile

It started off as a simple border checkpoint to keep what Soviet Foreign Minister Vyacheslav Molotov called “Western agents” out of East Berlin.

Then they erected a barbed wire fence and started using a system of official travel passes to cross the new border. East Germans who wanted to visit West Berlin needed to first be granted permission.

Soon the bureaucracy behind obtaining one of these passes become practically insurmountable. And they started issuing fewer and fewer of them.

People still found a way out. And by 1961, the East German government maintained that it had no intention of building a wall.

Later that year they formally closed the border and installed an improved security fence; the East German army tore up huge sections of road to make approaching the fence by vehicle nearly impossible.

Then, for more than a decade, they constructed increasingly sophisticated ramparts, including 45,000 sections of reinforced concrete, each more than 12 feet high.

All along the way the government had told everyone it was for their own good. Their security. The government needed to protect them from all the evils of the outside world, and everyone would be safer with a giant wall.

At that point people were clearly trapped. There had been years of warning signs… slow, gradual steps towards totalitarianism.

With each new measure there were those who saw the trend and left. Then there were those who ignored the trend and ridiculed the ones who left as unpatriotic cowards.

Those who remained behind gradually became accustomed to the new rules. Until one day they woke up to find that the country they were now living in was completely unrecognizable.

But by then it was too late, and millions of Germans were trapped in a failed Communist experiment.

It took three decades, but the Berlin Wall finally opened up on this day in 1989. And back then the Land of the Free was an entirely different place.

Freedom has clearly taken a nose dive. Back then, the government didn’t make its people terrified of men in caves. Combat-clad paramilitary forces weren’t deployed across the country to intimidate citizens and confiscate assets at gunpoint.

But from an economic and monetary perspective the landscape has changed even more dramatically.

Total US government debt in 1989 was $2.8 trillion, less than 50% of GDP at the time.

The Federal Reserve’s balance sheet in 1989 totaled less than $285 billion.

Interest rates in 1989 were 8.25%, substantially higher than the rate of inflation.

And back in 1989, the rest of the world had tremendous confidence in both the US dollar and the US government.

Today it’s entirely different.

The rest of the world (led by China) is actively starting to abandon the dollar and build alternatives to the US-dominated financial system. In fact, Canada just became a renminbi hub.

The Fed’s balance sheet today is a whopping $4.5 trillion, and interest rates are being held to 0%… well below the rate of inflation.

And of course, US debt has exploded to $18 trillion, well over 100% of GDP. The government is insolvent, major programs like social security are insolvent, and it all gets worse with each passing year.

In response, the US government continues to engage in confiscatory policies.

They hunt for every tax dollar they can get with aggressive furor.

When US taxpayers follow the government’s own rules and engage in legal, rational practices to minimize their tax burdens, the government now sets aside its own laws and issues decrees (Executive Orders) on a retroactive basis to go back in time and expropriate people’s assets.

They’ve also passed absurd laws like FATCA and Dodd-Frank to harrass foreign banks and law-abiding citizens.

And the US government continues to levy huge fines against foreign financial institutions (to the tune of billions of dollars) simply for engaging in practices they don’t like.

They’ve turned their tax agency into global bullies who threaten and intimidate the entire world, throwing their own citizens in jail for failing to file simple disclosure forms.

They’ve even imposed a huge exit tax for people who wish to permanently divorce themselves from this system, and charge substantial fees for going through the process to renounce US citizenship.

This is NOT how a free society is supposed to operate.

As a result of many of these practices, many foreign banks and brokerages simply no longer want to deal with US customers anymore. The risks and compliance costs are far too high.

Consequently, these policies have had the net effect of reducing people’s ability to move money overseas.

In a way, their funds are being increasingly trapped in a system where you have almost zero good options.

Bank deposits guarantee that you’ll lose money when adjusted for inflation. Stock and bond markets are at all-time high nosebleed levels. Many banks are still under-capitalized. The government is able to confiscate your assets with a few mouse clicks. And the dollar remains in precarious condition.

Yet if you try to move your money abroad to greener pastures, you’ll find far fewer options available than ever before.

In this way, whether intentionally or not, they have encircled your savings with a sort of financial Berlin Wall.

This Wall is invisible. And it’s been erected with a stroke of a pen instead of the labor of men. But still the same, capital (at least at the individual level) is increasingly finding itself trapped in a failed system.

There are still options to move some savings abroad and out of harm’s way. For now. How long does one wait?

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November 10, 2014
Santiago, Chile

It’s happening. With increasing speed and frequency.

The People’s Bank of China and the Canadian Prime Minister’s office issued a statement on Saturday stating that Canada will establish North America’s first offshore renminbi trading center in Toronto.

China and Canada agreed on a number of measures to increase the use of renminbi in trade, business, and investment. And they further signed a 200-billion renminbi bilateral currency swap agreement.

Moreover, just today, hot of the presses, the central banks of China and Malaysia announced the establishment of renminbi clearing arrangements in Kuala Lumpur, which will further increase the use of renminbi in South-East Asia.

This comes just two weeks after Asia’s leading financial center, Singapore, became a major renminbi hub, with direct convertibility established between the Singapore dollar and the renminbi.

Everyone is in on the trend. All across the world, the renminbi is quickly becoming THE currency for trade, investment, and even savings.

Renminbi deposits in South Korea, for example, surged 55-times in one single year. It’s stunning.

The government of UK just issued a renminbi bond, becoming the first foreign government to issue debt in renminbi.

Even the European Central bank is debating to include renminbi in its official reserves, while politicians the world over are sounding not-so-subtle warnings that a new non-dollar monetary system is needed.

Nothing goes up or down in a straight line. And given how volatile Europe and the global economy continue to be, the dollar may certainly be in for its surges and bumps in the coming months.

But over the long-term it’s glaringly obvious where this trend is going: the rest of the world no longer wants to rely on the US dollar, and they’re making it a reality whether the US likes it or not.

Right now there’s still time to buckle up. If you’re 100% exposed to the US dollar, consider diversifying your investments in real assets, or a currency like the Hong Kong dollar.

Hong Kong dollar is pegged to the US dollar. So if the US dollar surges, the Hong Kong dollar will strengthen accordingly. And because the peg is so tight, the currency volatility is minimal.

But if the US dollar takes a turn for the worse, Hong Kong would likely abandon this peg, thus eliminating your downside risk.

This is a very strong option to consider.

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November 10, 2014
London, England

[Editor’s note: This letter was written by Tim Price, London-based wealth manager and editor of Price Value International.]

In 1975, Charles Ellis, the founder of Greenwich Associates, wrote one of the most powerful and memorable metaphors in the history of finance.

His essay is titled ‘The loser’s game’, which in his view is what the ‘sport’ of investing had become by the time he wrote it. His thesis runs as follows:

Whereas the game of tennis is won by professionals, the game of investing is ‘lost’ by professionals and amateurs alike.

Whereas professional sportspeople win their matches through natural talent honed by long practice, investors tend to lose (in relative, if not necessarily absolute terms) through unforced errors.

Success in investing, in other words, comes not from over-reach, in straining to make the winning shot, but simply through the avoidance of easy errors.

Ellis was making another point. As far back as the 1970s, investment managers were not beating the market; rather, the market was beating them.

This was a mathematical inevitability given the over-crowded nature of the institutional fund marketplace, the fact that every buyer requires a seller, and the impact of management fees on returns from an index.

Ben W. Heineman, Jr. and Stephen Davis of the Yale School of Management asked in their report of October 2011, ‘Are institutional investors part of the problem or part of the solution?’

By their analysis, in 1987, some 12 years after Ellis’ earlier piece, institutional investors accounted for the ownership of 46.6% of the top 1000 listed companies in the US. By 2009 that figure had risen to 73%.

That percentage is itself likely understated because it takes no account of the role of hedge funds.

Also by 2009 the US institutional landscape contained more than 700,000 pension funds; 8,600 mutual funds (almost all of which were not mutual funds in the strict sense of the term, but rather for-profit entities); 7,900 insurance companies; and 6,800 hedge funds.

Perhaps the most pernicious characteristic of active fund management is the tendency towards benchmarking (whether closet or overt).

Since a capitalisation benchmark assigns the heaviest weightings in a bond index to the largest bond markets by asset size, and since the largest bond markets by asset size represent the most heavily indebted issuers – whether sovereign or corporate – a bond-indexed manager is compelled to have the highest exposure to the most heavily indebted issuers.

All things equal, therefore, it is likely that the bond index-tracking manager is by definition heavily exposed to objectively poor quality (most heavily indebted) credits.

There is now a grave risk that an overzealous commitment to benchmarking is about to lead hundreds of billions of dollars of invested capital off a cliff.

Why? To begin with, trillions of dollars’ worth of equities and bonds now sport prices that can no longer be trusted in any way, having been roundly boosted, squeezed, coaxed and manipulated for the dubious ends of quantitative easing.

The most important characteristic of any investment is the price at which it is bought, which will ultimately determine whether that investment falls into the camp of ‘success’ or ‘failure’.

At some point, enough elephantine funds will come to appreciate that the assets they have been so blithely accumulating may end up being vulnerable to the last bid – or lack thereof – on an exchange.

When a sufficient number of elephants start charging inelegantly towards the door, not all of them will make it through unscathed.

Corporate bonds, in particular, thanks to heightened regulatory oversight, are not so much a wonderland of infinite liquidity, but an accident in the secondary market waiting to happen.

We recall words we last heard in the dark days of 2008: “When you’re a distressed seller of an illiquid asset in a market panic, it’s not even like being in a crowded theatre that’s on fire. It’s like being in a crowded theatre that’s on fire and the only way you can get out is by persuading somebody outside to swap places with you.”

The beatings will continue until morale improves – and until bondholders have been largely destroyed. When will the elephants start thinking about banking profits and shuffling nervously towards the door?

Meanwhile, central bankers continue to waltz effetely in the policy vacuum left by politicians.

As Paul Singer of Elliott Management recently wrote, we inhabit a world of “fake growth, fake money, fake jobs, fake stability, fake inflation numbers”.

Top down macro-economic analysis is all well and good, but in an investment world beset by such profound fakery, only bottom-up analysis can offer anything approaching tangible value.

In the words of one Asian fund manager, “The owner of a[n Asian] biscuit company doesn’t sit fretting about Portuguese debt but worries about selling more biscuits than the guy down the road.”

So there is hope of a sort for the survival of true capitalism, albeit from Asian biscuit makers. Perhaps even from the shares of biscuit makers in Europe – at the right price.

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