[MONEY] Risk Parity Funds Just Suffered The Biggest Loss In History - when hedge arbitrage breaks down - [PEACE]
Zenaan Harkness
zen at freedbms.net
Fri Mar 13 17:30:51 PDT 2020
There are a few bell weathers starting to make the rounds, here's one:
"X suffers Biggest Loss in History!"
In this case, the X in the headline is "ALL risk parity funds" where risk parity funds are a type of hedge funds which apparently arbitrage stocks and aginst bonds.
Risk Parity Funds Just Suffered The Biggest Loss In History
https://www.zerohedge.com/markets/risk-parity-funds-just-suffered-biggest-loss-history
When your fud-durr-durr-mentals are brokensaw - 'member the Fed' - your houses of cards built on those fundamentals will at some point come crashing down.
You see there's a funny little thing with usury - the mathematical fundamental of this very Jewish banking system is exponential - forever growth or infinite growth (unlimited "economic expansion").
Now fictitious "assets" can in fact grow in unlimited numerical terms, but when "the real economy" is tied to fictious exponentially growing "financial assets", then there is a basic imbalance which must, inevitably, appear - one could say this is the ultimate arbitrage, between exponential maths and reality.
One consequence of this rollercoaster of financial death is that every mechanism designed on this exponential (thus broken) system, must itself be in essence, an exponentially growing system - so hedge funds must grow exponentially, every tool of financialization will, eventually, demonstrate exponential growth (such as stock buy backs etc), and the real economy needs to also grow exponentially to prop all the financialization up - and this is in fact achieved with things like real estate and business price growth.
(Those who are somewhat familiar with real estate from a lowly "investor" perspective, will be aware that there are expanding ripples of price inflation over time, which hit different geographic regions at different times (different years, sometimes different decades) - and once the "investor" crowd hits a new geographic area which was once relatively dormant (Australia's a big country ok), then the key growth metric is the time period for (real estate) price doubling - which is usually around the 6 to 8 years mark.)
So, real estate doubling in price every X years? Yes, that's exponential "asset valuation increases" and real estate is a fundamental of "the real economy" which supports the house of fictious cards above it.
But this exponential is gonna bite, because to support exponentially rising real estate prices, you need exponentially rising incomes to pay the interest rates.
So one signal of the imbalances of all this coming to the fore is usurious interest rates plummeting. Is this a good thing? No, because a) this demonstrates we are in a fundamentally messed up money system, b) real estate prices are way out of whack with real (average person) incomes, c) real estate price inflation has itself caused a bunch of system imbalances, wealth divide etc., and surely other reasons still.
Now, the summary and line punch:
0) our present money system is, mathematically, exponential; for the time being we are bound by this, and we see some of the effects of this quite starkly today
1) every aspect of our system must therefore also be exponential (in growth or decline); e.g. every "emergency intervention system" (such as QE) must also be eponential, that is, each QE (on average) must grow exponentially with respect to the previous intervention (corporate share buybacks are a pooman's (poor CEO's) intervention mechanism)
2) eventually the Fed's QE intervention must be larger than the entire market; in other words, at some point, if the goal is to sustain the system's existence, the Fed shall be mathematically bound, literally, to buy every asset everywhere, or the system will literally collapse if they fail to do so - i.e. to buy every bond (gov and corp), every business, every stock/share, every real estate title
This is of course the basic mechanism of an exponential debt based system, and one can fairly say this is in fact the intention of this system - Atlas Shrugged - no matter who you are, how ethical, how successful, how well intentioned, how contributory to society at large, except that you are the owner of the system (i.e. the BIS - 'member the Fed), then you are Atlas, and you are targetted, and eventually, in order to merely survive financially, you will have to sell to the Fed/BIS.
This is the nature, and intention, of "the Federal Reserve Banking system: your gibs, are mine!"
Exponential Growth and the Legend of Paal Paysam
http://www.singularitysymposium.com/exponential-growth.html
The rice and the chessboard story – The power of exponential growth
https://purposefocuscommitment.com/the-rice-and-the-chess-board-story/
There was once a king in India who was a big chess enthusiast and had the habit of challenging wise visitors to a game of chess. One day a traveling sage was challenged by the king. The sage having played this game all his life all the time with people all over the world gladly accepted the Kings challenge. To motivate his opponent the king offered any reward that the sage could name. The sage modestly asked just for a few grains of rice in the following manner: the king was to put a single grain of rice on the first chess square and double it on every consequent one. The king accepted the sage’s request.
Having lost the game and being a man of his word the king ordered a bag of rice to be brought to the chessboard. Then he started placing rice grains according to the arrangement: 1 grain on the first square, 2 on the second, 4 on the third, 8 on the fourth and so on.
Following the exponential growth of the rice payment, the king quickly realized that he was unable to fulfill his promise because on the twentieth square the king would have had to put 1,000,000 grains of rice. On the fortieth square, the king would have had to put 1,000,000,000 grains of rice. And, finally, on the sixty-fourth square, the king would have had to put more than 18,000,000,000,000,000,000 grains of rice which is equal to about 210 billion tons and is allegedly sufficient to cover the whole territory of India with a meter thick layer of rice.
It was at that point that the sage told the king that he doesn’t have to pay the debt immediately but can do so over time. And so the sage became the wealthiest person in the world.
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