The Big Picture For The Week of March 31, 2013

Zerohedge reposted a sort of tongue in cheek commentary from Charles Gave from GaveKal. In the commentary Gave offered up a series of bullet points of how distorted markets are because of central bank action and other related items like number 2 that Central Banks Should Control Asset Prices or in point number 6 that governments should issue unlimited debt to pay for politicians’ promises.

The bullet points (click through to read the commentary for each one);

Lesson #1 Government agencies allocate capital better than the private sector

Lesson #2 Central banks should control asset prices and prevent them from falling

Lesson #3 Darwin & Schumpeter were wrong, creationists are right; there is such a thing as a free lunch

Lesson #4 Towards a new orthopraxy

Lesson #5 Wondrous tools used by the clergy to grow GDP

Lesson #6 How to finance infinite needs

The point as I saw it was in part something we have discussed before which is to understand that whatever positive economic numbers have come out (there are bad ones too) and whatever the stock market has done in the last four years has occurred against a backdrop of policies that we are taught are bad and will cause a bad outcome.

Really it has been a perversion of how capitalism is supposed to work. Trying to predict a bad outcome is less important than understanding what the potential consequences are like much higher inflation (not hyperinflation), prolonging the malaise (in areas that continue to show signs of malaise from five years ago) and a general diminishing of the US economic way of life (not talking in apocalyptic terms).

It is possible that there will never be any consequence for any of this, after all it could have started by now–it has been five years.

On the other side of the argument, the US stock market has more than doubled in the last four years which, forgetting everything, else is a fantastic move. It just got back to its highwater mark this week from October 2007. Where is your portfolio in relation to its 2007 high? Did you take it back a long time ago and have moved higher (a great result), are you just getting back now (it may have taken a while but you probably didn’t sell at the low) or are you way below your 2007 high (likely a result from sitting out the rally)?

There is nothing wrong with be skeptical, understanding the backdrop but riding the market higher. Putting in a plug for a defensive-action-trigger-point, you don’t have to guess, just remain faithful to a strategy you have a reasonable basis for believing will help you avoid the full brunt of large declines. At least that is how we prefer to navigate these things and fortunately we are in the first group in the preceding paragraph which aside from trying to avoid large declines is also about managing for the entire cycle not for three or 12 month increments.

Finally a quick note about the lack of posts for the last few days. Yesterday Walker Fire hosted the 2013 Prescott Basin Ops Drill which is both a simulation for the local Type 3 Incident Management Team (IMT) and a boots on the ground training opportunity for firefighters from the local departments and the US Forest Service. I had the opportunity to wear a couple of different hats for this and so something had to give and it was blogging.

The first picture is from the portable pumps training station, the second picture is from the hoselay and drafting training station and the third picture is of two Type 1 Engines from neighboring departments staging in front of the Walker Fire Station.

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