Re: Marxist Financial Advice

["Devine, James" <jdevine@xxxxxxx>]

c'mon! Diversification is diversification, not "diversification only in dollar assets." Strictly speaking, diversification includes holding gold and canned food, along with euros and rupiahs. 

It's true that if the world economy melts down (or if the scenario of the flick "the Day After Tomorrow" happens), diversification won't do you any good. It can't deal with generalized or systematic risk. But I think it would probably do better than putting all one's assets into one basket. 

------------------------
Jim Devine jdevine@xxxxxxx &  http://bellarmine.lmu.edu/~jdevine

> Jim:
> 
> > The guidance I gave, as Michael Perelman noted, was 
> > simply common sense, not something from Marx (though 
> > I doubt Marx would reject the advice).
>  
> Put differently, it was simply common nonsense. If Roach is 
> right and "the
> equity bubble of the late 1990s was a transforming event in 
> many ways for
> the US economy", then that guidance is misguidance: 
> 
> http://www.morganstanley.com/GEFdata/digests/20040621-mon.html#anchor0
> 
> As he calls it, this "asset economy", the genesis of which 
> according to him
> can be traced back to the late eighties, is dependent on 
> wealth-effects
> driven by "asset price inflation", itself driven by the 
> poring money from
> foreign investors, central banks and US households who have been
> indoctrinated by that "common nonsense" into the US asset 
> markets. I go one
> step further and claim that the genesis of this asset economy 
> can be traced
> backed to 1971, when the Bretton Woods system was dismantled 
> and the US
> dollar became the world reserve currency.
> 
> Although I have no means of knowing what Marx would have done 
> had he been
> alive, I have doubts that he would agree with the advice. It 
> is my view that
> the period we are going through is not a good time for 
> diversification, if
> by diversification what is meant is diversification into US 
> assets such as
> "well-diversified" US fixed income and equity index funds or 
> funds of funds
> holding such index and even actively managed funds in some 
> proportions.
> 
> This is not diversification at all. It is a single bet, a bet 
> on the US
> dollar hegemony, whose future is more uncertain than ever.
> 
> Sabri
>