Tuesday, January 03, 2012

Investment strategist: 'Big banks make their money from optimism' | Joris Luyendijk | guardian.co.uk

Investment strategist: 'Big banks make their money from optimism' | Joris Luyendijk | guardian.co.uk:
"In big banks and asset management companies it's very difficult to be negative about the future. The reason is simple: they make their money from optimism. If you are going to tell investors that the economy is going down, they will move their money somewhere safe and reliable such as cash. It is tricky to charge fees for trading or managing cash. It also becomes more difficult to convince investors to purchase riskier products.

"Pension funds have all this money on their hands. People working there want to outsource risks so they give the money to asset and hedge fund managers. If things go wrong, they have somebody to blame."

And I thought I was cynical. Read it! Many good points.

Favorite quote?
"If you take an honest look at the financial sector today, you see banks can borrow money almost for free on what is called the short-term market, then lend that money to governments for 2% or 3%. Now why would they lend to small businesses if they can make money so easily? This is what 'zero interest rates' are doing to our economy, as well as taxing savers with inflation at over 5%. You take on new debt to pay off your old debt. It's like drinking your hangover away with ever more drinks. You are destroying your liver. That's what's currently happening."

HT: MoneyScience
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