IceCap Asset Management monthly commentary
In mountaineering lore, summiting Everest, McKinley or even the Vinson Massif certainly warrants a notch in your ice axe. However, the mountain that always produces jaw-dropping admiration, respect and outright fear, has been and always will be K2.
The World’s second highest mountain, is rarely guided and attempted only by the most skilled, the most patient and the most determined climbers – and for good reason, falls, slips and nasty tricks can happen in a moments notice. And when they occur, knowing how to swiftly execute a self arrest, or a belay can be the difference between a tragic fall and living to climb another day.
Now, when it comes to belays, American Pete Schoening has become synonymous with not just any belay, but the “miracle belay.” In 1953 at 25,000 feet high in the clouds on K2, one precarious moment turned Mr. Schoening into a climbing legend when he single handedly saved five of his rope mates from plummeting off the mountain. Naturally the climbers were all shaken; yet they learned from this experience and enjoyed many more years of climbing.
In 2009, 2010, 2011 and if you can believe it again in 2012, global financial markets were also hanging from a ledge. But each time, instead of having an experienced professional to save everyone involved, the World was dependent upon central banks whose entire legacy was smeared with economic and monetary failures.
In 2009, the Americans lead by Hank Paulson and Ben Bernanke threw unlimited amounts of money to the financial sector to self arrest the entire plant from spiraling out of financial control. These financial acts of bravery stabilized the system and so we were told would set the stage for a recovery.
Alas, one year later in 2010 the same Ben Bernanke announced that the recovery had completely stalled and he would once again save the system by printing even more money. Of course in 2011 he repeated the same strategy and began yet another round of more money printing to save us again.
And, then in 2012 the Europeans felt that everyone needed even more life saving, and told the World that just like the Americans, the Europeans too would watch your back.
Those who disagree with history conveniently forget it was actually the US Federal Reserve who created the housing bubble, by creating the technology bubble, by bailing out a Wall Street hedge fund. To add more ice cream to this dish, let’s not forget the central banks role in the Asian crisis, the Mexican crisis and the savings & loan crisis. As you can see, these are not one-hit wonders, and sadly the Fed’s Greatest Hits are anything but great.
Certainly, the stock market has recovered – and this is exactly what the US Federal Reserve wanted. At the time, they read somewhere that if people “feel” wealthier, they’ll borrow and spend more. Simple enough, all they had to do was to make people feel wealthier and when it comes to wealth in America, there’s no better barometer than the stock market.
Full IceCap Asset Management letter below