How I [they] Learned to Stop Worrying and Love the Bomb [Market]  paraphrasing Stanley Kubrick’s great cold war/nuclear paranoia film Dr. Strangelove (1964).
The USA thrived during a 20th century rife with war, famine and depression. This was a wealthy country however, founded on principles of self-reliance and valuing thrift, saving and honest work for an honest return. Add in unparalleled productivity and economically at least, the positives more than outpaced the negatives.
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Until the 1980′s the United States had a Federal Reserve that one might argue considered itself a steward of a more honest (though totally paper-based) monetary system.
Courtesy SlopeCharts
The huge spike in interest rates in 1980 was due to the Volcker Fed’s apparent intention to pop the bubble in inflation angst and as a by-product, the gold bubble as the post-Bretton Woods US dollar came under the pressure of inflation, which is all too easy to promote in a paper based system not backed by any asset of actual value other than the moving target known as ‘confidence’.
That spike in interest rates loaded the gun for Alan Greenspan and an era of monetary wizardry that continues to this day. I often bemoan Grandma’s savings account at the local bank paying 0% due to the Bernanke Fed’s current and ongoing ZIRP policy.
If Grandma wants return these days, she’s got to jump into the risk pool. It’s as simple as that. Risk-free return is a thing of the past now that T Bills have been pinned to the mat for over 5 years now. More than that, the trend in ‘Fed Funds’ has been down for decades as the trend in risk taking has gone orbital. The S&P 500 shown above is just one asset market that has responded I assume, as intended.
How many Grandmas are being put into junk bonds, chasing return and risk ever higher? Do you think some conventional advisers may have a percentage of allocation to these potential weapons of portfolio destruction? What is a conservative asset allocation these days?  30% US & Global Stocks, 20% T bonds, 10% ‘High Yield’ [junk], 30% Investment Grade and/or CDs, Annuities and 10% Commodity, Resource and Precious Metal?
