The Statens Pensjonsfond, Norway's sovereign wealth fund, combines the oil profits from its 2/3 stake in Statoil with an aggressive, 60% equities investment strategy.

The Pensjonsfund is massive, has a very long investment horizon and is actively managed.

Norway's Finance Ministry recently hired three well known professors to analyze the Pensjonsfond's stewardship of Norway's $525 billion. The results were surprising.

The Pensjonsfond

Norway has just 4.9 million people, which translates into Pensjonsfond assets of over $100,000 per person. Compare that to the pitiful $8,300 per person in Treasury IOUs held by the U.S.'s Social Security Ponzi scheme and you may want to move to Norway, the world's third happiest country (after neighbors Denmark and Finland).

(Click to enlarge)

The Rise of Sovereign Wealth

As a side note, Norway is not alone in running these huge sovereign wealth funds.

(Click to enlarge)

To

The stock market has a problem: It has underperformed long-term government bonds for 20 years.

Money you invested in the S&P 500 twenty years ago performed no better than long term government bonds, and you certainly would not have slept as well as a bond-holder.

click to enlarge images

The End for Bonds

Unfortunately, you cannot just dump your stocks and buy bonds, because the bond gravy train is skidding to a halt.

The Fed, which is short for the Federal Funds rate, is the rate at which banks lend money to each other overnight. The Fed is a barometer for interest rates in general, and it’s been falling for 20 years.

What happens when interest rates fall for 20 years? Two things:

1. Americans buy houses they can’t afford, precipitating a global financial crisis
2. The value of long term bonds increases for 20 years

A Short, Painless (Optional) Paragraph on