yada yada

The Meaning of Risk: A Proprietary Index for Current Times

On Sep 29 10:33 AM chap08 wrote:

> I agree. But if you think cash is risky, how about Tbonds?

to me, no difference between Tbonds and cash in terms of risk. the ultimate cash risk is a government default, which seems inevitable to me, though i can't say whether that is this month or 10 years down the road. if i could, it would feel a lot less risky...

see also this interview with marc faber: seekingalpha.com/artic...

The Meaning of Risk: A Proprietary Index for Current Times

i think that in the current environment, the concept of "risk" requires a complete re-definition that takes into account the fact that currency, the "asset" that "risk" is conventionally baselined against with a nominal risk of zero, is no longer being seen or treated as such.

in the current global economic environment, fiat currency has become just another asset, and the value of currency itself is clearly "at risk" and being treated by many as a potentially risky asset.

in the past, you could talk about the purchase of equities as a "risk-taking" activity. implicit in that description is the idea that leaving capital in currency/cash was the "risk-free" alternative to the more risky purchase of equities. and all kinds of measures of risk and strategies to mitigate risk have evolved, all based on the implicit or explicit assumption that cash has a risk of zero.

i don't know about you, but i am currently just as concerned about my cash position as i am about any of my equity, commodity, or real estate investments. to me, the cash feels every bit as risky as the equity investments. i doubt that i am alone in this, and i think that a lot of recent divergences in correlations that have held over time is at least partly due to this phenomenon of risk being re-defined, whether explicitly or implicitly.