The Vicious CFA Circle

CFA (Chartered Financial Analyst) pension fund managers couldn’t understand why sub-prime paper offered a fifty basis point yield advantage over Treasury paper. They did know that they would be out of work if they failed to keep up with the short term paper benchmark yield. No question about that. The benchmark was up to its eyeballs in sub-prime paper.

So money managers swallowed their solemn fiduciary oaths and loaded up with worthless sub-prime paper. That’s how the pension funds demolished our lifetime savings.

Ten math guys invented sub-prime paper. Credit rating agencies couldn’t figure out what they were looking at so they rated this trash triple A. Securities regulators took a pass. Giant insurance companies abetted the fraud and raked in billions. Sub-prime paper destroyed the U.S. dollar and this in turn collapsed the entire world economy.

Pension funds are now running for cover into U.S. Long Treasury Bonds. But the Treasury Bond is denominated in U.S. dollars and the U.S. dollar is totally worthless as a result of the sub- prime paper debacle.

Why U.S. Treasuries? The CFA brain trust has nowhere left to run. Hoisted on its own petard. Should you be concerned? I believe so. The same credit rating agencies that once loved sub-prime paper will still attest to their unfailing affection for U.S. Treasury Securities. I’ve got a bridge …