TINA rules, OK! The prince said so. TINA is not a person, or even a virtual
person on some stupid-but-addictive computer game. TINA is an acronym,
increasingly prevalent in discussions about investing and the financial markets.
It stands for There Is No Alternative.
The supposedly overwhelming,
unanswerable, logic behind TINA goes something like this. The world is in the
grip of a new economic/monetary doctrine, widely called QE for short, in which
major central banks engage in very, VERY expansionary monetary policies. These
policies ensure that short-term interest rates remain at or near zero and that
long-term rates, too, are very low by historic standards.
The goal of
these policies is to stimulate consumption and/or investment (depending on which
economy we are talking about) and thereby restore national and global economies
to a healthy, or at least healthier, state.
The flood of liquidity
emanating from the central banks and the maintenance of very low interest rates
for a period of several years has had an enormous impact on the financial
markets. The easy availability of credit has allowed and encouraged –
effectively obliged – speculators to use it to bid up the prices of assets.
Financial asset prices – especially equities, but before that commodities and
bonds – have soared. So have real-estate values and those other assets most
readily available to wealthy individuals or institutions – collectibles such as
works of art, rare items, etc.
It is now widely accepted and fairly
easily demonstrated that the prices of many of these assets – from impressionist
paintings, to houses in central London, to shares in Twitter and to Bitcoins –
have detached from any standard valuation concepts. In plain language, these
asset prices are in bubbles. Indeed, some analysts have noted that we have “a
bubble of bubbles.”
However, when the promoters or buyers of these
overpriced assets are challenged as to the desirability of paying current
prices, and the feasibility of these prices being maintained, let alone
exceeded, their answers – whether long or short, sophisticated or crude – can be
summed up in one word: TINA .
What are potential investors supposed to
do, in a world in which banks offer almost nothing on deposits and are now
openly discussing charging depositors, rather than paying them; in which cash is
trash and even “solid” assets, such as government bonds, generate virtually no
income? There is no apparent alternative to investing in the various markets –
financial, real, collectibles, whatever.
The TINA response deals with
follow-up questions as well. Is this behavior not dangerous, even reckless? No,
because in a TINA world, everyone must act this way, so that speculation is the
new investment, recklessness the new prudence – and the devil take the hindmost.
Those who understood the new rules several years ago have waxed fat, but now is
not yet too late. The reason it is not too late, to answer another follow-up
question, is that the central banks will not – cannot – desist from their
expansionary policies. If they talk about doing so, let alone actually act, they
trigger a collapse, which forces them to reverse course and resume printing
Many people, from pensioners whose income streams from their
investments have dried up, to pension funds facing the same problem with regard
to their future income streams, have surrendered to the TINA
The relevant dictum here is “you can’t fight the Fed” (and
all the other central banks).
The result is the investment world of 2013:
Regular bonds have fallen out of favor, but high-yield bonds (called, in an
earlier and less phony era, junk bonds) are very much in demand. Shares
generally have been strong, but technology companies and small-cap stocks, which
sport much higher risk profiles, are leading the surge. Residential real estate
is hot, even in places that recently saw spectacular collapses – such as Las
Vegas – because the returns to be made from renting are so much better than from
other “safe” investments. Somehow, incredibly, the snake-oil salesmen are able
to rebrand and peddle the old poison that “real-estate prices only go
All these trends are massively enhanced by the use of borrowed
money, because credit is so cheap and plentiful. Everywhere, risk in general and
the exceptionally high levels of risk in many of the areas mentioned above is
ignored or pooh-poohed. The longer the process goes on, the more confident most
people become about it and the more convinced they are that it can, must,
continue. TINA does indeed rule.
Everyone in investments knows the now
legendary quote from Chuck Prince, the boss of Citibank in the run-up to the
2007-09 crash: “As long as the music is playing, you’ve got to get up and
dance.” He actually said it, on July 9, 2007, to the Financial Times, by way of
“explanation” of his bank’s continued involvement in areas of finance that were
inherently toxic – as he and the world were to discover within weeks and even
So there you have it. You have to get up and dance with TINA . Or