Sep 25, 2017

Woody Allen: "mankind faces a crossroads"

More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly.

~ Woody Allen

Sep 24, 2017

Mario Draghi: "We don't see systemic danger coming from bubbles." (2017)

We don't see systemic danger coming from bubbles.  If you look at the various markets - the stock market, the bond market - the prime commercial real estate is the only area where you actually see stretched valuations... We don't see the other component of a bubble which accompanied the crisis in the pre-crisis time, namely an increase in leverage.  We see that credit remains pretty subdued all across the board.

~ Mario Draghi, ECB press conference, September 7, 2017

Jim Grant on the great interest rate suppression experiment

An interest rate is a price.  Prices convey information.  Distorted prices convey misinformation.  Build a new factory?  Reckon the value of a future cash flow?  Deduce financial risk from a credit spread?  Manipulated rates give you the data you need to arrive at the wrong conclusion.

Like the flu, mispricing is communicable.  Like a sneeze, arbitrage transmits the disorder from one place, and one asset class, to the next.  Pygmy interest rates lead to tiny real-estate cap rates and towering equity P/E multiples.

~ Jim Grant, "Meet the Carrefour S.A. senior unsecured 1 3/4s of 2022," Grant's Interest Rate Observer, September 22, 2017

Sep 23, 2017

Christopher Ailman on the limits of diversification this cycle

For the past 30 to 40 years, the common wisdom has been that diversification reduces risk, and the main diversifying asset has been fixed income. With interest rates in the U.S. at 200-year lows and negative interest rates elsewhere in the world, you can’t say fixed income is a diversifier.

~ Christopher Ailman, chief investment officer of CalSTRS, "The Trendsetter: Christopher Ailman of CalSTRS," Barron's, September 23, 2017

Sep 22, 2017

Zachary Karabell thinks it is time to add risk

Risk. Mention the word, and many investment professionals pause. Traders, hedge funds, and a few quantitative firms and their algorithms may love risk. But these days, the preponderance of investors, advisors, strategists, and their clients—not to mention the individual investor—see risk as a negative to be avoided. And that is why, dear readers, it may be time to consider adding some to clients’ portfolios.

[...]

Given investors’ paltry appetite for anything that has a whiff of risk, and given how crowded the “safety” trade remains, it is an opportune time to consider investments that, relative to one’s current allocation, appear riskier.

~ "Investors Can Afford to Take on More Risk," Zachary Karabell, Barron's.com, September 18, 2017

Warren Buffett: "Being short America has been a loser's game."

It has been 241 years since Thomas Jefferson wrote the Declaration of Independence. Being short America has been a loser's game. I predict to you it will continue to be a loser's game.

~ Warren Buffett, "Warren Buffett predicts Dow will hit 1 million and that may actually be pessimistic," CNBC, September 21, 2017

Sep 21, 2017

Ron Paul on Alexander Hamilton

Hamilton is the architect of big government in America.

~ Ron Paul, from the forward to How Alexander Hamilton Screwed Up America, by Brion McClanahan