Nov 27, 2018

Daniel Rasmussen on the three premises underlying the private equity bubble

There are three premises that underlie the private equity boom. First, the experts believe that PE firms make money by improving the companies they buy. Second, the experts believe that PE is less volatile and less risky than public equity. Third, the experts believe that PE will significantly outperform every other investment. There is near complete consensus on these three points among academics, investors, and PE firms.

Private equity assets today exceed $2 trillion, and PE firms have $700 billion of dry powder capital just sitting there, waiting to be invested. The market is so flooded with investors and valuations are so high that even the truest believers have not found a way to invest it. There is a huge amount of money betting that this consensus is right, and the voices arguing that the consensus is wrong are marginal relative to the chorus of those who agree.

~ Daniel Rasmussen, founder and portfolio manager at Verdad Advisers, "Private Equity: Overvalued and Overrated?," American Affairs, Spring 2018

Time magazine on the tendency of dictatorship to go to war

The dynamics of dictatorship are such that few who have studied Fascism and its leaders can envision sexless, restless, instinctive Adolf Hitler rounding out a mellow middle age in his mountain chalet at Berchtesgaden while a satisfied German people drink beer and sing folk songs. There is no guarantee that the have-not nations will go to sleep when they have taken what they now want from the haves. To those who watched the closing events of the year it seemed more than probable that the Man of 1938 may make 1939 a year to be remembered.

~ Time editors, "Adolph Hitler. Man of the Year, 1938," Time, January 2, 1939

Time magazine on the coming war in Europe (1939)

A generation ago western civilization had apparently outgrown the major evils of barbarism except for war between nations. The Russian Communist Revolution promoted the evil of class war. Hitler topped it by another, race war. Fascism and Communism both resurrected religious war. These multiple forms of barbarism gave shape in 1938 to an issue over which men may again, perhaps soon, shed blood: the issue of civilized liberty v. barbaric authoritarianism.

~ Time editors, "Adolph Hitler. Man of the Year, 1938," Time, January 2, 1939

Nov 26, 2018

Michael Santoli on $6.6 bil flowing into Fidelity's zero fee index funds (excluding ETFs)

Low-fee exposure to the equity market is the new performance chasing.

~ Michael Santoli, as appeared on CNBC, November 26, 2018

Nov 25, 2018

Martin Fridson: "you don't have the classic signs pointing to recession" (2018)

The key dynamic in the high-yield market is recession.  There's a possibility of some economic shock that isn't apparent right now, but you don't have the classic signs pointing to recession.

~ Martin Fridson, "Yes, Junk Bonds Are Pricey. But the End Isn't Near," Barron's, October 6, 2018

Nov 21, 2018

Hunter DeRensis on the choice between receiving Social Security checks and maintaining the American empire

When the world loses confidence in the American government’s ability to pay its debt, or the interest rate on our debt becomes unsustainably high, choices will have to be made. No more kicking the can down the road, no more 10-year projections to balance the budget. Congress, in a state of emergency, will have to take a buzzsaw to appropriations. And the empire will be the first thing to go.

Just like its warfare state, the government’s welfare state has plenty of internal calamities. But while it might be the preference of some megalomaniacal globalists to let the proles starve while preserving overseas holdings, it’s not going to happen. What would transpire if Social Security checks stopped showing up in mailboxes and Medicare benefits got cut off? When presented with that choice, will the average American choose his social safety net or continued funding for far-flung bases in Stuttgart, Okinawa, and Djibouti? Even the most militaristic congressperson will know which way to vote, lest they find a mob waiting outside their D.C. castles.

~ Hunter DeRensis, "The Coming Bankruptcy of the American Empire," The American Conservative, November 20, 2018

Larry Kudlow: no recession in sight (2018)

The basic economy has reawakened and it's gonna stay there.  I mean, I'm reading some of the weirdest stuff, how a recession is around the corner - nonsense.  My personal view, our administration’s view, the recession is so far in the distance you can’t see it.

~ Larry Kudlow, White House economic adviser, November 20, 2018

(The most recent Bloomberg survey of 45 economists showed the chance of a recession in the next 12 months at 15 percent.  The poll also showed expectations for growth this year to be 2.9 percent, before slowing to 2.7 percent next year and 2 percent in 2020.)

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Nov 19, 2018

Conference Board director: consumer confidence highest since fall of 2000

Consumer Confidence increased in October, following a modest gain in September, and remains at levels last seen in the fall of 2000 (September 2000, 142.5).

~ Lynn Franco, Conference Board Senior Director of Economic Indicators, October 30, 2018

NFIB President on small business: "Our members say that business is booming"

This is the longest streak of small business optimism in history, evidence that tax cuts and regulatory rollbacks are paying off for the economy as a whole. Our members say that business is booming and prospects continue to look bright.

~ Juanita D. Duggan, NFIB President and CEO, October 9, 2018

Jim Grant on passive investing

By definition, an index investor must be agnostic as to price and value – he takes the market for what it is, and what it appears to be (or has appeared to be).  A persistently rising market is a money machine.

~ Jim Grant, Grant’s Interest Rate Observer, November 2, 2018

Nov 17, 2018

Jim Cramer calls the top on NVIDIA

My dog is named Nvidia and he's about to hit an all-time high!!

~ Jim Cramer, CNBC tweet, June 1, 2018

Nov 14, 2018

Kevin Duffy on the anti-capitalist mentality

At the root of our problems is a lack of morality and critical thinking. We accept that coercion (i.e. government force) is the solution to all problems. Who pays for it? The "wealthy." We justify this theft (and abdication of our own responsibility) by dehumanizing those who, by hard work, risk taking, vision, resiliency and serving consumers (i.e. the rest of us) got rich. Then we attack the very system - the free market - that allowed this miracle to take place.

It's all very sick and contrary to our own self interest, of course, but most fail to see it that way. Instead, they swallow whole the pro-state propaganda that's been fed to them since birth by politicians, history teachers, mass media, and movie producers.

~ Kevin Duffy

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Nov 11, 2018

Warren Buffett on prudence

The less prudence with which others conduct their affairs, the greater the prudence with which we should conduct our own affairs.

~ Warren Buffett

Nov 7, 2018

Jeff Deist on the nasty 2018 midterm elections

By any objective measure, the ideological and policy disagreements between the national Democrat and Republican parties are not significant. Both accept the central tenets of domestic and foreign interventionism, both accept the federal government as the chief organizing principle for American society, and both view politics simply as a fight for control of state apparatus.

Similarly, differences between policies actually enacted by Mr. Trump and the existing Congress and those likely to have been enacted by Mrs. Clinton and the same Congress are fairly small. While Mr. Trump alarms the Left with his tone and tenor, his actual views on taxes, spending, debt, trade, guns, immigration (the "Muslim ban" was neither) and war (unfortunately his good campaign rhetoric is largely abandoned) plainly comport with the general thrust of Clinton's neo-liberalism. 

Today's ugly midterm elections are about style rather than substance, party rather than principle, and power rather than ideas. Americans do not much argue about whether we are governed by DC, and only slightly over how we are governed by DC. But we argue viciously about who governs us from DC. 

~ Jeff Deist, president, Ludwig von Mises Institute, November 6, 2018

Nov 6, 2018

Kevin Duffy on anarchy

Critics of anarchy have cause and effect backwards.  Government reflects the morality of the people. To the extent they advocate violence to solve problems, the state will exist and grow.  If they reject violence, the state will shrink.  If they reject violence entirely, the state will wither up and die.  Yet we are told that a society with such high moral standards would devolve into chaos.  Makes no sense.

~ Kevin Duffy, November 6, 2018

Adam Smith on the ingredients needed for prosperity

Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes and a tolerable administration of justice.

~ Adam Smith

Nov 1, 2018

Strategist Tom Lee sees the bull market resuming and possibly lasting decades (2018)

We believe the selloff is behind us, [and the bull market] could last to 2035... That’s going to coincide with millennials peaking.

~ Tom Lee, Fundstrat Global Advisors, "Market strategist urges aggressive buying, says bull market could last decades," MarketWatch.com, November 1, 2018