Genevieve Roch-Decter: "those stimmies weren't free and the bill is coming due"

Pandemic led to lockdowns.  Lockdowns led to stimmies.  Stimmies led to inflated asset prices.  Inflated asset prices led to irrational exuberance.  Irrational exuberance leads to stock market crashes. 

Those stimmies weren't free and the bill is coming due. 

~ Genevieve Roch-Decter, tweet, September 28, 2022

President Biden brags about stock market hitting record highs (2022)

The stock market—the last guy's measure of everything—is about 20% higher than it was when my predecessor was there.  It has hit record after record after record on my watch, while making things more equitable for working class people.

~ President Joe Biden, January 7, 2022

(Video tweeted by ABC News on that day.)

Tom Woods on the Nord Stream 2 pipeline attack

Our ruling class will not stop making catastrophic decisions.  Destroying society over Covid is now no longer their primary idiocy.  Now it's risking nuclear war, without so much as a thought of negotiation or diplomacy, as normal people would be pursuing right now. 

I agree with Dr. Pierre Kory from episode #2209 of the Tom Woods Show: I am not jumping on any bandwagon, or putting some mob-demanded emoji on my social media, ever, unless I have thoroughly investigated the situation and decided it is not yet another psyop being played on me by psychotics. 

So now we've learned of a terrorist attack, almost surely state-led, on the Nord Stream pipelines. 

Our CIA-run newspapers (no, they aren't literally run by the CIA, but if they were, how would they be any different?) of course rushed to blame the pipeline destruction on Russia, which has precisely zero motivation to do such a thing.  If they wanted to impede the movement of natural gas from Russia to other European countries, couldn't they just turn the pipelines off rather than destroy a $20 billion project? 

Meanwhile, we have footage of Joe Biden and creepy Victoria Nuland -- Under Secretary of State for Political Affairs, an unnecessary office if there ever was one -- assuring the world at the beginning of 2022 that if Russia were to invade Ukraine, one way or another Nord Stream 2 would not go forward. 

For that matter, Der Spiegel ran this headline: "CIA warns German government against attack on Baltic Sea pipelines."  And Radek Sikorski, a member of the European Parliament who chairs the delegation that deals with relations with the United States, responded to the news of the pipeline blowing up by saying: "Thank you, USA." (At the same time, the Ron Paul Institute's Daniel McAdams notes that Sikorski could be distracting attention from the actions of his own government.) 

Do we know for certain what happened? Of course not. But we know this: it's now far easier to keep European countries in line that might otherwise have broken ranks to seek energy supplies in the face of the extremely challenging winter that's on the horizon.

~ Tom Woods, September 28, 2022

James Freeman on poor performance at Calpers due to political activism

There is no such thing as a free lunch.  Activists who think they can use public companies to pursue political agendas without endangering shareholder returns are indulging in a fantasy.  Disappointing results at a giant government pension fund cannot all be tied to political agendas, but the retired workers who rely on Calpers have every right to demand that fund managers adopt a singular focus on maximizing returns. 

[...]

Let’s hope Calpers finally gets it, and a good fresh start would include a determination to urge portfolio companies to simply pursue profits, not politics.  For years, the big fund has been fairly active in pursuing the latter, despite early red flags.

~ James Freeman, "An ESG Champion Stumbles," WSJ, September 28, 2022

Benjamin on stock market forecasts

If I have noticed anything over these past 60 years on Wall Street, it is that people do not succeed in forecasting what's going to happen in the stock market.

~ Benjamin Graham

Peter Thiel endorses Alex Epstein's book 'Fossil Future'

The climate debate ignores the reasons we burn fossil fuels in the first place.  Alex Epstein reminds us that rich countries may be able to treat green lifestyles as luxury fashion, but for much of the world reliable energy is a matter of life and death.

~ Peter Thiel

Doug Pollitt on gold, Powell and Pacino

We didn’t go to Denver this year, which was apparently all about copper anyway.  That and battery metals.  Gold’s not selling, so dance as dance can. 

Turns out, nothing is selling, not copper nor battery metals nor any other commodity.  Nor, for that matter, equities in general.  Critically, even “risk-off” assets also look askance for bids.  The mood in Denver was grim but if you really wanted to feel what it was like to have your face ripped off you might have attended a convention of UK 2-yr gilt holders.  The WSJ front page thundered: “Gold losing its safe haven status”; it could have been far more broad-minded without any loss of accuracy. 

The driver in all this is a Fed trying to fix four decades of monetary profligacy within a forecastable time frame, presumably before the Chairman’s tenure is up.  Listening to Powell last week you got the sense that he feels that he and only he can solve this problem and that if he doesn’t, our economic future totters on the wrong side of the abyss.  Accordingly, “[W]e shall fight on the seas and oceans, we shall fight with growing confidence and growing strength in the air, we shall defend our island, whatever the cost may be.”

The problem is that Powell has neither air force nor army. Instead, he has a single policy tool, a blunt instrument that, historically, has been effective only in places. For example, it is easy to see that Europe could raise rates to 20% and the price of gas still would not be affordable. Higher rates are also likely to increase the cost of some things. It’s not straightforward. Powell may fancy himself a Churchillian figure but a better image may be Al Pacino in the final scene of Scarface, spraying his machine gun in front of a giant pile of cocaine.

~ Doug Pollitt, "Powell's quick fix," September 27, 2022

Warren Buffett on leverage

Having a large amount of leverage is like driving a car with a dagger on the steering wheel pointed at your heart.  If you do that, you will be a better driver.  There will be fewer accidents, but when they happen, they will be fatal.

~ Warren Buffett

Jordan Peterson on the collision course between saving the planet and war with Russia

We can't win against Putin anyways because you cannot win against someone you cannot say "no" to.  Period.  And we can't say no to Putin because we sold our soul for his oil and gas.  And we did that to elevate our moral stature in relationship to saving the planet.  And so here we are, facing a very dire winter hoisted on the petard of our own foolishness and moral presumption.  We're saving the planet.  We'll see.  I don't think so.  It doesn't look like it to me and this is the most catastrophic issue here: Assuming that we're facing an environmental crisis of planetary proportions, which is not something I buy, by the way.  Assuming we are, well then I would imagine that you would put in place measures that would ameliorate that problem instead of exacerbating it, but all the measures you're putting in place are actually making the environmental problem worse.  So how is that even vaguely acceptable?  And I look at that and think, "oh, I see, it's just like what Goerge Orwell said about middle class socialists fifty years ago: it's not that you love the planet, it's that you hate humanity."  

So, well, have at her, boys and girls.  And we'll see what happens this winter, and it's very terrifying to me.  Especially here because your energy prices have gone way out of control, and that's going to hurt a lot of poor people.  And certainly around the world as well.  The World Bank already estimated that we put 350 million people into what they call "food insecurity."  350 million.  That's three times as many as the communists managed to kill.  Maybe we can manage that in a winter.  But the planet has too many people on it anyways, you know, so just poor people.

~ Jordan Peterson, interview with Piers Morgan, Sky News Australia, 5:05 mark, September 22, 2022

Robert Murphy on admitting that the people you hate sometimes say true things

If you allow yourself to admit that the people you hate sometimes say true things, it's extremely liberating and keeps you from painting yourself into a corner.

~ Robert P. Murphy, tweet, September 24, 2022

Lao Tzu on those who glorify war

How could a decent person ever rejoice in victory and delight in the slaughter of men?

~ Lao Tzu

Howard Marks on risk taking

There are old investors and there are bold investors, but there are no old bold investors.

~ Howard Marks

Jeffrey Tucker on Trump's legacy of lockdowns

I'm getting a sense that people are finally realizing the unbearably obvious: it was Trump who approved the lockdowns that kicked off all this wreckage.  It's a tragic tale but it's reality.

~ Jeffrey Tucker, tweet, September 23, 2022

Warren Buffett on portfolio concentration

We believe that a policy of portfolio concentration may well decrease risk if it raises, as it should, both the intensity with which an investor thinks about a business and the comfort-level he must feel with its economic characteristics before buying into it.

~ Warren Buffett

George Soros on mistakes

To others, being wrong is a source of shame; to me, recognizing my mistakes is a source of pride.  Once we realize that imperfect understanding is the human condition, there is no shame in being wrong, only in failing to correct our mistakes.

~ George Soros

Peter Darland on the traits of an outstanding investor

This message is 'love it or leave it,' but how can a young person with no experience of investing know in advance how much he will like it?  Here are some of the qualities which an outstanding practitioner of the art of investment is likely to have:

• an insatiable curiosity as to everthing that is going on in the world.
• a capacity to assess people, because businesses are mainly about the people who run them; a sense for psychology will be useful too.
• an awareness of the constant need to question conventional wisdom and a healthy scepticism about what he hears from company spokesmen, stockbrokers and research analysts.
• the ability to accept losses and move on, combined with the patience to stay with winning investments indefinitely.
• a calm temperament - investment can be humbling and stressful.
• common sense.
• intuition.
• a sense of humour - it will be necessary for survival.
• an acquisitive instinct - materialistic as it may sound, the desire to make money for oneself through investing is essential.

If a young person feels he has most of these qualities in good measure, he should try investment management.  He will be endlessly absorbed by it, he will enjoy it and he may even make some money.

~ Peter Stormonth Darling, City Cinderella: The Life and Times of Mercury Asset Management (2000)

(Thanks to Chris Mayer for tweeting this page.)

Nassim Taleb on ZIRP: "we've had 15 years of Disneyland"

I think that we've had 15 years, 14 1/2 years of Disneyland that basically has destroyed the economic structure.  Think about it, no interest rates.  So anyone who's, say, 40 years old, has no experience in markets.  Zero.  They don't know what time value of money is.

[...]

So that generation of people who have the wrong instinct, they have the wrong methods, those who made a lot of money during that period are basically the least fit for real markets.

~ Nassim Taleb, CNBC interview with Andrew Ross Sorkin, 0;15 and 3:00 mark, September 15, 2022

Joel Litman on confirmation bias in the media

In many cases I think the media, they come up with a narrative and then they find the data to support it. It's the opposite of the scientific method. 

~ Joel Litman, "A 'Not-So Secret Weapon' in Finance," Stansberry Investor Hour, 30:35 mark, September 19, 2022

Dan Ferris: "the market is sadastic"

The market is sadastic and it will act, especially in a bear market..., in such a way as to harm the greatest number of people.

~ Dan Ferris, "A 'Not-So Secret Weapon' in Finance," Stansberry Investor Hour, 7:35 mark, September 19, 2022

WSJ: earnings are inflated by energy and commodities

Soaring profits at oil companies and miners are making earnings look better than the reality of the rest of the stock market, and distorting Wall Street’s favorite valuation tool, the ratio of price to forecast earnings. 

Strip out the energy sector and the expected rise in earnings for the S&P 500 this year drops from 8% to just over 1%, according to data from Refinitiv’s IBES. Strip out miners and other commodity players, too, and earnings for the rest of the market are now expected to fall this year.

~ James Mackintosh, "Energy and Mining Are Making the Stock Market Look Too Good," The Wall Street Journal, September 18, 2022

Kevin Duffy on macro forecasting

We should be grateful the Buffett faithful reject macro forecasting.  This is just one of many tools in our toolbox.  Like all tools in the investing game, it works best when others fail to see its worth.

~ Kevin Duffy, "In Defense of Macro Forecasting," The Coffee Can Portfolio, September 18, 2022

Kevin Duffy on the trend towards big government

To keep the game going, the political class has increasingly relied on borrowing, inflation and diversions like victimology, Covid and climate change.  “War is the health of the state” needs updating.  The modern state has evolved, learning the lesson that any conflict feeds the Leviathan.  Conflict is not limited to “us vs. them” and “good vs. evil,” but left vs. right, black vs. white, male vs. female, straight vs. LGBTQ, rich vs. poor, entrepreneurs vs. employees, young vs. old and even man vs. the planet.  Wars have morphed into abstractions, e.g. war on poverty, war on drugs, war on terrorism and now a war on a virus.  The justifications for protecting party A against the predations of party B are endless.

~ Kevin Duffy, "Inflection Points: Where the big money is made," The Coffee Can Portfolio, September 18, 2022

Kevin Duffy on the 2000 and 2022 tech busts

The great tech bust of 2000-02 could not take place if not for the boom that preceded it. And quite a boom it was.  As Grant’s Interest Rate Observer reports, U.S. venture capital investment doubled in 1999 and then again in 2000 to a record of roughly $125 billion (1.2% of GDP).  By comparison, the 2021 vintage doubled from 2020 to $342 billion (1.4% of GDP); worldwide figures were twice as large: $643 billion. 

The initial casualties, in both cases, were money-losing tech companies (ARKK is our present-day proxy). Both busts were sharp and unequivocal.  Both times investors early on failed to connect the dots to the suppliers of uneconomic ventures.

~ Kevin Duffy, "Summer of 2000: Déjà vu all over again," The Coffee Can Portfolio, September 18, 2022

Rob Bradley on climate change

Adaptation yes; mitigation futile.  Protecting against bad weather is good, always good.

~ Robert L. Bradley, Jr., LinkedIn comment, September 19, 2022

Dan Niles on how big internet companies will not be able to avoid recession

If you look at '08-'09, advertising revenues went down 20%.  The internet, though, was only about 12% of total advertising dollars in '08-'09.  Now it's 66%, or two-thirds of the market.  So big ad-supported internet companies are not going to be able to avoid a recession.  They're going to see their businesses get hit pretty hard.

~ Dan Niles, CNBC interview, 3:00 mark, September 13, 2022

Pascal Canfin on EU's energy and Russia strategy

Our strategy is working, and that's very good news.  First leg: economic sanctions.  The economic impact on Russia is much worse than the impact of the sanctions on energy, on our own economy.  It's not perfect on us... but the situation in Russia is much worse than that...  Second leg: military.  Of course, support to Ukraine.  And it works...  But of course it has impact on us as well and we knew that from the very beginning...

[...]

For peak hours, it's putting the pressure on households - not with a policeman in their bedroom, of course -  but putting the pressure on households collectively, saying, "ok, if you have to put your washing machine on, then do it at 5 AM and not at 7, or not at 8 PM..."  Second, we need to cap the revenues - and that's a taxation issue - we need to cap the revenues of electricity and oil and gas companies...  Cap revenue on electricity generation companies in order to get the rents to the member states so that we can invest in solidarity to handle the social consequences and to invest in green energies.  Plus, let's say call it tax, it's one of levy on oil excess profits...  We are in an exceptional situation.  They have excess profits...  We cannot keep that rent untouched.  We will get it, part of it..., and it will be redistributed both on social aspects... and to invest in green technology...

[...]

[The Green Deal] is more than ever alive and more than ever the solution and not the problem.  More renewables means less dependence from Russia, mean less emission.  More efficiency, more investment in green technologies.  All of that is good for the climate, it's good for the Green Deal, it's good for independence from a political point of view.

~ Pascal Canfin, European Parliament Member, Bloomberg TV interview, September 14, 2022

Warren Buffett on analyzing businesses

A business should be viewed as an unfolding movie, not as a still photograph.

~ Warren Buffett

Jim Grant on the risk of monetary deflation

Von Mises said that deflation can never undo the harm that inflation causes, and he warned central bankers against imitating the motorist who, after running over a pedestrian, stops his car, throws it into reverse and backs it up over the same hapless victim.  Whether Jay Powell has the stomach for that second sickening bump remains to be seen.

~ Jim Grant, "The CDC at Jackson Hole," Grant's Interest Rate Observer, September 2, 2022

Susan Barnes on subprime stresses being contained (2007)

Due to minor home price declines in 2007, we expect losses and negative rating actions to keep increasing in the near term relative to previous years.  However, as long as interest rates and unemployment remain at historical lows and income growth continues to be positive, we believe there is sufficient protection for the majority of investment grade bonds.  As of April 12, 2007, only 0.3 percent of the outstanding subprime ratings issued in 2006 have been downgraded or placed on Creditwatch.

[...]

Let me conclude by stating S&P does not anticipate pervasive negative rating actions on financial institutions due to rising credit stresses in the subprime mortgage sector since the majority of rated financial institutions have diversified assets and mortgage lending and servicing operations aligned with strong interest rate and credit risk management oversight. Specialty finance companies that focus solely on the subprime market, however, do not enjoy the same protection and have felt the effects of the current subprime credit stresses.

~ Susan Barnes, managing director, Standard & Poor's Ratings Services, hearing before the Committee on Banking, Housing, and Urban Affairs, United States Senate, April 17, 2007

Frederic Mishkin: exposure of banks to subprime losses minimal (2007)

Moreover, because most sub-prime mortgages are securitized, the risks associated with these loans are spread widely.  Bank and thrift institutions that hold these mortgages are well-capitalized and exposure of individual banks to possible sub-prime losses do not appear to be large.

~ Frederic Mishkin, Fed vice-chair, April 20, 2007

President Biden on U.S. withdrawal from Afghanistan

We no longer had a clear purpose in an open-ended mission in Afghanistan.  After more than $2 trillion spent in Afghanistan, costs that Brown University researchers estimated would be over $300 million a day for 20 years — yes, the American people should hear this... what have we lost as a consequence, in terms of opportunities? ...I refuse to send America’s sons and daughters to fight a war that should have ended long ago.

~ President Joe Biden, August 31, 2021

(as quoted by Jill Kimball, "Costs of the 20-year war on terror: $8 trillion and 900,000 deaths," Brown University, September 1, 2021)

Murray Rothbard on the upward march of human progress

[H]istorians of economic thought, similar to historians of other disciplines, have habitually treated the development of science as a linear and upward march into the truth.  Each scientist patiently formulates, tests and discards hypotheses, and thereby each succeeding one stands on the shoulders of the one who came before.  What might be called this 'Whig theory of the history of science' has now been largely discarded for the far more realistic Kuhnian theory of paradigms.  For our purposes the important point of the Kuhn theory is that a very few people patiently test anything, particularly the fundamental assumptions, or basic 'paradigm,' or their theory: and shifts in paradigms can take place even when the new theory is worse than the old.  In short, knowledge can be and is lost as well as gained, and science often proceeds in a zig-zag rather than linear manner.  We might add that this is particularly true in the social or humane sciences.  As a result, paradigms and basic truths get lost, and economists (as well as people in other disciplines) can get worse, and not better, over time.  The years may well bring retrogression as well as progress.

~ Murrary Rothbard, Economic Thought Before Adam Smith: An Austrian Perspective on the History of Economic Thought, Volume I, "The celebrated Adam Smith," p. 438

Hans Hermann-Hoppe on the myth of the "noble savage"

In the literature, primitive man has been frequently described as peaceful and living in harmony with nature.  Most popular in this regard is Rousseau's portrayal of the "noble savage."  Aggression and war, it has been frequently held, were the result of civilization built upon the institution of private property.  In fact, matters are almost exactly the reverse.  True, the savagery of modern wars has produced unparelled carnage.  Both World War I and World War II, for instance, resulted in tens of millions of deaths and left entire countries in ruins.  And yet, as anthropological evidence has in the meantime made abundantly clear, primitive man has been considerably more warlike than contemporary man.  It has been estimated that on the average some 30 percent of all males in primitive, hunter-gatherer societies died from unnatural - violent - causes, far exceeding anything experienced in this regard in modern societies...  Of course, primitive warfare was very different from modern warfare.  It was not conducted by regular troops on battlefields, but by raids, ambushes, and surprise attacks.  However, every attack was characterized by utmost brutalilty, carried out without mercy and always with deadly results; and while the number of people killed in each attack might have been small, the incessant nature of these aggressive encounters made violent death an ever-present danger for  every man (and abduction and rape for every woman).

~ Hans Hermann-Hoppe, A Short History of Man: Progress and Decline, pp. 27-28

President Biden signs CHIPS Act into law

For all the division in our country, we are showing ourselves and the world that we can take on the biggest challenges.  We can take on the special interests.  And that our democracy can deliver for the people of this country.  That's why I'm confident that decades from now people are going to look back at this week with all we passed and all we moved on, that we met the moment at this inflection point in history.  A moment when we bet on ourselves, believed in ourselves and recaptured the story, the spirit and the soul of this nation.  We are the United States of America, a singular place of possibilities.  I'm now going to sign the CHIPS and Science Act and once again, I promise you, we're leading the world again for the next decades.

~ President Joe Biden, "Biden to take victory lap in Ohio after passage of CHIPS Act," Yahoo Finance, September 8, 2022

Rick Rieder on Fed credibility in fighting inflation

I think the Fed deserves an awful lot of credit.  Listen, there was enough criticism to go around, myself included, that last year they waited on QE.  I think that's been well chronicled.  This year, they cannot be any more clear.  They cannot be more strident in inflation is what they're doing and they're not going to back off that.  I think they're going to get the funds rate to 3 3/4, 4% and then I think they're going to let long and variable lags in monetary policy do their thing, so they're pretty clear.  So I think there's a credibility from the Fed that you've got to applaud.

~ Rick Rieder, Head of Global Allocation Investment Team at BlackRock, Bloomberg TV, September 9, 2022

Queen Elizabeth II on work ethic

Work is the rent you pay for the room you occupy on earth.

~ Queen Elizabeth II, 1926-2022

Queen Elizabeth II on independence

The world is not the most pleasant place.  Eventually, your parents leave you and nobody is going to go out of their way to protect you unconditionally.  You need to learn to stand up for yourself and what you believe and sometimes, pardon my language, kick some ass. 

~ Queen Elizabeth II

(According to snopes.com, this quote is misattributed.)

Queen Elizabeth II on humility

Let us not take ourselves too seriously.  None of us has a monopoly on wisdom.

~ Queen Elizabeth II

 

Whitney George on the impotence of the Fed's inflation-fighting tools

Today, the Fed is attempting to fight structural inflation over which it has no control.  It did not cause the reversal of China from a deflationary force to an inflationary contributor.  The Fed did not cause the political forces behind deglobalization.  And the Fed had nothing to do with decarbonization goals that have resulted in bad energy policies.  The recent historic 75 basis points rate hike and the next hikes that are expected is akin to administering electroshock therapy to a flu patient.

~ Whitney George, Sprott Focus Trust 2022 Semi-Annual Report, July 20, 2022

Jerome Powell on fighting inflation (2022)

My colleagues and I are strongly committed [to lowering inflation]...  We think we can avoid the kind of very high social costs that Paul Volcker and the Fed had to bring into play.

~ Fed chairman Jerome Powell, comments at a Cato Institute conference, September 8, 2022

Tom DiLorenzo on how William Graham Sumner warned of American imperialism in 1899

In 1899 the great libertarian scholar William Graham Sumner of Yale University delivered a speech in which he warned that the Spanish-American War was a crossing-the-Rubicon event in the nation’s history that had finally transformed the nation from a constitutional republic to an empire.  Empire was what the Pilgrims escaped from, and the American Revolution was fought against, for in an empire the average citizen is viewed by his rulers as nothing more than a tax slave and cannon fodder.  Americans would soon become, he warned, exactly what their country was founded to oppose. 

The speech was entitled “The Conquest of the United States by Spain” to denote the fact that the Spanish-American war, an imperialistic war of conquest, was no different from the types of aggressive wars that the old empires of Europe had been waging for centuries.  Having devoted his adult life to scholarly pursuits in the field of political economy (among others), William Graham Sumner was prescient in his predictions about what America would become once it embarked on the road to empire.

~ Tom DiLorenzo, "The Man Who Predicted (in 1899) What America Would Become," LewRockwell.com, October 10, 2013

Michael Senger on Xi Jinping's lockdowns

Mass lockdowns of entire countries as a technique for fighting disease sprung into the world’s consciousness on the order of Xi Jinping, general secretary of the Chinese Communist Party (CCP), who fomented a global propaganda offensive targeting Western governments and media.  Within weeks, the WHO, an organization that once devoted itself to fighting disease and which has sadly become a tool of Chinese foreign policy, promulgated lockdowns into global policy through a series of press conferences that showed a complete absence of analysis or logic. 

The world has been fighting a virus from China with a public health policy from China that transforms the world into China.  But if the national security community has noticed this bizarre development, they haven’t said so.  Instead, their preoccupation has remained largely unchanged since February 2020.

~ Michael P. Senger, "The Masked Ball of Cowardice," Tablet Magazine, August 21, 2021

The Wall Street Journal: speculative fervor is back

Individual investors have purchased an average of $1.35 billion a day of U.S. stocks and exchange-traded funds on a net basis so far this month, according to Vanda Research through Thursday.  That puts their purchases on pace for their highest monthly average since January, the month when the recent bull market peaked. 

The clamor is reminiscent of the speculative fervor that cascaded over markets in 2020 and 2021, when millions of Americans got hooked on trading stocks, options and cryptocurrencies.  Stuck at home during the Covid-19 pandemic and flush with stimulus checks, newbie traders banded together on online forums, pushing up shares of favorite stocks.  Some made small fortunes.  Others lost big.

~ Caitlin McCabe, "Meme-Stock Investors Are Back! Sort of, Anyway," The Wall Street Journal, August 13, 2022

Pink Floyd on time

Ticking away the moments that make up a dull day 

Fritter and waste the hours in an offhand way 

Kicking around on a piece of ground in your hometown 

Waiting for someone or something to show you the way 

Tired of lying in the sunshine, staying home to watch the rain 

You are young and life is long, and there is time to kill today 

And then one day you find ten years have got behind you 

No one told you when to run, you missed the starting gun

~ Pink Floyd, "Time," The Dark Side of the Moon (1973)

Jim Grant on time

I think Samuel Johnson said, "Reputation is the one thing that no man can give to himself."  I would say that time is something else that is not for sale.  You can't buy reputation, nor can you buy the heartbeats.  So as life goes on, you become to covet those heartbeats and husband them, and expend them in ways... rather more carefully than when you were known for throwing them around like confetti.  They are not.  

~ Jim Grant, interview with William Green, 1:48:10 mark, August 20, 2022

Jim Grant on writing

If it appears effortless, that's good.  That means the sweat was worth it.  But I assure you, there ain't no effortless in it.

~ Jim Grant, interview with William Green, mark, August 20, 2022

Jim Grant on Bitcoin: "It's simply crazy"

So if you're really a zealot on Bitcoin what you are saying is the world of technological innovation will never create something better.  It's simply crazy.  Bitcoin trades like a tech stock.  It is as vulnerable to disruption as any other tech stock.  Who's to say it's not the PalmPilot of cryptocurrencies?

~ Jim Grant, interview with William Green, 1:20:50 mark, August 20, 2022

Jim Grant on bond risks and the 60/40 portfolio

As the upside is limited, so are the risks great.  So bond selection is one of exclusion rather than of selection.  You approach it with the idea of avoiding risk.

So, what about Treasury securities?  They're characterized as super safe in The Wall Street Journal.  They have anchored most retirement portfolios for most of the past four decades.  How do you analyze that?  One way of looking at it is to observe that over the course of 150 years of the national history, bonds have tended - tended - to move over the course of decade-long cycles.  Interest rates will rise for 30, 40 years, and fall for 20, 30, 40 years, and so on, starting from the late 19th century to the present.  They have fallen for 40 years since 1981.  Now, it might be that that cycle has broken...  If indeed the cycle has ended and rates are going to go up, we are in a different investment world because bonds will not provide the hedge that they have against falling stock prices.

Just recollect that for everyone's investment memory really, when stocks got into a rough patch, you had some protection from falling interest rates and rising bond prices.  But if bond prices are falling and interest rates are rising, you are forever not getting a hedge, but rather a drag.  So the 60/40 portfolio or the 70/30 portfolio is not the thing for you.  Now this is still speculative, but I think that is likely to be the case and people ought to be alert to the idea that something new is in the offing.  And what the something might be is kind of in the womb of time, but we can guess a little bit about it.  It might be that... stocks are going to become more important after they reach a point at which they become truly cheap.  It might be that cash, for all the damage that inflation does to cash, that cash is going to be the thing, rather than long-dated bonds.  So one would have a 60/40 or a 70/30 portfolio, but the 30% or 40% portion would be in a near-cash thing.

~ Jim Grant, interview with William Green, 1:05:55 mark, August 20, 2022

Jim Grant on the everything bubble's malinvestments

I think the way to imagine this is to put ourselves in mind of the old college freshman fraternity initiation trick, and that is yanking a tablecloth out from under a set table of china, glassware and porcelain.  Now, if you go on WikiHow to investigate how to do this, WikiHow will advise, "Always try it with plastic cutlery and cups."  But notice the Fed has not got that option because the table is set proverbially and metaphorically... with the most brittle glassware and the most precious porcelain and bull market champagne flutes because of 12 years of suppressed interest rates which have fostered risk taking, which have brought forth into the world all these companies called unicorns because they come to market with a billion dollars and generate not much earnings.  So the world is full of uneconomic economic projects, fostered through financial stimulus, principally low interest rates, right?

So, what happens when you raise the rate of interest on companies that need to borrow just to stay alive?  Well, they can't stay alive, so they're cascading failures.  And companies supply those uneconomic things.  Think of craft beer makers that sold beer to WeWork in the day, right?  So there's a whole chain of economic activity that goes to support uneconomic activity.

So that's the metaphor for the yanking the tablecloth.

~ Jim Grant, interview with William Green, 58:15 mark, August 20, 2022