Christopher Mayer on seeing differences and similarities

When you see only differences or similarities, you get into trouble...

Professor [Irving J.] Lee taught: It is the mark of a mature mind to see both.  Aim to see similarities among things that are different and see differences where the unsophisticated see similarities.

~ Christopher Mayer, How Do You Know? (2018)

Howard Marks on financial market risks

I wouldn't describe it as urgent today.  The economy is still clipping along at a modest pace and likely to do so.  There has not been an economic boom, so I don't think there has to be an economic bust, and certainly not anytime soon.  So I'm not commenting so much on the fundamentals; I'm commenting on investor behavior and asset prices.

~ Howard Marks, Bloomberg interview, 3:30 mark, August 1, 2017

Kyle Bass on the Chinese economic model

[China's] economy has given them the confidence globally to be more geopolitically assertive in their dealings.  It's given their military the ability to be much more assertive in the South China Sea.  And it's given Xi [Jinping] an aura that he's made the west think that somehow his economic model is superior to that of western capitalism.  And it's all a facade.  The whole thing is a mirage.  The whole thing is made up with the printing press, keeping a closed capital account, and hoping the world doesn't notice it.

~ Kyle Bass, RealVision interview at the 6:15 mark, "China's Crisis and the Coming Global Recession," March 1, 2019

Kevin Duffy: "Warren Buffett is the ultimate crowded trade"

Warren Buffett is the ultimate crowded trade. Every finance major studies him and wants to emulate him.  So perhaps we should look at him as a contrary indicator:

• He doesn’t understand macroeconomics at a time when it really matters. Prepare for the bust phase of the business cycle.
• He hates gold (because he doesn’t understand economics). Own some gold as a hedge against systemic problems.
• He just lost over $4 bil last week on his 25% stake in Kraft Heinz. At the time of the merger in 2015 he said, “This is my kind of transaction, uniting two world class organizations and delivering shareholder value.” Instead, they brought in the financial engineers at 3G Capital and destroyed value. Millennial tastes are changing, but Buffett is stuck in a Cherry Coke time warp.
• He thinks he can cozy up to the political establishment. That worked in 2008, but it could very well fail during the next bear market.

Kevin Duffy on taxing the rich

Let's tax the rich! What a great idea!!! There is a downside, however...

First of all, the rich earned their money fairly by satisfying consumers better than the competition while keeping their costs down. Some, like Bill Gates, helped pioneer entire industries that transformed the economy (and fattened the government's coffers). All voluntary... win-win. If anyone gets rich by stealing, we have laws against theft. Enforce them.

To "tax the rich" you're basically saying, "we're going to knock on your door, put a gun to your head, and take your money." That's just great... what gives you the right? Envy? Insecurity? A lack of faith in freedom? A belief that the ends justify the means? Ignorance of the basic laws of economics? Besides the obvious violation of morality, there are plenty of practical reasons why we ought to leave the rich alone. 1) They have a high propensity to save and invest. Deferring consumption and deploying capital is what creates economic growth. 2) They've proven to be above-average stewards of capital. 3) The recipient of their largess - government - has proven to be below-average stewards of capital (putting it mildly). E.g., the waste in DC is off the charts and they’re $22T in hock. 4) They have a long-term horizon (vs. politicians who can't think past the next election.) 5) They have a high propensity towards charitable giving and they do it with purpose and efficiency (as opposed to the government). E.g., look at what the Gates Foundation has done to reduce disease and increase life expectancy in Africa.

There are three more reasons why we shouldn't tax the rich. 1) At some point they'll leave. (This is exactly what happened in Venezuela.) They have the means and in a digital economy, it's much easier to pick up and leave. 2) Taxing capital reduces competition and protects entrenched companies. 3) We will destroy our moral compass. Eating the productive will bring out the worst traits in humans.

~ Kevin Duffy, Facebook post, February 20, 2019

Simon Mikhailovich: "Wealth is created in spurts"

[Gold] is a means to an end.  Wealth is created in spurts.  Everybody thinks that you can invest and you can generate a certain return every year in the stock market over and over and over again.  And the last 35 years have taught people potentially this kind of lesson. But in reality if you look throughout history, wealth is usually created in bursts of time.

 ~ Simon Mikhailovich, lead manager of the Tocqueville Bullion Reserve, Grant's podcast, February 3, 2019

Lao Tzu on knowledge and wisdom

To attain knowledge, add things everyday. To attain wisdom, remove things every day.

~ Lao Tzu