Archive - Apr 2010 - Blog entry

Hands down, our favorite quote on investor’s lack of historical memory comes from Jeremy Grantham who said: “We will learn an enormous amount in the very short term, quite a bit in the medium term and absolutely nothing in the long term. That would be the historical precedent.” In this spirit, we highlight the lessons that should have been learned from the turmoil of 2008, complements of Seth Klarman. The excerpt below is from his annual letter. While most market participants have immediately forgotten these lessons, more prudent investors (who may still suffer from short term memory loss) should consider dusting this list off on an annual basis!

European pension funds hired more fund managers in 2009 than in the previous year to take advantage of bargains in crisis-hit asset classes, a study by Mercer said on Tuesday. And PE shop Candover, which has been slashing costs in the face of a cash shortage, is in talks with the Alberta Investment Management Company (Aimco). Despite the flows and deals, I doubt PE will stage a serious comeback.

Ponzi's are not just of Italian origin!

Goldman employees have incriminated the company in the quest for compensation, but I have the solution...

The ongoing Greek debt crisis has revived the old arguments that all national governments need monetary sovereignty. So, what if Greece had stayed with the Drachma, and never switched to the euro? Would this debt crisis be averted?

What's another $100b matter at this point?

Iraq will soon become the world’s largest oil exporter. The success of the recent oil auctions in Iraq is creating a windfall for American oil services companies. It will bring the most significant change to world trade patterns this century. Who knew it would take so long? There are major implications for the rest of us. (SLB), (BHI), (WFT), (HAL)

European central bankers and politicians have been as dumb as their American counterparts ...

Before I get pilloried for this article, just forget everything you believe about Goldman and their ethics and role in the economy because those mean nothing in this case. There is one issue and that is, within the facts set forth in the SEC complaint: What did Goldman do wrong? Here is a way to analyze it.

Notice how many central bankers, analysts, pundits, banks and politicians said the debt problem was not only contained to Greece, but was also solved and all should move on. Uh huh...
I believe what we are seeing is just the beginning, and what the world saw with the collapse of Lehman was simply a microcosm of what happens when actual sovereign states threaten to fail!

Not just Greece ...

Help those most in need
Yes, you read that correctly! Greece killed its own banks. You see, many knew as far back as January (if not last year) that Greece would have a significant problem floating its debt. As a safeguard, they had their banks purchase a large amount of their debt offerings which gave the perception of much stronger demand than what I believe was actually in the market. So, what happens when these relatively small banks gobble up all of this debt that is summarily downgraded 15 ways from Idaho.

Improving California state finances make its municipal bonds a “buy.” With California in the heat of primary elections, this is good news no one seems to want to talk about. Inconvenient ties to the “vampire squid.” With taxes about to skyrocket everywhere, tax free municipal bonds are about to become more valuable. What’s this movie, "Fight Club", all about, anyway? (VCV), (NCP), (NVX).

My thoughts on the Goldman hearings. Behind the circus show, there were important themes that need to be underscored.

I think he did.