Deep Thoughts

We believed from the start that this market rally and any outperformance of risk would have very little to do with any dividend discount model concept of value, so it is pointless to “ooh and ah” too much at how far and how fast it has traveled. The lessons, if any, are that low rates and generous liquidity are, if anything, a little more powerful than we thought, which is a high hurdle because we have respected their power for years. And what we thought were powerful and painful investment lessons on the dangers of taking risk too casually turned out to be less memorable than we expected. Risk-taking has come roaring back. Value, it must be admitted, is seldom a powerful force in the short term. The Fed’s weapons of low rates, plenty of money, and the promise of future help if necessary seem stronger than value over a few quarters. And the forces of herding and momentum are also helping to push prices up, with the market apparently quite unrepentant of recent crimes and willing to be silly once again. We said in July that we would sit and wait for the market to be silly again. This has been a very quick response although, as real silliness goes, I suppose it is not really trying yet. In soccer terminology, for the last six months it is Voting Machine 10, Weighing Machine nil!

Price, however, does matter eventually, and what will stop this market (my blind guess is in the first few months of next year) is a combination of two factors. First, the disappointing economic and financial data that will begin to show the intractably long-term nature of some of our problems, particularly pressure on profit margins as the quick fi x of short-term labor cuts fades away. Second, the slow gravitational pull of value as U.S. stocks reach +30-35% overpricing in the face of an extended difficult environment.

After being discredited for being a bull market, pro-cyclical permabull, whose "stellar" performance was only courtesy of a multi-decade credit bubble, Bill Miller shares his latest thoughts. Also, nothing like one permabull quoting another permabull to bloster his case.

As we sit at our desks pondering the myriad questions we’re faced with as investors, questions of great complexity, and ones of undeniable importance to our future well-being, it probably makes sense to get up and go outside, where the view is likely to be different, and clearer, and better." Bill Miller

We agree- what one will find is 17% real unemployment, empty storefronts, Fed owned malls that are deserted, ammo shortages, collapsing CRE rents, tens of thousands of formerly unemployed Wall Streets trying to find a job... and that's not even walking too far past one's block

The man who made billions shorting subprime shares his latest observations.

It's funny cause it's so not true true

Deep thoughts from one of the premier financial thinkers of our generation (700 pages worth in fact) and a recent recipient of $1 billion worth of generosity from CIC.

With Leucadia coming boldly from behind the shadows, where Ian Cumming and Joe Steinberg have always enjoyed operating, and joining Buffett in a deal over Capmark's loan-servicing and mortgage business, it makes sense to introduce readers with some of the very original thinking of the Leucadia founders (and very close friends of the mellifluously named Dick Handler). We present their most recent annual investor letter, which frequently is cited as among the best hedge fund (even though they don't like to be seen as one) strategy reading material.

The big brain from RBS chimes in with highly abbreviated yet quite insightful perspectives once again

CG: Hey Zero Intelligence whatchu got?

ZI: What I got is GE is in discussions to swap out its equity stake in CNBC with a 100% investment in Wall Street Pro.

Third "must read" in a row. Now if only Howard could practice just as phenomenally as he preaches...

Straight from the CIO of TCW

Gundlach June 15 -

hat tip Stephen

The English Grammar Standards Association is spinning in its grave with a Formula 1-esque RPM with each of these missives (don't run a spell checker on this - it will fry your computer), however that can not take away from the profound insight that Bob provides.

pardon the horrendous spelling... but focus on the ideas. Bob is a smart man, even if he was a little overcaffeinated on this particular occasion.

Bob's World: Mini-May turn?
05/13 10:59:08

Turning to mrkts, some moans 1st:

Grantham rides the moral hazard wave to new peaks. Complete with some amusing probability scenarios

Another fund manager whose investment decisions we respect, absent his occasional entanglements in groupthink short squeezes.

Greenlight_Capital_-_Q1_2009 - Free Legal Forms

Hat tip KGB 666

Third Point Q109 letter - Free Legal Forms

Hat Tip Hairy Palmed, Momentum Chasing, Program Trader