• Gold Standard I...
    07/28/2015 - 04:17
    Greece has no future, so long as it clings to the euro. The dollar won't servce you much better. A drachma will only harm the Greek people. That leaves one other option.

Seth Klarman

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If The Fed Continues This, "There Won't Be Any Active Managers Left In 5 Years"





As the dash-for-trash continues in US equities, Neuberger Berman sums up the state of investing currently, "there has certainly been little reward for owning high-return, superior business models that are conservatively financed," as Bloomberg notes, Fed policy has had the “unintended consequence” of boosting the stocks of companies with heavy debt and little or no earnings. Typically after a recession, such companies lose out to firms that generate more cash and have better balance sheets; this time, no “Darwinian” shakeout happened and low-quality stocks ruled. Managers say they haven’t changed, the market has.

 
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2014 Year In Review (Part 2): Will 2015 Be The Year It All Comes Tumbling Down?





Despite the authorities' best efforts to keep everything orderly, we know how this global Game of Geopolitical Tetris ends: "Players lose a typical game of Tetris when they can no longer keep up with the increasing speed, and the Tetriminos stack up to the top of the playing field. This is commonly referred to as topping out."

"I’m tired of being outraged!"

 
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2014 Year In Review (Part 1): The Final Throes Of A Geopolitical Game Of Tetris





Every year, David Collum writes a detailed "Year in Review" synopsis full of keen perspective and plenty of wit. This year's is no exception. "I have not seen a year in which so many risks - some truly existential - piled up so quickly. Each risk has its own, often unknown, probability of morphing into a destructive force. It feels like we’re in the final throes of a geopolitical Game of Tetris as financial and political authorities race to place the pieces correctly. But the acceleration is palpable. The proximate trigger for pain and ultimately a collapse can be small, as anyone who’s ever stepped barefoot on a Lego knows..."

 
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10 Legendary Investment Rules From Legendary Investors





As an investor, it is simply your job to step away from your "emotions" for a moment and look objectively at the market around you. Is it currently dominated by "greed" or "fear?"  Your long-term returns will depend greatly not only on how you answer that question, but to manage the inherent risk.  “The investor’s chief problem – and even his worst enemy – is likely to be himself.” - Benjamin Graham

 
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James Montier: "Stocks Are Hideously Expensive" In "The First Central Bank Sponsored Bubble"





"The stock market just keeps zooming up. A low equity allocation must be hurting you now... For all purposes, this is a hideously expensive market. I don’t care if it’s a bubble or not. It’s too expensive, and I don’t need to own it. That is the problem. This is the first central bank sponsored near-bubble. There is just nowhere to hide... but... to think that central banks will always be there to bail out equity investors is incredibly dangerous."

 
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4 Years Later, Fed Critics Explain Why Central Planning Still Doesn't Work





On Nov. 15, 2010, a letter signed by academics, economists and money managers warned that the Federal Reserve's strategy of buying bonds and other securities to reduce interest rates risked "currency debasement and inflation" and could "distort financial markets." As Bloomberg reports, they also said it wouldn't achieve the Fed's objective of promoting employment. Four years later, many members of the group, which includes Seth Klarman of Baupost Group LLC and billionaire Paul Singer of Elliott Management Corp., explain why they stand by the letter's content...

 
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5 Things To Ponder: The Fed





It has been quite an eventful week between Scotland's battle over independence, the Federal Reserve's FOMC announcement and the markets making new all time highs. The FOMC announcement was more comedy than anything else as the continued facade of the Fed's forecasting capabilities was revealed, it appears the biggest factor in the world of investing and for this weekend's list of "Things To Ponder" we have accumulated a few reads relating to the Fed.

 
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5 Reasons Why The Market Won't Crash Or Will





One of the biggest mistakes that investors make is falling prey to cognitive biases that obfuscate rising investment risks. Here are 5 counter-points to the main memes in the market currently...

 
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Value in France - Who Would have Thought?





We were surprised to find out about this deep value opportunity in France, bastion of European bureaucratic policies and socialism.

 
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Will Fundamentals Ever Matter Again?





Will investing based on fundamentals eventually find favor once again with investors? The problem is that market participants no longer view the financial markets as a place to invest savings over the "long term" to ensure future purchasing power parity. Today, they view the markets as a place to "create" wealth to offset the lack of savings. This mentality has changed the market dynamic from investing to gambling. As Seth Klarman warned, "There is a growing gap between the financial markets and the real economy. Not surprisingly, lessons learned in 2008 were only learned temporarily. These are the inevitable cycles of greed and fear, of peaks and troughs." Simply put, fundamentals will matter, but only after the fact.

 
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"Making Investment Decisions Based On Fundamentals Is No Longer A Viable Philosophy"





Yet another in a long stream of relatively esteemed hedge fund managers has decided enough-is-enough and is shuttering his firm. The reason? Same as the rest... As WSJ reports, Steve Eisman, who emerged as one of the stars of the financial crisis with a winning bet against mortgages, has wound up his fund because he believes that "making investment decisions by looking solely at the fundamentals of individual companies is no longer a viable investment philosophy." As Baupost's Seth Klarman reminds us "Six years ago, many investors were way out over their skis. The survivors pledged to themselves that they would forever be more careful, less greedy, less short-term oriented. But here we are again, mired in a euphoric environment in which some securities have risen in price beyond all reason, where leverage is returning to rainy markets and asset classes, and where caution seems radical and risk-taking the prudent course. Not surprisingly, lessons learned in 2008 were only learned temporarily. These are the inevitable cycles of greed and fear, of peaks and troughs."

 

 
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"Can We Say When It Will End? No. Can We Say That It Will End? Yes"





As the Buddha taught, “This is like this, because that is like that.” Extraordinary long-term market returns come from somewhere. They originate in conditions of undervaluation, as in 1950 and 1982. Dismal long-term returns also come from somewhere – they originate in conditions of severe overvaluation. Today, as in 2000, and as in 2007, we are at a point where “this” is like this. So “that” can be expected to be like that." As Seth Klarman from Baupost Capital recently stated: "Can we say when it will end? No. Can we say that it will end? Yes. And when it ends and the trend reverses, here is what we can say for sure. Few will be ready. Few will be prepared."

 
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Everything We Are Told About Deflation Is A Lie





The conventional view of deflation is that if it sets in, “the banking industry, the financial markets, and much of the rest of the economy will be wiped out in a bottomless deflationary spiral.” But, such a spiral would not prove fatal to the lives and welfare of the general population. Rather, it would destroy “essentially those companies and industries that live a parasitical existence at the expense of the rest of the economy, and which owe their existence to our present money system.” Let us be more explicit. Severe deflation threatens at an existential level bankrupt banks and the bankrupt governments that perpetuate their existence. Deflation is a mortal enemy to the heavily indebted state and its embedded parasites, but it is a friend to the saver and to anyone with a positive net worth.

 
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