"Sense And Nonsense" - Assorted Deep Thoughts

With newsflow today non-existent, and the market acting somewhat bizarrely (i.e., not soaring on endless revenue misses and GDP forecast cuts, and in fact, selling off) we take this opportunity to share some philosophical "deep thoughts", although not from Jack Handey, but from the latest issue of the Edelweiss Journal.


“Government interference into economic affairs almost never alleviates the problem it set out to solve. The unintended, and perhaps  intended, consequences only rally more calls for further intervention. Because of its countless edicts, the majority of people who reside in Western economies have no concept of how and why markets function as they do. They have mistaken crony capitalism or socialism for genuine capitalism. While mistaken, this distrust of the market has been the lifeblood of the parasitic state.”

—James E. Miller, “Learning to Laugh at the State,” posted 1 July 2012 in the Ludwig von Mises Institute of Canada blog. Read more: http://tinyurl.com/ej-miller.


“We have been living beyond our means. We have been paying ourselves more than our efforts were earning. We sought political leaders who would assure us that the good times would never end and that the centuries of boom and bust were over; and we voted for those who offered that assurance. We sought credit for which we had no security and we gave our business to the banks that advertised it. We wanted higher exam grades for our children and were rewarded with politicians prepared to supply them by lowering exam standards. We wanted free and better health care and demanded chancellors who paid for it without putting up our taxes. We wanted salacious stories in our newspapers and bought the papers that broke the rules to provide them. And now we whimper and snarl at MPs, bankers and journalists. Fair enough, my friends, but, you know, we really are all in this together.”

—Matthew Parris


“Suppose I’m a fund manager worried that if I underperform the market over a twelve-month period I’ll be out of a job. What value would I attach to a boring business with dependable and robust cash flows, and therefore represents an excellent place to allocate preserve and grow my client’s capital over time but which, nevertheless, is unlikely to ‘perform over the next twelve months? The likelihood is that I will value such cash flows less than an investor who considers himself the custodian of his family’s wealth, who attaches great importance to the protection of existing wealth for future generations, values permanence highly, and is largely uninterested in the next  twelve months. In other words, an institutional fund manager might apply a ‘higher discount rate’ to those same expected cash flows than the investor of family wealth. They arrive at different answers to the same problem. The same cash flows are being valued subjectively and there is no such thing as an objective or ‘intrinsic value’ embedded in the asset, even though it has cash flows.”

—Dylan Grice in SocGen’s Popular Delusions, 17 July 2012.


They’ve found yet another shipwreck off the coast of Ireland. The SS Gairsoppa went down in 1941 by a German torpedo. It was laden with 1.4 million ounces of silver. The insured value at the time was 325’000 pounds and it was paid up properly. Assuming they can get to the wreck and bring the loot up, it has a current market value of around 38 million dollars. One can’t help but wonder what the current value would be if the ship had been carrying banknotes instead.

Courtesy of JE, read the article here: http://tinyurl.com/shipwreck


“If you’d invested a pound in the FTSE in 2005 (when [Bob] Diamond joined the [Barclays] board) and hung on to your dividends you’d  now have £1.08, notes a story in today’s Times. If you’d invested it in HSBC you’d have 78 pence. If you’d invested it in Barclays you’d have 29 pence. Which is rubbish, really. In the same time period, Diamond has been paid £119 million.”

—Merryn Somerset Webb, “The hounding of Bob Diamond: it isn’t disgraceful, it’s essential,” posted 4 July 2012 in her MoneyWeek blog.


“All government, in its essence, is a conspiracy against the superior man: its one permanent object is to oppress him and cripple him. If it be aristocratic in organization, then it seeks to protect the man who is superior only in law against the man who is superior in fact; if it be democratic, then it seeks to protect the man who is inferior in every way against both. One of its primary functions is to regiment men by force, to make them as much alike as possible and as dependent upon one another as possible, to search out and combat originality among them. All it can see in an original idea is potential change, and hence an invasion of its prerogatives. Th e most dangerous man to any government is the man who is able to think things out for himself, without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane and intolerable, and so, if he is romantic, he tries to change it. And even if he is not romantic personally he is very apt to spread discontent among those who are.”

—H.L. Mencken


“They’re there because people have to have them, not because people believe in them.”

—David Jacob, who was fi red from Standard & Poors in December, in an interview at Bloomberg about the ratings industry


“I wholeheartedly agree on the issue of dishonesty in the financial markets. I am muzzled by our compliance offi cer and prevented from being as frank as I would like. Your reference to the delusional hope that keeps investors in the game reminds me of Nietzsche’s observation that “hope is the worst of all evils, for it prolongs the torment of man.” Confidence is unraveling before our eyes, but goes unseen by most. The fi nal stages of disillusionment will be swift.”

—From recent correspondence with a fund manager whom we admire


“Democracy is a pathetic belief in the collective wisdom of individual ignorance.”

—H.L. Mencken


“Confidence is the feeling a person has before he fully understands the situation.”




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