Blog

Just shy of five years ago, the following essay posed the question that seems even more relevant today: Why did the “Dean of Wall Street,”[1] Benjamin Graham, single out 1925 (not the more fortuitous years of 1926–29) in the following quotation from the first edition of The Intelligent Investor published in 1949?

It is worth pointing out that assuredly no more than one out of 100 who stayed in the market after 1925 emerged from it with a net profit and that the speculative losses taken were appalling.[2]

Continue reading “Why 1925?” →

In the financial markets, head fakes happen when the market appears to be moving in one direction, but ends up going in the opposite. In January 2018, after an exponential rise on low intraday volatility from August 2017, it unexpectedly reversed course through April. From there, through late September it ascended to an incremental new high, with spectators making note of each new record along the way. Lulled into the invasive complacency that attends such market moves, apathy morphed into shock when the S&P subsequently dropped like a rock, giving up 20% by Christmas Eve. In an abrupt reversal of policy, the equally blindsided Fed went from hawk to dove overnight. In the first six months of 2019, all the ground lost, and a little more, has been recovered.

Continue reading “Head Fake” →

Voters and political opponents have fleeting memories for some pronouncements, but as George H. W. Bush was so inconveniently reminded, painfully long recollections for others. Take his 1988 Republican Convention campaign promise. “Read my lips: No more taxes.” He broke that pledge, but he had no choice. The problem was that he made it in the first place.

Continue reading “A Blindside in 2020?” →

Sound investment requires rigorous attention to fundamentals, primarily the cost and value of any given economic endeavor. While not every consumer is practiced in the requirements of accurate valuation—economic application aside, U.S. students as a whole are distinctly average in mathematics—the mechanics of valuation are routinely complexified, if not obscured, by the psychological haze through which the analyst, professional or otherwise, must pass. The task is not merely to adjudicate between numeric values. It is to navigate the gray terrain between dreams and reality.

The reality is one defined by return on investment and the sundry considerations such a calculation might include. The dream is the reason we do the calculus in the first place.

Continue reading “Between Dreams and Reality: Taxi Drivers, Student Borrowers, and the Retirement Gamble” →

On Friday, May 11, 2007, Jason Zweig—who pens the “Intelligent Investor” column for the Wall Street Journal—was interviewed by my friend and former Barron’s editor, Kate Welling.[1]

Coincidentally, on the preceding Saturday, I was in Nebraska, packed in among the thousands drawn to figuratively sit at the feet of the Oracle of Omaha, Warren Buffett, and his taciturn partner, Charlie Munger. Unlike most everyone else at the Berkshire Annual Meeting, my presence was not entirely as a spectator. Having written my firm’s annual report in February, I was looking for confirmation of my conviction that risks were proliferating throughout the capital markets. So, in the company of a packed house of my fellow shareholders, I asked Warren the following question.[2]

Continue reading “Buffett And Inverse Emotionalism” →

The full-scale assault on the Federal Reserve System is something to behold. On Sunday, April 14, the president tweeted: “If the Fed had done its job properly, which it has not, the Stock Market would have been up 5,000 to 10,000 additional points, and GDP would have been well over 4% instead of 3% … with almost no inflation. Quantitative tightening was a killer, should have done the exact opposite!”

Continue reading “Modern Monetary Theory: Flying in Under the Radar” →

In June 2011 an op-ed titled “When a Nobel Prize Isn’t Enough” appeared in the pages of the New York Times. In it MIT professor Peter Diamond—who had won the Nobel Prize in economics for his work on unemployment and the labor market—pled his case. The Obama nominee chastised partisan Republican senators who had thwarted his confirmation. He simultaneously argued that sound analysis of unemployment is crucial to conducting monetary policy.

Continue reading “Moore of the Same at the Fed” →

Newly elected U.S. representative Alexandria Ocasio-Cortez (New York) has a point. At a recent Austin, Texas, Democratic Party confab she launched directly into one of her rallying cries: “While America is wealthier than ever, wealth is enjoyed by fewer than ever.” When Ocasio-Cortez went on to lament “an increase in homelessness in New York City among veterans and the elderly while penthouses sit empty,” I couldn’t help but reflect on the recent purchase of a $238 million penthouse condominium overlooking Central Park. In all likelihood, it often sits unoccupied. Could it be that she had the billionaire hedge fund manager and trophy-property collector in mind?

Continue reading “Thoughts on Ocasio-Cortez and Inequality” →

This guest post is courtesy of my friend Edward Chancellor and was originally published on Breakingviews.com.

Just over 300 years ago, in early December 1718, a Parisian bank was nationalised by the French state. This marked the beginning of the Mississippi Bubble, which captivated France over the following couple of years. The aristocratic world of the “ancien regime” may seem impossibly distant to modern minds. Yet there are parallels between this saga and the modern age of quantitative easing, ultra-low interest rates and highly valued asset prices. As central bankers struggle to reverse their post-crisis monetary measures, the lessons imparted by the Mississippi Bubble are more relevant than ever.

Continue reading “A 300-year lesson in bubble inflation” →