Monday, June 29, 2015


Wilbur Ross on CNBC (video) (LINK)

This short piece from Michael Lewis last month is making its rounds again: Greece Saunters Across the Autobahn (LINK)

The recent Greek drama reminded me of the short "discussion" from 5 years ago between Hugh Hendry, Gillian Tett and Jeffrey Sachs (video) (LINK)

Claudio Borio's slides on persistently low interest rates [H/T Marginal Revolution] (LINK) [And you can watch him give his talk on them as well, HERE.]

Grant's Interest Rate Observer on Puerto Rico, from May 2014 (LINK)

Matt Ridley on EconTalk (LINK)
Related book: The Rational Optimist
Hussman Weekly Market Comment: Durable Returns, Transient Returns (LINK)
Significant news items tend to concentrate selling decisions that contribute to abrupt losses, but those losses are already inevitable once valuations become extreme. In the current cycle, the catalyst might be European bank leverage (which is the main reason Greece is a concern), credit concerns related to covenant lite junk debt, economic weakness, investor concern about monetary shifts, or possibly by wholly unanticipated events. But the “catalyst” will merely affect the timing of the losses. 
This is not a Goldilocks market. No, this is a Roseanne Roseannadanna market (Gilda Radner’s character from Saturday Night Live). Though investors seem to believe that catalysts for a market plunge should be known ahead of time, they’re likely to learn in hindsight that the specific catalyst didn’t matter. History teaches that once obscene valuation is coupled with overvalued, overbought, overbullish extremes, and is then joined by deterioration in market internals, the outcome is already baked in the cake. Afterward, investors discover “Well Jane, it just goes to show you… It’s always something. If it’s not one thing, it’s another.” 
Understand that now. Once extreme valuations have been established, further market gains have always been transient. Once market internals deteriorate, it’s a signal that investors have shifted from risk-seeking to risk-aversion. At that point, there is no specific event that must be known in advance. One need only have an appreciation for the inevitable swing of the pendulum from extreme euphoria to extreme fear that has characterized the financial markets for centuries. The “catalyst” is rarely appreciated as a catalyst until after severe market losses have already occurred, and in many cases, that catalyst is simply an event that concentrated selling plans that were already being contemplated. If it’s not one thing, it’s another. But it’s always something. 
The message here is not “sell everything.” The message is to understand where we are in the market cycle from the standpoint of a century of reliable evidence, and to act in a way that meets your investment objectives. Align your portfolio with careful consideration for your tolerance for losses over the market cycle; with your willingness to miss out on interim market gains should they emerge; with the horizon over which you will actually need to spend from your investments; with the extent that you believe that history is actually informative for making investment decisions; with the extent to which alternative investment outlooks are supported by evidence, ideally spanning numerous market cycles.