Feb 6, 2017

Bill Bonner: "investment markets reward virtue and punish sin"

We are, frankly, in far too much awe of the world, and too deeply entertained by it, to think that we can understand it today or foretell tomorrow.  Life's most attractive components - love and money - are far too complex for reliable soothsaying.  Still, we can't resist taking a guess.

We may not know how the world works, but we are immodest enough to think we can know how it does not work.  The stock market is not, for example, a simple mechanism like an ATM machine, where you merely tap in the right numbers to get cash out when you need it.  Instead, the investment markets - like life itself - are always complicated, often perverse, and occasionally absurd.  But that does not mean that they are completely random; though unexpected, life's surprises may not always be undeserved.  Delusions have consequences.  And, sooner or later, the reckoning day comes and the bills must be paid.

In this sense, the investment markets are not mechanistic at all, but judgmental.  As we will see, they reward virtue and punish sin.

~ Bill Bonner, Financial Reckoning Day (2006), p. 2

Feb 5, 2017

The New York Times: "A taxi medallion is comparable to buying an apartment in Manhattan" (2011)

A taxi medallion is comparable to buying an apartment in Manhattan. It will always make good money and pay for itself.

~ The New York Times, 2011

Bill Bonner on the upward (bumpy) slope of human progress

When it comes to science and technology, man learns.  When it comes to love, war, and finance, he makes the same mistakes over and over again.

~ Bill Bonner

Feb 2, 2017

Kevin Duffy on the learning process

The learning process, if pursued long enough, goes through many phases: trepidation, pain, comfort, confidence, overconfidence, and ultimately humility.

Feb 1, 2017

We are not going to achieve a new world order without paying for it in blood as well as in words and money.

~ Arthur Schlesinger, Jr., Foreign Affairs, July/August 1995

Jan 31, 2017

Jim Grant reports on the bond bubble: "$13 trillion of bonds are priced with negative yields"

Arbor Quantitative Analytics reports that the 30-year Treasury bond delivered a 10% return in the 10 days ended last week, among the best such sprints on record (it was in the 99.5th percentile).  Tuesday's Financial Times reported a drop in 10-year gilt yields to 0.71%, far below any yield recorded even when the pound was convertible into gold at a fixed price.  "Across the world," the paper said, "government bond yields continue to collapse as economists forecast low global growth and greater stimulus from central banks in spite of years of monetary easing.  Dutch benchmark 10-year rates are now negative, joining those of Japan, Germany and Switzerland."  According to Bank of America Merrill Lynch, $13 trillion of bonds are priced with negative yields, up from just about none two years ago.

~ Jim Grant, Grant's Interesting Rate Observer, "Remember the Shell Oil 2 1/2s of 1971," July 15, 2016

Grant's: "sovereign debt is the biggest bubble since the Bronze Age" (2016)

If practice makes perfect, Grant's is unrivaled in calling the top in bond prices.  We have done so repeatedly over the course of many years, even if not lately; since 2014, our line has rather been "one last gasp" for the bulls.  We now say that the last gasp has been gulped.  With all the fluency that comes with study and repetition, we say that sovereign debt is the biggest bubble since the Bronze Age, or maybe since ancient Sumer.  The notion that negative-yielding bonds, denominated in a fiat currency, are a "safe" asset is a misconception that belongs in the next edition of Extraordinary Popular Delusions and the Madness of Crowds.  We are bearish on bonds, especially the ones that, like new cars on a dealer's lot, positively guarantee the owner a loss as soon as he takes possession of his property.

~ Jim Grant, Grant's Interesting Rate Observer, "Remember the Shell Oil 2 1/2s of 1971," July 15, 2016