Comments (4)

  1. james romain says:

    Excellent insight and great financial writing. Well Done!!

  2. Thomas Wolf says:

    Another comprehensive piece. You’re ability and willingness to patiently explain and re-explain is so appreciated and sets you apart.

  3. Rick says:

    Great insight.Thanks for the good read.

  4. Dear David,

    My test for something I read is very simple; if you read it twice, because there is too much meat to digest in just one sitting, it passes with flying covers. Your recent commentary is a must read! I think your Alice in Wonderland analogy is appropriate. Suppressed interest rates have led to investment distortions and prices which…..in many cases may not be real. I’d like to be a long term investor but I’ve looked at the 7-10 year projections for assets returns by the people at GMO and BCA and one had better have a very high octane portfolio because as you point out, the probabilities favor lower returns. As so I find myself waiting for something to be stupid cheap and then I try to summon the courage to make a non-trivial investment. Energy six weeks ago met this test but I’m probably more a seller than buyer today with oil inventories 54% above historic averages. We’re about to see a large number of bankruptcies in the energy patch. In December, I ventured into MLP’s, an area I’d never invested in before. I’m not sure the companies are out of the woods yet, but again, they appeared “stupid cheap” and therefore investible. Are we all to be tactical investors now?

    Here’s the question that should get attention. Why are all the OECD countries and many EM’s focused only on monetary policy? My feeling is that the investment environment requires a pivot in the direction of fiscal policy so that prospects for higher nominal and real GDP growth can develop. Without this, we’re heading for a financial crisis in the next 3-7 years as a guess. However, in the U.S., fiscal policy is being directed to reducing income inequality via higher effective tax rates rather than as a vehicle for stimulating the U.S. economy.

    I’m getting another Pinot Grigio and taking another look at the graphs in your article. Great work and insight!

    All the best,
    John

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