Money and Finance
- Market Share And Moats
From The Little Book That Builds Wealth: Surely, companies with large market shares must have economic moats, right? Unfortunately, bigger is not necessarily better when it comes to digging an economic moat. It is very easy to assume that a company with...
- Giverny Capital – 2013 Letter To Partners
Link to letter: Giverny Capital – 2013 Letter to PartnersSince 1993, the cornerstone of our investment philosophy is based on Benjamin Graham’s book “The Intelligent Investor”, first published in 1949. In it, Graham wrote: “In the short...
- Is Monetary Policy A Science? - The Interaction Of Theory And Practice Over The Last 50 Years – By William R. White
And in case you missed the two quotes from White that I posted on Twitter last night as I was listening to his McAlvany podcast (these were in regards to economic modeling and the desire to try and control the economy through monetary policy): "I'm...
- John Mauldin's Outside The Box: The Geopolitics Of Brazil
Just last week in Thoughts from the Frontline, we discussed the relative valuations of emerging markets. Any discussion of an emerging market is incomplete without understanding the underlying geopolitical forces that guide behaviors of countries and...
- First Eagle: Views On Developing Markets
At First Eagle we are often asked how we view the developing markets. Some prospective investors also wonder about our noticeable lack of exposure to the BRIC countries (Brazil, Russia, India and China). After all, the world’s wealth seems to be created...
Money and Finance
When Does the Story Break? - by W. Ben Hunt
Link to: When Does the Story Break?
The most common question I get from Epsilon Theory readers is when. When does the market break? When will the Narrative of Central Bank Omnipotence fail? To quote the immortal words of Devo, how long can this go on? Implicit (and sometimes explicit) in these questions is the belief that this – whatever this is – simply can’t go on much longer, that there is some natural law being violated in today’s markets that in the not-so-distant future will visit some terrible retribution on those who continue to flout it. There has never been a more unloved bull market or a more mistrusted stock market high.
It’s a lack of love and a lack of trust that I share. I believe that public markets today are essentially hollow, as what passes for volume and liquidity is primarily machines talking to other machines for portfolio “positioning” or ephemeral arbitrage rather than the human expression of a desire to own a fractional ownership share of a real-world company. I believe that today’s public market price levels primarily reflect the greatest monetary policy accommodation in human history rather than the real-world prospects of real-world companies. I believe that the politicalrisks to both capital market structure and international trade (which are the twin engines of global growth, period, end of story) have not been this great since the 1930’s. Simply put, I believe we are being played like fiddles. That does NOT mean, however, that I think anything has to change next week … or next month … or next year … or next decade. The human animal is a social animal in the biological sense, and as such we are cognitively evolved to maintain our beliefs and behaviors far beyond what is “true” in an objective sense. This is, in fact, the core argument of Epsilon Theory, that there is no such thing as Truth with a capital T when it comes to the institutions and the social organizations that we create. There’s nothing more “natural” about our market behaviors than there is around, say, our fashion behaviors … the way we wear our clothes or the way we cut our hair. For 150 years everyone knew that everyone knew that gentlemen wore wigs. This was the dominant common knowledge of its day in the fashion world, absolutely no different in any way, shape or form than the dominant common knowledge of today in the investing world … everyone knows that everyone knows that it’s central bank policy that determines market outcomes. And this market common knowledge could last for 150 years, too.
I’m not saying that a precipitous change in market beliefs and behaviors is impossible. I’m saying that it’s not inevitable. I’m saying that it’s NOT just a matter of when. I’m saying that understanding the timing of change in market behaviors is very similar to understanding the timing of change in fashion behaviors, because both are social constructions based on the Common Knowledge Game. It’s no accident that the most popular way to relate that game is the story of the Emperor’s New Clothes.
- Market Share And Moats
From The Little Book That Builds Wealth: Surely, companies with large market shares must have economic moats, right? Unfortunately, bigger is not necessarily better when it comes to digging an economic moat. It is very easy to assume that a company with...
- Giverny Capital – 2013 Letter To Partners
Link to letter: Giverny Capital – 2013 Letter to PartnersSince 1993, the cornerstone of our investment philosophy is based on Benjamin Graham’s book “The Intelligent Investor”, first published in 1949. In it, Graham wrote: “In the short...
- Is Monetary Policy A Science? - The Interaction Of Theory And Practice Over The Last 50 Years – By William R. White
And in case you missed the two quotes from White that I posted on Twitter last night as I was listening to his McAlvany podcast (these were in regards to economic modeling and the desire to try and control the economy through monetary policy): "I'm...
- John Mauldin's Outside The Box: The Geopolitics Of Brazil
Just last week in Thoughts from the Frontline, we discussed the relative valuations of emerging markets. Any discussion of an emerging market is incomplete without understanding the underlying geopolitical forces that guide behaviors of countries and...
- First Eagle: Views On Developing Markets
At First Eagle we are often asked how we view the developing markets. Some prospective investors also wonder about our noticeable lack of exposure to the BRIC countries (Brazil, Russia, India and China). After all, the world’s wealth seems to be created...