Comments on: So Much For Diversification!

By: bitplayer

bitplayer — Sun, 13 Sep 2009 01:50:50 +0000

Regarding the Time magazine cover from 1999: How come Mr. Greenspan never buys a new pair of glasses? He’s been wearing those same specs since the Reagan years at least! They are out of fashion, their field of vision is needlessly large, they don’t look at all comfortable, and he can afford better.

Warren Buffett is another one. What good is it to be the world’s richest man if the lower rims of your glasses are constantly getting gunked up with sebum and sloughed epithelial cells? Bill Gates got religion; how come his buddy can’t?

You would think that at some point when having lunch with Henry Paulson, these guys would have complimented him on his rimless glasses and asked “Hey, where’d you get those, Hank? Can I try them on for a second?” And then maybe gaze into a soup spoon and ask “How do I look?”

By: Seattle Chill

Seattle Chill — Sun, 13 Sep 2009 00:01:45 +0000

OfT- what makes this “never again” attitude all the more nonsensical is that we have already blown well past some of the signposts that were put in place during the last depression. Private leverage ratios are far higher now than they were at the prior all-time peak in 1930. If you price the Dow in gold (as it essentially was in 1929, due to the gold standard) then the 2007-2009 decline fully matched the magnitude of the entire 1930s bear market. And there’s no reason to believe it’s over yet. As Nassim Taleb put it, relative to a year ago, we now have fewer people working to pay off an even larger debt load. That is not the recipe for a “priced for perfection” recovery.

Bernanke is doing exactly what he once said the Fed chair should be doing in a deflationary depression, that is, projecting the image of irresponsibility without actually doing anything dangerous. And yet no one seems to realize that it’s a deliberate act of theater. That big, scary pile of money he’s made such a dramatic show of “printing” is practically microscopic when viewed next the the yawning crater of bad debt it’s supposed to fill. Still, he’s managed to scare investors back into risk assets with the specter of looming inflation. Monetizing enough debt to decisively stop deflation in its tracks would send real interest rates spiraling to the moon, and the entire financial system would collapse overnight in a blizzard of defaults. The Fed is really far more impotent than anyone wants to admit. But if one accepts that the Fed isn’t in control, then that means no one is, and that’s the most terrifying prospect of all.

By: call me ahab

call me ahab — Sat, 12 Sep 2009 22:55:52 +0000

onlooker-

“The worship of Bernanke is reaching sickening levels in the MSM lately. They’ve bought the idea that he’s got this thing whipped and “the danger has passed.”’

which just reinforces my growing suspicion that most everyone- especially journalism majors (what is that anyway- you can either write or you can’t)- is so oblivious to economics that they listen to whatever they are told and take it as gospel-

much akin to the Greenspan/Summers/Rubin cover in Time-

http://img.timeinc.net/time/magazine/archive/covers/1999/1101990215_400.jpg

never underestimate the stupidity of a journalist

By: Onlooker from Troy

Onlooker from Troy — Sat, 12 Sep 2009 22:42:50 +0000

Seattle Chill

Yeah, I was thinking pretty much that same thing. They don’t analyze periods before WWII very much; all those inconvenient facts and comparisons, you know. (And all too often the analysis is limited to the the late ’70s on, or something like that.) And the arrogance that our economy is so much more sophisticated now than then, and our economists have figured it all out so we “can’t” have another GD. The worship of Bernanke is reaching sickening levels in the MSM lately. They’ve bought the idea that he’s got this thing whipped and “the danger has passed.”

By: constantnormal

constantnormal — Sat, 12 Sep 2009 21:28:04 +0000

So what’s a good way to invest in Chinese stocks, without being able to do any kind of decent financial analysis on them (the same reason I will not buy bank stocks), and receiving second-class-citizen treatment as an investor via the class A & class B stocks with foreighners only able to purchase the class B shares.

By: spencer

spencer — Sat, 12 Sep 2009 21:23:20 +0000

The developing country markets are just the high beta segments of the world stock market.

By: constantnormal

constantnormal — Sat, 12 Sep 2009 21:16:42 +0000

It would seem that for the risk-averse conservative investor, the best course was to have 100% of your assets in Chinese stocks for the past several years … at least that’s what history would apparently tell you.

By: Seattle Chill

Seattle Chill — Sat, 12 Sep 2009 20:21:37 +0000

“If history is a guide, the strong recovery may be an indication that better prices are still ahead. Since World War II . . . ”

I suppose it’s begging the question to wonder why these discussions always carry the analysis back to just after the last historical period when debt levels were anywhere near where they are right now.

By: Mark Wolfinger

Mark Wolfinger — Sat, 12 Sep 2009 19:50:32 +0000

Yes, put options, in the form of a collar spread represent the 21st century method for guaranteeing the value of a portfolio. It’s superior to diversification and asset allocation as a risk reducing tool, but the professional advisors run away from options.

Barry, I wonder if you’ve been using collars, or any other option strategy. I’ve been a professional options trader for since 1977 and I know the power of options to reduce risk.

http://blog.mdwoptions.com/Options_for_Rookies/

By: How the Common Man Sees It

How the Common Man Sees It — Sat, 12 Sep 2009 19:29:38 +0000

Thankfully, put options provide the better level of diversification these days. Of course, if we all did that……;)