I need to catch up on a few things, so bear with me. This might ramble.
1) Should I live and continue to write until mid-October of 2013, I will reach 10 years of investment writing. I started writing for RealMoney in October 2003, and that changed my life. Thanks to Cramer, because he created an organization that revolutionized financial media. Former TST news writers occupy a wide number of top spots in many places in the financial press — it is astounding how much better financial news is today. I am grateful to know many of them, some of whom would call me for help on occasion.
2) In a few more weeks, Aleph Blog will hit its sixth blogoversary. Seems like minutes to me, but I have a lot more grey to prove that the time has passed. I do want to note that much as I wrote at RealMoney, I have written far more here. I have a problem though. It seems that RealMoney has lost its ability to recover old posts pre-2008. I would love to get copies of my old posts that are listed here. If any of you know how to do that, please let me know.
3) Saturday night’s second article was hate me or love me in terms of responses. There are no other writers at this site; the same flawed man writes them all. My main point is that you need someone who acts like a fiduciary (whether they are a fiduciary or not) to tend to your assets. Investment banks do use retail to lay off exposures that they do not want.
In any significant transaction, you want to know who is with you and who is not. (This was true in the housing bubble, where many parties teamed up against buyers.) For my clients, they know that over 50% of my net worth is on the line in the same portfolio that they have. (At present, over 70%.) I have a lot of confidence in my ideas. I eat my own cooking.
You want to invest in situations where there is alignment of incentives. Are there brokers who are noble? Yes. But to use one, he needs to jump through extra hoops, because he is not under obligation to be a fiduciary.
4) 4+ years ago I wrote a piece called: Inflation for Goods Prices, Attempted Inflation for Housing-Related Assets, but Sorry, No Inflation for Wages. Probably one of my longest titles… but that still seems to be the case today. Fed policy inflates housing-related assets, gives some price inflation, but because labor is not scarce globally, wages are flattish.
5) I wrote this piece summarizing my views on the rating agencies. I stand by it. The rating agencies are not the problem. Regulators are the problem. They create the conditions where ratings are needed. Ratings by their nature are opinions, they are not guarantees. They can’t be otherwise, or else the rating agencies will have to become financial guaranty insurers, and charge far higher fees that will destroy financing for so many.
That’s why I think the lawsuits against the rating agencies will fail, again. This is not to say the rating agencies were blameless, but it is very difficult to estimate future losses on any class of securities that has not ever gone though a failure cycle.
6) I believe in the conservation of liquidity: it can’t be created or destroyed, but it can be shifted. My first example is stock price increments. I think that the tick size is arbitrary, and a small tick size will favor small investors who are looking to buy small positions. A large tick size will favor larger institutions that wait patiently to buy and sell.
7) I believe in the conservation of liquidity in bigger ways also. The Fed does not create liquidity, at least not in the sterilized way that they do it presently. But they can shift liquidity; who do the QE programs help? The US Government and the GSE-backed mortgage market. Liquidity has been shifted there, and away from everyone else.
That’s all for now.