A letter from a “reader” that looked like he sent it to a lot of people:

Hello my name is XXX,
After looking through your website I have really been enjoying your content.
I am also involved in the investing space and wanted to ask a quick question.
I was curious as to what you think the biggest problems are for investors today?
For example do they not have enough investment choices? Do they just not have enough knowledge? Really anything that you have noticed.
I would love to hear your perspective on this. I really appreciate the help. If you have any questions feel free to ask. Thanks.

This was entitled “Love what your doing, my question will only take 2 minutes.” ?I wrote back:

This is not a 2 minute question.

That said, it’s a decent question. ?Here are my thoughts:

• The biggest problem for investors is low future returns. ?Bonds have low rates of returns, and equities have high valuations. ?You’ll see more about equity valuations in my next post.
• The second largest problem is investment monoculture — there is a handful of large cap growth stocks that dominate the major indexes, and there is a self-reinforcing cycle of cash flow going on now that is forcing their prices well above what can be justified in the long run.
• Third is inadequate ability to diversify. ?This is largely a function of the two problems listed before, and benchmarking and indexing, which has been correlating the markets more and more. ?I’m not talking about short-term correlations — diversification applies of the time horizon of the assets, which is long.
• Fourth is bad government and central bank policy. ?The growth in government debt is the growth in unproductive capital, which drives the first problem.
• Fifth, too many people are relying on investments to fund their future spending — that also exacerbates the first problem.

That’s all — if you can think of more, leave your suggestion in the comments.

PS — my apology to those I tweeted to on Friday about a post on equity valuations. ?That will appear Saturday night. ?Thanks.