Written by Mr. Grantham, co-founder of GMO:
“The market is much higher today than it was last fall when the economy looked fine and unemployment was at a historic low. Today the P/E ratio of the market is in the top few percent of the historical range and the economy is in the worst few percent.”
“As a Model 3 owner, my personal favorite Tesla tidbit is that its market cap, now over $600 billion, amounts to over $1.25 million per car sold each year versus $9,000 per car for GM.”
“This time, more than in any previous bubble, investors are relying on accommodative monetary conditions and zero real rates extrapolated indefinitely. This has in theory a similar effect to assuming peak economic performance forever: it can be used to justify much lower yields on all assets and therefore correspondingly higher asset prices. But neither perfect economic conditions nor perfect financial conditions can last forever, and there’s the rub.”
Caltech's President Thomas Rosenbaum interviews 2020 Distinguished Alumnus Charlie Munger on his accomplished career as an investor, businessman and attorney in this 1 hour video.
Risk is what you can’t see, think only happens to other people, aren’t paying attention to, are willfully ignoring, and isn’t in the news. A little surprise usually does more damage than something big that’s been in the news for months.
Daniel Kahneman says a key to investing is having a well-calibrated sense of your future regret, which might actually be the key to understanding all forms of risk. You know exactly how much risk to take if you know exactly when you will cry Uncle when things don’t work out.
When interest rates are zero stories about what the future could be are more important than what the present actually is. Interest rates tempt investors away from stories about future potential with promises of returns right now, this year. Once those returns fall to zero, stories about what could potentially happen years from now – even if it’s low probability – gain most of the market’s attention. And people are good at coming up with awesome stories. That’s part of why Tesla is worth two-thirds of a trillion dollars, and the market is at an all-time high with 10 million people unemployed.
An engineer can have a successful career knowing nothing other than engineering. Same for a chemist, meteorologist, or radiologist. Business and investing don’t work like that. They’re a little math, a little accounting, a little sociology, a little psychology, a few parts marketing, law, politics, game theory, history, statistics, biology, and public relations. That doesn’t make them harder than other fields; just more uncertain, prone to change, and with fewer experts.
Are wind, solar, and batteries the magical solutions to all our energy needs? Or do they come with too high a price? Mark Mills, Senior Fellow at the Manhattan Institute, analyzes the true cost, both economic and environmental, of wind and solar energy.
Residential mortgages in Canada
Some humour to start the year