Thread: coolhand's Account Talk

Originally Posted by coolhand

I don't watch many financial videos the way I once did, but I found this one to be very insightful and having been around the markets for quite some time now, what Jeremy had to say resonated with me.

First, an introduction on who the speaker is:

Jeremy Grantham is a British investor and co-founder and chief investment strategist of Grantham Mayo van Otterloo (GMO), a Boston-based asset management firm. GMO is one of the largest managers of such funds in the world, having more than US $118 billion in assets under management as of March 2015. Grantham is regarded as a highly knowledgeable investor in various stock, bond, and commodity markets, and is particularly noted for his prediction of various bubbles. He has been a vocal critic of various governmental responses to the Global Financial Crisis. Grantham started one of the world's first index funds in the early 1970s.

In 2011 he was included in the 50 Most Influential ranking of Bloomberg Markets magazine.

Grantham to Investors: Brace Yourselves

COOLHAND, Despite not being an economist, I somewhat understand the issue of economic cycles and bubbles. However, Grantham's approach to these matters is daunting and earth-shaking. I don't wish ill to anyone, but from us small investors, it appears that the PTB members and the Boyz understand very well how to use the bubbles to their benefit. Now, however, all of the manipulation is growing the bubbles larger and larger, increasing corporate options and stock growth excessively -- to the point that the normal cycle of returning to the mean has been dangerously interrupted. The only positive that I heard from Grantham is his opinion that, possibly, the bubble will not break until at least next year's elections. I suppose that regardless of when the big collapse will occur, we are not yet vaccinated against the 5%,15,% or more of the usual corrections of the stock market -- some of which we expect to correct soon.

So why are stocks falling seemingly uniformly around the globe? The Wall Street Journal has a good article on what may very well be driving the sell-off.

The Trouble With Sovereign-Wealth Funds - WSJ

It appears the link is for WSJ subscribers only.

Yup, pay site...

Anyway, I'll take a guess. Sovereign funds have been investing in bonds of all sorts. You know, a mix of 'high quality' gubmint bonds, 'quality' corporate bonds, and 'junk' bonds. You know the type. High finance, taught in MBA school - cash is dead money, gotta be in to win. And, bonds are safe 'interest' bearing assets that do not fluctuate with the market.

But somewhere things got a little wild. People - ok, da'Boyz - started trading bonds. They started trading them like stocks. Suddenly, it became fashionable to yammer about 'Total Return' which included the bond price along with it's yield. Only oldsters talks about the blend of bond quality and yield. Only fuddy duddies talk about holding a bond to maturity and living within the yield. And, buy a bond - oh perish the thought. Instead diversify by buying ETF/Mutual Funds of Bonds. Gotta sell the sizzle.

What could go wrong?

How about this. If instead of everyone bailing out of equities to bonds, they bail to cash. Bonds then do not soften the blow in balanced asset accounts. In fact, our 'F Fund' has been in slow decline for a year. Is anyone here looking at the 'F Fund' as a truly safe haven for a correction? Yeah, the 'G Fund' can be grabbed at by the Treasury during the semi-annual budget duffus convention in DC, but those asset are commingled with Social Security bonds. Those oldsters have very sharp pitchforks in voting season. Personally, I sold my stupid Treasuries two decades ago. Anyone really want to make three points on decades long debt? I don't think that is the Boomer Style - they are probably investing their house in Google or something.

Also, sovereign funds have been used for great public works projects that are not exactly hydroelectric dams and freeways. More like man made island retreats for folks who have never had to squeeze a thousand dollar bill for a whole day. They are built for the glory of the king and to keep the ignorant masses employed. But, their return on investment is in glamour and pride. Now, some rubes in jeans and tee-shirts in South Dakota start pumpin' oil and you are blowing through your assets just to fake the funk to your own rubes.

Just a guess.

By the way, Hi CoolHand!!!

Originally Posted by Boghie

Now, some rubes in jeans and tee-shirts in South Dakota start pumpin' oil and you are blowing through your assets just to fake the funk to your own rubes.

if i may clarify a bit... i think you mean north dakota and the bakken shale, and while the boom brought with it massive wealth and business influx, it also blew apart small close-knit traditional communities and pushed civil infrastructure past its limits in many places. most long-time residents of this region do not feel bad about the drop in oil prices the last year or so as the jacked up roughneck pickups with texas and arkansas license cleared out pretty dang fast. so the rails are not so clogged anymore with tanker unit trains and farmers can deliver their grain again.

two interesting things about north dakota is that they run a budget surplus called the budget stabilization fund, about $575 million at last check like cash in the bank, and it can only be used to offset budget shortfalls in excess of 2.5% as the first 2.5% comes from automatic across the board cuts to all state agency budgets. these are savers not spenders out here. also they have their own state-owned private bank to hold and clear all state agency collections and expenditures, like its own central bank. BND also guarantees student loans for its residents and provides favorable financing rates and terms to support critical state industries like family agriculture.

so rubes, maybe. but some pretty damn smart conservative rubes who save for rainy days and thank you for consuming our petroleum, and our beef, wheat, corn, and beans. the oil is all still out there in the ground and will flow again when the price is right, it is not going anywhere and we know exactly where it is at. and there is lots of it.

i hope the rest of the world enjoys its crash. we are pretty used to hardscrabble getting by on next to nothing out here, even enjoy it like a challenge.

Originally Posted by burrocrat

if i may clarify a bit... i think you mean north dakota and the bakken shale, and while the boom brought with it massive wealth and business influx, it also blew apart small close-knit traditional communities and pushed civil infrastructure past its limits in many places. most long-time residents of this region do not feel bad about the drop in oil prices the last year or so as the jacked up roughneck pickups with texas and arkansas license cleared out pretty dang fast. so the rails are not so clogged anymore with tanker unit trains and farmers can deliver their grain again.

two interesting things about north dakota is that they run a budget surplus called the budget stabilization fund, about $575 million at last check like cash in the bank, and it can only be used to offset budget shortfalls in excess of 2.5% as the first 2.5% comes from automatic across the board cuts to all state agency budgets. these are savers not spenders out here. also they have their own state-owned private bank to hold and clear all state agency collections and expenditures, like its own central bank. BND also guarantees student loans for its residents and provides favorable financing rates and terms to support critical state industries like family agriculture.

so rubes, maybe. but some pretty damn smart conservative rubes who save for rainy days and thank you for consuming our petroleum, and our beef, wheat, corn, and beans. the oil is all still out there in the ground and will flow again when the price is right, it is not going anywhere and we know exactly where it is at. and there is lots of it.

i hope the rest of the world enjoys its crash. we are pretty used to hardscrabble getting by on next to nothing out here, even enjoy it like a challenge.

Your just bragging.

Kalefornea holds surplus tax revenue till our Democrats vote equal or greater spending. It usually takes them about seven minutes.

Originally Posted by Cactus

It appears the link is for WSJ subscribers only.

That's odd. I am not a subscriber and yet I was able to access that article.

That's because you're "Coolhand"!

FS

Here is another link alluding to the sovereign wealth fund issue. I think you can access this one.

Sovereign Wealth Funds Face Their Rainy Day - Bloomberg View

Originally Posted by Boghie

Yup, pay site...

Anyway, I'll take a guess. Sovereign funds have been investing in bonds of all sorts. You know, a mix of 'high quality' gubmint bonds, 'quality' corporate bonds, and 'junk' bonds. You know the type. High finance, taught in MBA school - cash is dead money, gotta be in to win. And, bonds are safe 'interest' bearing assets that do not fluctuate with the market.

But somewhere things got a little wild. People - ok, da'Boyz - started trading bonds. They started trading them like stocks. Suddenly, it became fashionable to yammer about 'Total Return' which included the bond price along with it's yield. Only oldsters talks about the blend of bond quality and yield. Only fuddy duddies talk about holding a bond to maturity and living within the yield. And, buy a bond - oh perish the thought. Instead diversify by buying ETF/Mutual Funds of Bonds. Gotta sell the sizzle.

What could go wrong?

How about this. If instead of everyone bailing out of equities to bonds, they bail to cash. Bonds then do not soften the blow in balanced asset accounts. In fact, our 'F Fund' has been in slow decline for a year. Is anyone here looking at the 'F Fund' as a truly safe haven for a correction? Yeah, the 'G Fund' can be grabbed at by the Treasury during the semi-annual budget duffus convention in DC, but those asset are commingled with Social Security bonds. Those oldsters have very sharp pitchforks in voting season. Personally, I sold my stupid Treasuries two decades ago. Anyone really want to make three points on decades long debt? I don't think that is the Boomer Style - they are probably investing their house in Google or something.

Also, sovereign funds have been used for great public works projects that are not exactly hydroelectric dams and freeways. More like man made island retreats for folks who have never had to squeeze a thousand dollar bill for a whole day. They are built for the glory of the king and to keep the ignorant masses employed. But, their return on investment is in glamour and pride. Now, some rubes in jeans and tee-shirts in South Dakota start pumpin' oil and you are blowing through your assets just to fake the funk to your own rubes.

Just a guess.

By the way, Hi CoolHand!!!

Hello Boghie. Been awhile since I've been to San Diego. Don't travel as much as I used to. Actually, I think I am scheduled to do a business trip there in March.

So are the Bolts leaving or not?

Originally Posted by coolhand

Here is another link alluding to the sovereign wealth fund issue. I think you can access this one.

Sovereign Wealth Funds Face Their Rainy Day - Bloomberg View

That one worked. Thanks, CH!