Jeremy Grantham is a wildly successful investment manager whose laser focus on the long term mean of the market is depressingly at odds with the short-view, crash-boom wave riders that have so far dominate 21st century American investment. By way of introduction, here is his a snippet of his April 2012 quarterly letter for Grantham Mayo van Otterloo (GMO), the $100 billion asset management firm he heads:
In the professional investment business we are all agents, managing other peoples’ money. The prime directive, as Keynes knew so well, is first and last to keep your job. To do this, he explained that you must never, ever be wrong on your own. To prevent this calamity, professional investors pay ruthless attention to what other investors in general are doing. The great majority “go with the flow,” either completely or partially. This creates herding, or momentum, which drives prices far above or far below fair price. There are many other inefficiencies in market pricing, but this is by far the largest.
To wit, Grantham recently gave an interview with the Wall Street Journal where he expressed his dissatisfaction with both the Fed's strategy of keeping interest rates low and the market's bubbling reaction to it:
like to get what I consider the central idea, which in the stock market is patience and value and mean reversion. And in society, it is resources and climate damage. That's plenty to go on, and that's a pretty strong focus. We have a shockingly short horizon in the stock market, as witnessed in the Internet bubble. And we have a shockingly short horizon about social problems, where all we want to hear is how rapid the growth will be and how good everything is.
Unlike the vast, vast majority of investment managers, Grantham has his eyes on the horizon and not on the fly an inch from his nose. When he worries, so should you.
I endeavored to write a long post on Josh Bivens and Lawrence Mishel's "The Pay of Corporate Executives and Financial Professionals as Evidence of Rents in Top 1 Percent Incomes" and ended up with a wordy, reductive mess. Instead I will post it without comment, and with only the following quote:
First, the increase in the incomes and wages of the top 1 percent over in the last three decades should largely be interpreted as driven by the creation and/or redistribution of economic rents, and not simply as the outcome of well-functioning competitive markets rewarding skills or productivity based on marginal differences. This rise in rents accruing to the top 1 percent could be the result of increasedopportunities for rent-shifting, increased incentives for rent-shifting, or a combination of both.
If you wish to make some sense of the perversion of the distribution of income in the last 30 years, read this paper.
I recently came across this Vanity Fair piece on now-Senator, then-candidate Elizabeth Warren. The article paints a woman at home in battle, whose victories (chiefly devising and creating the Consumer Financial Protection Bureau) are the result of an unflagging diligence and a singular willingness to confront the unconfronted. Center stage are her opponents, whose size and power allow them places at the very hearts of the executive and legislative apparatuses. The mind fairly boggles at the amount of time and money they put into the fight, making it all the more incredible that one person has been able to stymie their efforts and raise their hackles to the degree Senator Warren has. Among the more astounding facts from the article:
"When the C.F.P.B. was first proposed to Congress, in early 2009, the Chamber of Commerce, the leading business lobbying group in the country, announced that it would “spend whatever it takes” to defeat the agency. According to the Center for Public Integrity, from 2009 through the beginning of 2010, it would be one of the biggest spenders among the more than 850 businesses and trade groups that together paid lobbyists $1.3 billion to fight financial reform."
Pennsylvania is poised to pass a bill requiring debt collectors to disclose the applicable statute of limitations when contacting consumers about debts.
Is this a good bill? Yes, requiring collectors to include a single line of text further informing consumers of their legal rights is good. Next question.
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