Juggling Dynamite

Chanos speaks in length on his long career as a short-seller. [Warning: short-selling is very high risk, and not a recommended strategy for most people.]  Here is a direct audio link to the Bloomberg business segment.

The interview offers interesting insights on the conviction needed to succeed with rules-based risk management and the courage to bet against the consensus view.   He also talks about the reckless deployment of capital routinely exercised by Wall Street and corporate executives that buy shares at high market valuations and freeze in fear at market bottoms. The following chart shows the pattern of corporate buy-backs since the last market peak in 2008.

I am reminded that amid the crash of ’29, Herbert Hoover first sought an investigation of the ‘evil short-sellers’ rather than into the investment banks and the reckless sales forces that drove stock prices to nose-bleed levels that then collapsed on the masses. The more things stay the same…

If you haven’t seen this excellent Frontline report (originally released in April 2013), there was an encore presentation of it this week. Critical issues for financial market participants to comprehend.

Retirement is big business in America, but is the system costing workers and retirees more than what they’re getting in return, asks FRONTLINE correspondent Martin Smith. Here is a direct video link.

And now that the Canadian market has this month finally reclaimed its bubble peak from June 2008–and the few who were able to hang on through 50%+ losses, have now spent 6 long years making back their losses–the question to ask all those confident financial advisers today is, “ok, so what’s the plan to avoid repeating that painful cycle all over again?” Remember we are all 6 years older now, 6 years less time to waste in a journey to financial security.

Robert Shiller, Yale University professor of economics, explains his “Titianic” economic theory for why the stock, bond and housing markets all look pricey today. Here is a direct video link.

He points out that historically “there are always special factors” to argue why ‘this time is different’ and price to earnings ratios should remain permanently higher than their 144 year average. (Until they mean revert way below average once more of course)

“Stocks, bonds, real estate. How can it be that everything is expensive?” QE-seats on the Titanic everyone? Your friendly broker/dealer/financial advisers are all just itching to help you pick your seat. Step on up! Maybe you can enjoy the ride a little longer before all the passengers plunge below the waves. PE in blue below, interest rates in grey.