Juggling Dynamite

Like our firm Venable Park Investment Counsel, Hoisington Investment Management, manages the capital under its care as long-term pension savings on which owners are depending for their present and future security. This 30-minute audio interview is worth listening to a couple of times.  No slick sales pitch here, just valuable information and insight.   Direct audio link.

Dr. Lacy Hunt is an internationally recognized economist and the Executive V.P. and Chief Economist of Hoisington Investment Management Company, a firm that manages over $4.5 billion USD and specializing in the management of fixed income accounts for large institutional clients. He also served as Senior Economist for the Federal Reserve Bank of Dallas, where he was a member of the Federal Reserve System Committee on Financial Analysis.

It is important for thinking people to acknowledge that the financial sector that continues to hollow out the real economy, social stability and the rule of law today, has been aided and abetted by both political parties, over the past 30 years.  Meaningful change requires more than just swapping in different speech-reading figureheads.

Critical first step is to re-separate investment sales from financial advisory and deposit-taking banks (Return to Glass-Steagal Act was proposed in 2013), and then to jam the revolving door between financial sector jobs and government.

On Reality Asserts Itself, Thomas Frank, author of Listen Liberal, says Democratic Party administrations allowed the big banks to run economic policy and create exploding income inequality – with host Paul Jay. Here is a direct video link.

John Hussman has written a particularly valuable piece this month in Three Delusions: Paper Wealth, Economic growth and Bitcoin–and how they are all connected. A synthesis of key takeaways from history, fundamental analysis, technical analysis, macro perspective and human behavior around saving and speculation.  This is no Tweet-sized bite.  The article is longer, but well written and worth printing and highlighting for increased digestion.

Hussman includes the below quote from Graham and Dodd– the so-called founding fathers of security analysis–which the investment world pretends to espouse, while conveniently ignoring, in pursuit of product sales at every price.  The real life carnage that follows, is never their concern.  This is why individuals must enlighten and discipline themselves, as we work through another 1929-style capital risk environment today:

“During the latter stage of the bull market culminating in 1929, the public acquired a completely different attitude towards the investment merits of common stocks… Why did the investing public turn its attention from dividends, from asset values, and from average earnings to transfer it almost exclusively to the earnings trend, i.e. to the changes in earnings expected in the future? The answer was, first, that the records of the past were proving an undependable guide to investment; and, second, that the rewards offered by the future had become irresistibly alluring…

“The notion that the desirability of a common stock was entirely independent of its price seems incredibly absurd. Yet the new-era theory led directly to this thesis… An alluring corollary of this principle was that making money in the stock market was now the easiest thing in the world. It was only necessary to buy ‘good’ stocks, regardless of price, and then to let nature take her upward course. The results of such a doctrine could not fail to be tragic.”

—Benjamin Graham & David L. Dodd, Security Analysis (1934)