Henry McVey, Head of Global Macro and Asset Allocation at KKR, provides a fascinating insight into the structural shifts occurring in China across the economic, political and social spectra of the region. Please follow this link for a detailed analysis and review of the potential opportunities and inevitable challenges that face the discerning investor as KKR's McVey reports on some of the highlights of his recent visit to China.Read More
Of course, before you can address this file, you have to have a definition as to what is a bubble. Everyone has their own definition. Or as Alan Greenspan liked to say back in the day, you can only tell if something was in a bubble after the fact (nonsense). Well, we gave it a strict definition based on price only, and whether the asset class in question was at least one standard deviation away from its historical norm. Investor complacency is definitely in a bubble in terms of extreme low levels of volatility. Then again, this is a product of the Fed (and other central banks) applying massive doses of sedative to the marketplace. So the VIX which measures the price of downside protection in the stock market has a normalized value of -1.1 (values of standard deviation, above or below 1 is bubble like); and in the bond market, the comparable score for the MOVE index is -1.5.Read More
Adaptation is tantamount to survival in the physical world. So argued Darwin, at least, and I am not one to argue with most science and its interpretation of natural laws. Adaptation has been critical as well for the survival of countries during wartime, incidents of which I am drawn to like a bear to honey, especially when they concern WWI. Stick with me for a few paragraphs on this – the following is not likely to be boring and almost certainly should be instructive.
In the first decade of the 20th century, British war colleges and their generals were philosophically trapped by the successful strategies of a prior era – an era before the invention of a functional machine gun. They felt that machine guns might dampen the spirit of their fighting forces. What counted was the horse and the sword. Britain’s cavalry training manual of 1907 in fact stated that “the rifle or machine gun, effective as it is, cannot replace the devastation produced by the speed of the horse, the magnetism of the charge, and the terror of cold steel.”Read More
[T]he financial system (including the institutions themselves, products traded, and risks taken) has "gotten away from" the Fed's ability to comprehend. The Fed is primarily responsible for that state of affairs, and it is out of its depth. Former Chairman Greenspan created -- and reveled in -- a cult of personality centered on himself, and in the process created a tremendous and growing moral hazard. By successive bailouts and purporting to understand (to a higher and higher level of expressed confidence) a quickly changing financial system of growing complexity and leverage, he cultivated an ever-increasing (but unjustified) faith in the Fed's apparent ability to fine-tune the American (and, by extension, the world's) economy.Read More