quote:
But they're just playing the central bankers' game of musical chairs--they dance or they have to quit and find employment in another type of career.

i am not saying that the story begins and ends with the forces driving these "investments", but like you said, they have to justify their existence (and with more data coming out about how effective they actually are, this requires lots of risky/aggro moves) so they flood markets to artificially increase the values of these markets

quote:
It's the classic financial advisors who are selling people on bullshite (i.e., that stocks are currently a good investment because of their dividend yield relative to bond yields) once again. You can hardly blame them either though. They're just doing their jobs.

i somewhat blame them b/c they aren't really good at their jobs but are having their value masked by the insanity of the current market. but, this thread is about "everything being a bubble" and these people clearly are promoting a bubble niche/economy. i can blame them for that

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we're just experiencing overinflated asset prices everywhere because nobody knows what else is better to do,

i agree, but i think there are mini-bubbles within the larger economy. i still think tech is a legit bubble

just take Amazon. they are solely focused on pumping up their stock over profits. that model is being copied everywhere in tech. at some point, that bubble will pop and once the confidence is lost, the whole industry will implode. the tech over-valuation is clearly a bubble b/c it's insanely inflated based on confidence that a very specific inflation will continue and little else. yes tech does have some tangible value, but so did the tulips who were owned after the crash or real estate in 2009

quote:
There are people out there who make a pretty good case that recent U.S. stock market appreciation is correlated to the combined asset balances of the FRB, ECB, BOJ, & PBOC (plus the BOE, SNB, etc.). So even as the Fed begins to wind down, that doesn't mean that other major central banks won't keep propping things up. The Swiss National Bank alone has about $80 billion invested in the U.S. stock market, or about $10,000 for every man, woman, and child in Switzerland. Crazy times.

i agree and i use this more of an example to counter people who claim the US is about to fall. there is no replacement for the US, b/c everyone who may be able to overtake us is in worse positions and investing here

certainly this has extreme effects in isolated examples (like real estate in certain areas) but a much larger macro effect overall

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Posted by GenesChin

The Promise Land

Member since Feb 2012

37722 posts

Posted on 9/22/17 at 12:57 pm to SlowFlowPro

quote:
just take Amazon. they are solely focused on pumping up their stock over profits.

This is a stupid comment and clearly doesn't understand the Amazon strategy. They don't care at all about their stock price. Amazon's strategy/argument is they will have greater delayed profits than the PV of taking profits now. They have a clear plan of becoming profitable if they want

Now there is an argument the investment communprity are stupid and think that concept of delayed profitability works for other companies too. Except they pump up places like twitter who have no clear path to pumping out profits

This post was edited on 9/22/17 at 1:01 pm

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Posted by Doc Fenton

New York, NY

Member since Feb 2007

52698 posts

Posted on 9/22/17 at 2:45 pm to SlowFlowPro

quote:
there are mini-bubbles within the larger economy. i still think tech is a legit bubble

Well, yeah, if everything is generally overvalued, then there will always be some niches that are worse than others. But I don't think the FAANG story is indicative of anything fundamentally askew with the way financial markets operate. Those corporations really are the bright spots of the macro picture, even if they might not be attractively valued at the moment.

The San Francisco unicorns get closer to being a classic example of a tulip-style bubble, but even there, it's not all euphoria. People are wary, and there seems to have been a peak around 2014 or so.

But that's just bankers and venture capitalists doing their best to pick winners, which they aren't that bad at doing, even though everything now is more difficult and inflated. Which brings us to...

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how financial/investment guys aren't really actually that great at picking winning investments

We've talked mostly about the wheelers & dealers and dealmakers who sell deals, and not about the activist investors (Ackman, Icahn, etc.) and the true cold, calculating asset managers and hedge funds who actually get paid solely on picking winners and losers. (The VCs sort of do, but they are really just hoping for one big success story out of 10 as their usual business model.)

One thing that the near-ZIRP environment and popularity of passive investing through indices and ETFs has done, is it's made it much more difficult (related to dispersion metrics and other things) for active money managers to make a living picking individual assets. This doesn't make them any better or worse than they always were (there is always a give and take between active and passive strategies, according to Lasse Pedersen's theory of markets being "efficiently inefficient", to allow for reasonable profit margins for the active crowd), but it's been a huge problem for hedge funds the past several years. Even the HFT quant funds have had a terrible few years, since they make their profits from high-volume trading strategies that don't scale very well.

Which brings us to Grinold & Kahn's "Fundamental Law of Active Management", but I'll leave that for another time, as I am Baton Rouge bound this weekend...

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