“Government
interference into economic affairs almost never alleviates the problem it set
out to solve. The unintended, and perhaps intended, consequences only rally
more calls for further intervention. Because of its countless edicts, the
majority of people who reside in Western economies have no concept of how and
why markets function as they do. They have mistaken crony capitalism or
socialism for genuine capitalism. While mistaken, this distrust of the market
has been the lifeblood of the parasitic state.”
—James E.
Miller, “Learning to Laugh at the State,”
“We have been
living beyond our means. We have been paying ourselves more than our efforts
were earning. We sought political leaders who would assure us that the good
times would never end and that the centuries of boom and bust were over; and we
voted for those who offered that assurance. We sought credit for which we had
no security and we gave our business to the banks that advertised it. We wanted
higher exam grades for our children and were rewarded with politicians prepared
to supply them by lowering exam standards. We wanted free and better health
care and demanded chancellors who paid for it without putting up our taxes. We
wanted salacious stories in our newspapers and bought the papers that broke the
rules to provide them. And now we whimper and snarl at MPs, bankers and
journalists. Fair enough, my friends, but, you know, we really are all in this
together.”
—Matthew Parris
“Suppose
I’m a fund manager worried that if I underperform the market over a
twelve-month period I’ll be out of a job. What value would I attach to a boring
business with dependable and robust cash flows, and therefore represents an
excellent place to allocate preserve and grow my client’s capital over time but
which, nevertheless, is unlikely to ‘perform over the next twelve months? The
likelihood is that I will value such cash flows less than an investor who
considers himself the custodian of his family’s wealth, who attaches great
importance to the protection of existing wealth for future generations, values
permanence highly, and is largely uninterested in the next twelve months. In
other words, an institutional fund manager might apply a ‘higher discount rate’
to those same expected cash flows than the investor of family wealth. They
arrive at different answers to the same problem. The same cash flows are being
valued subjectively and there is no such thing as an objective or ‘intrinsic
value’ embedded in the asset, even though it has cash flows.”
—Dylan Grice in
SocGen’s Popular Delusions, 17 July 2012.
They’ve found yet another shipwreck off the coast of Ireland. The SS Gairsoppa went down in 1941 by a German torpedo. It was laden with 1.4 million ounces of silver. The insured value at the time was 325.000 pounds and it was paid up properly. Assuming they can get to the wreck and bring the loot up, it has a current market value of around 38 million dollars. One can’t help but wonder what the current value would be if the ship had been carrying banknotes instead.
“If you’d invested
a pound in the FTSE in 2005 (when [Bob] Diamond joined the [Barclays] board)
and hung on to your dividends you’d now have £1.08, notes a story in
today’s Times. If you’d invested it in HSBC you’d have 78 pence. If you’d
invested it in Barclays you’d have 29 pence. Which is rubbish, really. In the
same time period, Diamond has been paid £119 million.”
—Merryn Somerset
Webb, “The hounding of Bob Diamond: it isn’t disgraceful, it’s essential,”
posted 4 July 2012 in her MoneyWeek blog.
“All government,
in its essence, is a conspiracy against the superior man: it’s one permanent
object is to oppress him and cripple him. If it be aristocratic in
organization, then it seeks to protect the man who is superior only in law
against the man who is superior in fact; if it be democratic, then it seeks to
protect the man who is inferior in every way against both. One of its primary
functions is to regiment men by force, to make them as much alike as possible
and as dependent upon one another as possible, to search out and combat
originality among them. All it can see in an original idea is potential change,
and hence an invasion of its prerogatives. The most dangerous man to any
government is the man who is able to think things out for himself, without
regard to the prevailing superstitions and taboos. Almost inevitably he comes
to the conclusion that the government he lives under is dishonest, insane and
intolerable, and so, if he is romantic, he tries to change it. And even if he
is not romantic personally he is very apt to spread discontent among those who
are.”
—H.L. Mencken
“They’re there
because people have to have them, not because people believe in them.”
—David Jacob, who
was fired from Standard & Poors in December, in an interview at Bloomberg
about the ratings industry
“I wholeheartedly
agree on the issue of dishonesty in the financial markets. I am muzzled by our
compliance officer and prevented from being as frank as I would like. Your
reference to the delusional hope that keeps investors in the game reminds me of
Nietzsche’s observation that “hope is the worst of all evils, for it prolongs
the torment of man.” Confidence is unraveling before our eyes, but goes unseen
by most. The final stages of disillusionment will be swift.”
—From recent correspondence with a fund
manager whom we admire
“Democracy is a
pathetic belief in the collective wisdom of individual ignorance.”
—H.L. Mencken
“Confidence is the
feeling a person has before he fully understands the situation.”
—Unknown
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