“Abundance” All Over Again

@ReformedBroker piece entitled “Abundance” has really been resonating in my Twitter stream and for good reason. It’s an excellent piece but somehow oddly familiar to me. A little google search and I found it’s actually a theme written quite extensively by @todd_harrison from Minyanville.

His tag line is that we have deflation in things we DON’T NEED (TV’s, phones, NetFlix, Facebook) and inflation in things we NEED (education, healthcare, housing) He calls it “inflastagdeflation”.

http://www.minyanville.com/businessmarkets/articles/Wal-Mart-Stagflation-Bear-Stearns-Merril/6/20/2007/id/13158

That article was written in 2007 and he has continued to write about it, from 2014 with an excellent chart:

http://www.minyanville.com/special-features/random-thoughts/articles/Todd-Harrison-Prepare-for-the-Return/5/5/2014/id/54796

inflastagdeflation

I’m still trying to wrap my head around WHY exactly this malinvestment¬†occurs?

Edit: I wrote a long, winding hypothesis and decided to delete it. I’d rather hear your thoughts/comments/links.¬†

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DrawDown Fever

Everyone, everywhere has no tolerance for draw down. More than rate of return, drawdown seems to be the ultimate optimization metric. “If I reduce the drawdown I can increase the leverage and viola!” This usually ends badly. I love this article because it shows that no matter who the manager is or what the strategy is, drawdowns are inevitable. Institutions manage money because they are supposed to be more sophisticated, only to do exactly what retail does (panic at the wrong time) and charge you a nice fee for it.

https://blog.thinknewfound.com/2016/02/god-buffett-three-oenophiles/