Ok, everyone else but Granchio - LOOK AWAY! I'm still offtopic!
Smiley
There's some interesting stuff about Hitler trying to perfect synthetic fuels, in particular he wanted to produce oil from coal. Germany relied heavily on coal for its industrialization (90% of energy, compared to about 50% for U.S.). Some of the German work in this area generated a Nobel Prize in Chemistry (1931). The global glut of oil from Texas at the time almost bankrupted the German company pursuing this, but they got support from the Third Reich, and the from the Luftwaffe by proving they could develop high-quality aviation fuel.
Mussolini led Italy on an invasion of Ethiopia in 1935, and the League of Nations threatened an oil embargo. This apparently had quite an effect on Hitler, as did an event the next year, when the Soviets stopped pumping oil through a distribution system that the Germans had acquired. He then announced to the world that Germany had figured out synthetic oil (a bluff), and shortly thereafter he started violating treaties w/ France regarding military outposts on their border.
The blitzkrieg strategy was also based at least in part on oil supplies. The idea was to avoid long draining conflicts, and to capture fuel supplies whenever possible.
Anyway, the book I mentioned before goes on for some time about this stuff. Near the end of the war Patton was positively apoplectic about lack of enough gas to finish the job, he once said something like "I could finish this war right now, if I only had more gas"
-t.
PA thread
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tristanreid
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PA thread
If you can make computers as smart as humans you will have invented a machine that can sing the words to the Flintstones tune but will forget to pay the phone bill.
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aaron
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PA thread
The part of tristanreid's post that is vaguely on topic is the claim that investment results, even over long periods of time, depend on when you start and stop. That's clearly true, it's difficult to find any strategy with a 30-year or longer history that doesn't have a tremendous Sharpe ratio over some long period, long enough to make MD's out of new analysts and eminent experts out of new PhD's (and about ten times longer than necessary to create a bestselling book or investment fad, and several billion times as long as it takes to make a CNBC expert).
Your grizzled veteran investor looks for the strategies with non-terrible Sharpe ratios over their worst long-term period, plus good Sharpe ratios over their entire history and some economic justification. But "my worst periods are better than his worst periods" is a tough sell when the other guy is touting his tremendously great good periods.
Your grizzled veteran investor looks for the strategies with non-terrible Sharpe ratios over their worst long-term period, plus good Sharpe ratios over their entire history and some economic justification. But "my worst periods are better than his worst periods" is a tough sell when the other guy is touting his tremendously great good periods.
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tristanreid
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PA thread
So are bubbles inevitable because of human nature?
Aaron, you said rational investing is a tough sell in good periods, but even in bad periods, I can't shake the feeling that today's average 'investor' would rush to invest in the next bubble, if s/he but knew what it was. Is that an overly fatalistic view? It implies that regulation is necessary to prevent a tragedy of the commons.
-t.
Aaron, you said rational investing is a tough sell in good periods, but even in bad periods, I can't shake the feeling that today's average 'investor' would rush to invest in the next bubble, if s/he but knew what it was. Is that an overly fatalistic view? It implies that regulation is necessary to prevent a tragedy of the commons.
-t.
If you can make computers as smart as humans you will have invented a machine that can sing the words to the Flintstones tune but will forget to pay the phone bill.
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Johnny
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PA thread
Interesting, rambling discussion. 
With bubbles, I think there are really only two choices: in all the way through and out all the way through. The choice that is most frequently discussed (miraculously getting out just before the bubble bursts) is, let's say, an unreliable strategy. Of the two choices, I think that in all the way through is more lucrative than out all the way through. Hence, I believe that it is rational to rush into the next bubble. Better than sauntering towards it and arriving late and definitely better than missing out on the whole thing.
With bubbles, I think there are really only two choices: in all the way through and out all the way through. The choice that is most frequently discussed (miraculously getting out just before the bubble bursts) is, let's say, an unreliable strategy. Of the two choices, I think that in all the way through is more lucrative than out all the way through. Hence, I believe that it is rational to rush into the next bubble. Better than sauntering towards it and arriving late and definitely better than missing out on the whole thing.
Stab Art Radiation Capital Structure Demolition LLC
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Martinghoul
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PA thread
Bubbles are, in fact, inevitable, in my view. All has to do with the agency/incentive problem that is inherent in capitalism, so I guess you could blame human nature. Even in the absence of excess leverage, bubbles would still occur.
Speaking of PA, I am desperately trying to a) get into debt; b) buy some physical assets to hold. Doing the above while avoiding the illiquidity of property is a pain in the a*rse. If I could borrow against my pension, it would be a dream come true.
Speaking of PA, I am desperately trying to a) get into debt; b) buy some physical assets to hold. Doing the above while avoiding the illiquidity of property is a pain in the a*rse. If I could borrow against my pension, it would be a dream come true.
Insofar as I may be heard by anything, which may or may not care what I say, I ask, if it matters, that you be forgiven for anything you may have done or failed to do which requires forgiveness...
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aaron
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PA thread
Bubbles are not inevitable, but the alternative is stagnation. Bubbles and crashes are the only things that get most people out of ruts, and free things up for new ideas.
The ideal strategy is constant exposure. Jump in early and ramp up to significant size quickly. Don't worry about getting your fingers burned in some false starts, it's worth it not to miss any of the genuine opportunities. More important, the time and energy needed to tell the false starts from the genuine opportunities doesn't improve your selection ratio much, and makes you too late to the good ones.
Because you are early and big in all the good opportunities, you don't have to increase exposure as the bubble froth expands. You don't have to guess when it will end, again the trouble and expense of trying doesn't help much, and makes your exposure too volatile. Better to make up your mind at the beginning that you will take a significant loss when things collapse.
In this way you are the victim of every idea that fizzles out, and every bubble that pops. That's the price you pay for getting all the good stuff. It works very well over time, in good markets and bad, in bubbles and crashes. The trick is to always survive.
The perfect bad strategy is to be skeptical of all new ideas and investigate thoroughly before doing anything. Once you have statistical proof that people make money in the idea, jump in really big, without the experience of everyone else the the market. Ramp up to insane levels, the more you make the more you bet, guaranteeing that your losses in the crash dwarf any profits to date. Then blame the unprecedented crash for your troubles and ask for a bailout.
The ideal strategy is constant exposure. Jump in early and ramp up to significant size quickly. Don't worry about getting your fingers burned in some false starts, it's worth it not to miss any of the genuine opportunities. More important, the time and energy needed to tell the false starts from the genuine opportunities doesn't improve your selection ratio much, and makes you too late to the good ones.
Because you are early and big in all the good opportunities, you don't have to increase exposure as the bubble froth expands. You don't have to guess when it will end, again the trouble and expense of trying doesn't help much, and makes your exposure too volatile. Better to make up your mind at the beginning that you will take a significant loss when things collapse.
In this way you are the victim of every idea that fizzles out, and every bubble that pops. That's the price you pay for getting all the good stuff. It works very well over time, in good markets and bad, in bubbles and crashes. The trick is to always survive.
The perfect bad strategy is to be skeptical of all new ideas and investigate thoroughly before doing anything. Once you have statistical proof that people make money in the idea, jump in really big, without the experience of everyone else the the market. Ramp up to insane levels, the more you make the more you bet, guaranteeing that your losses in the crash dwarf any profits to date. Then blame the unprecedented crash for your troubles and ask for a bailout.
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akimon
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PA thread
It's around the time of the year again to revisit this thread! Wink
Last year, my punt into the metals sector and commodity-related assets worked out well, but I definitely missed the boat on last year's equity rally.
Where should we put our own money in this year? What has changed in the world and how should we adjust our investments in the PA account?
Let's put our hard-earned money to work again this year!
Few thoughts / themes and ramblings:
- Currencies: USD, and USD assets may have lost their status as safeguard instruments (debatable, as other G10 currencies are just as problematic). May need to diversify away from possible currency risk.
- Emerging markets: As with the above point, emerging markets significantly performed developed markets last year. We could see further transition of wealth this year as emerging countries surpass developed countries.
- Fixed income: I don't buy into the whole hyper-inflation thing yet. With a possibility for a very slow recovery I think fixed-income holdings is still attractive as part of one's PA. The Fed is probably not going to hike when we are still seeing 10%+ unemployment. Maybe STRIPS or related securities are safe places to put our money (and get better tax treatment in some places).
- Commodities: Demand for commodities are not going away. This year's price action is not a bubble, we will see more and more demand.
- Risk assets / Equities: Having missed the boat in equities last year, it maybe stupid to buy now. Keep in mind that if you work for a financial institution, much of your comp this year will be tied to stock prices anyways so buying at this point could be adding to systematic risk correlated to your day job. Maybe property investments, or direct private investments in niche businesses could be a better alternative than equities.
- "Green energy" companies?
Any more ideas?
Last year, my punt into the metals sector and commodity-related assets worked out well, but I definitely missed the boat on last year's equity rally.
Where should we put our own money in this year? What has changed in the world and how should we adjust our investments in the PA account?
Let's put our hard-earned money to work again this year!
Few thoughts / themes and ramblings:
- Currencies: USD, and USD assets may have lost their status as safeguard instruments (debatable, as other G10 currencies are just as problematic). May need to diversify away from possible currency risk.
- Emerging markets: As with the above point, emerging markets significantly performed developed markets last year. We could see further transition of wealth this year as emerging countries surpass developed countries.
- Fixed income: I don't buy into the whole hyper-inflation thing yet. With a possibility for a very slow recovery I think fixed-income holdings is still attractive as part of one's PA. The Fed is probably not going to hike when we are still seeing 10%+ unemployment. Maybe STRIPS or related securities are safe places to put our money (and get better tax treatment in some places).
- Commodities: Demand for commodities are not going away. This year's price action is not a bubble, we will see more and more demand.
- Risk assets / Equities: Having missed the boat in equities last year, it maybe stupid to buy now. Keep in mind that if you work for a financial institution, much of your comp this year will be tied to stock prices anyways so buying at this point could be adding to systematic risk correlated to your day job. Maybe property investments, or direct private investments in niche businesses could be a better alternative than equities.
- "Green energy" companies?
Any more ideas?