Waiting for the Last Dance

“…it is highly probable that we are in a major bubble event in the U.S. market, of the type we typically have every several decades and last had in the late 1990s. It will very probably end badly, although nothing is certain. I will also tell you my definition of success for a bear market call. It is simply that sooner or later there will come a time when an investor is pleased to have been out of the market. That is to say, he will have saved money by being out, and also have reduced risk or volatility on the round trip. This definition of success absolutely does not include precise timing. (Predicting when a bubble breaks is not about valuation. All prior bubble markets have been extremely overvalued, as is this one. Overvaluation is a necessary but not sufficient condition for their bursting.) Calling the week, month, or quarter of the top is all but impossible….

…Nothing in investing perfectly repeats. Certainly not investment bubbles. Each form of irrational exuberance is different; we are just looking for what you might call spiritual similarities. Even now, I know that this market can soar upwards for a few more weeks or even months – it feels like we could be anywhere between July 1999 and February 2000. Which is to say it is entitled to break any day, having checked all the boxes, but could keep roaring upwards for a few months longer. My best guess as to the longest this bubble might survive is the late spring or early summer, coinciding with the broad rollout of the COVID vaccine. At that moment, the most pressing issue facing the world economy will have been solved. Market participants will breathe a sigh of relief, look around, and immediately realize that the economy is still in poor shape, stimulus will shortly be cut back with the end of the COVID crisis, and valuations are absurd. “Buy the rumor, sell the news.” But remember that timing the bursting of bubbles has a long history of disappointment.”

-Jeremy Grantham, “Waiting for the Last Dance.” GMO.com. January 2021

I thought in March 2020 that COVID-19 was going to clobber markets, and I was dead wrong. Too early. But, at some point, markets have to reflect the economic reality, which should happen Real Soon Now.

Should You Refinance Your Mortgage?

“Ask your broker what rate they would offer you for a ‘zero closing cost’ refinance. Mechanically, this really means the lender will offer you a higher rate, so that they can sell your mortgage loan for a higher price — they will pay you for this by throwing some cash into the deal to cover the closing costs. This makes optimal refinancing strategy very easy for the borrower! Just refinance every single time your ‘zero closing cost’ rate is below your current rate. No more worrying about whether rates will fall more, whether it takes too long to break even on initial costs, very simple.”

Advice from the Internet, caveat emptor.

Sweet Enough

“It’s not how much you have. It’s the difference between what you have and what you spend. If you have more than you spend, you’re rich. If you spend more than you have, you’re not. If you live cheaply, it’s easy to be free.”

—Derek Sivers, “How I got rich on the other hand.” sive.rs. October 30, 2019.

Money: enough. Additional windfalls don’t seem to bring me any lasting joy, but I also don’t have so much money that it makes me nervous. It’s enough to feel safe and empowered, and that’s all I need. Meanwhile, giving away money has brought me lasting happiness, without creating a feeling of shortage or regret.”

—Mr. Money Mustache, “The Sweet Spot.” mrmoneymustache.com. August 4, 2020.

Harvard’s Reinhart and Rogoff Say This Time Really Is Different

“And you want to talk about a negative productivity shock, too. The biggest positive productivity shock we’ve had over the last 40 years has been globalization together with technology. And I think if you take away the globalization, you probably take away some of the technology. So that affects not just trade, but movements and people. And then there are the socio-political ramifications. I liken the incident we’re in to The Wizard of Oz, where Dorothy got sucked up in the tornado with her house, and it’s spinning around, and you don’t know where it will come down. That’s where our social, political, economic system is at the moment. There’s a lot of uncertainty, and it’s probably not in the pro-growth direction.”

-Simon Kennedy, “Harvard’s Reinhart and Rogoff Say This Time Really Is Different.” Bloomberg. May 18, 2020.

Probably the best thing I’ve read on the financial implications of the coronavirus pandemic. If you have any interest in GDP, the economy, etc., this is worth reading in full.

Knowledge of the Future

“…there are (a) facts, (b) informed extrapolations from analogies to other viruses and (c) opinion or speculation.

…if you’re experiencing something that has never been seen before, you simply can’t say you know how it’ll turn out.

…There’s no algorithm for deciding whether to favor life for a few (or for thousands) versus economic improvement for millions.”

-Howard Marks, “Knowledge of the Future.” Oaktree Capital. April 14, 2020.

Interesting throughout.

If You Want to Be Happy, Spend Your Bonus On Your Coworkers | Jeremiah Stanghini

“How would you react if your company made a slight change to your bonuses this year. Instead of receiving your usual 1% or 10% bonus, depending on your industry, what if your boss said you had to donate that money to a charity or that you had to spend that money on your fellow coworkers?

I’d imagine that you probably wouldn’t be too happy, am I right? That bonus you were looking forward to at the end of the year is “yours” and you should get to spend it on you and your family. Except, research shows that’s not the case. In fact, the research indicates that spending the money on someone other than yourself actually leads to greater happiness. More than that, it can lead to your improved performance at work.”

—Jeremiah Stanghini. “If You Want to Be Happy, Spend Your Bonus On Your Coworkers.” jeremiahstanghini.com. September 20, 2013.

The Cost of Wars

“One of the striking aspects of American military power is how little serious attention is spent on examining the key elements of its total cost by war and mission, and the linkage between the use of resources and the presence of an effective strategy. For the last several decades, there has been little real effort to examine the costs of key missions and strategic commitments and the longer term trends in force planning and cost. Both the Executive Branch and the Congress have failed to reform any key aspect of the defense and foreign policy budgets to look beyond input budgeting by line item and by military service, and doing so on an annual basis.”

—Cordesman, Anthony. “The Cost of Wars.” CSIS. June 26, 2017.