anecdotes

In Chicago’s commodity pits, we measured risk by calculating how much we’d personally lose if we got stopped out. Clearing firms stood in the shadows, scythes sharpened, Grim Reapers. At Lehman in the early 1990s it was no different. Then in 1995, management gave us a tool called Value-at-Risk (VaR). It seemed foolish at first, because it was. VaR calculated past correlations of each position to all others, observed

“Where will we be in seven years?” asked Lithium, handsfree on Highway One, repeating my question. We were talking about stocks, which investors assume return 7% per year on average, forever. That means they rise 60% every 7yrs, which would leave the S&P 500 at 4300 in 2025. But GMO now forecasts that US large cap equities will return -2% per year in nominal terms each year for the next seven (-4.2% per year in r

“Remember that bad oyster?” I asked. He groaned, it was years ago. “You know there’s no pretty way to deal with food poisoning. You got two options, both awful,” I continued. He agreed. We were talking politics, policy, our President. My brother is a scientist, entrepreneur. The greatest threat his company faces is that the Chinese steal his technology. Because that’s what they do. Sounds ugly, but if there’s an Amer

He looked back, steps in the snow. And retraced the extraordinary 10yr path to 2008. The Global Financial Crisis cut far deeper than recent predecessors; decades of policy to abolish the cycle had created the 100yr storm it sought to stem. Central bankers responded with a breathtaking experiment in the meaning of money, which was printed in quantities previously considered unfathomable, and priced at rates that defie

“Every market has its generals,” said the CIO, atop the hill, surveying the battlefield. “Bull markets march onward, upward until their leaders die,” he said, lowering his binoculars, smoke rising from the valley floor. Banks led the last great bull market. Fueled by reckless lending and leverage, loose regulation, moral hazard, and the wondrous illusion of boundless riches that accompany all reflexive markets, these

“I’m going to puke,” said Mara. We waited for the call, the text, the result. Our daughter Olivia was attempting the impossible. “Tell me she’s going to make it,” whispered Mara. I quietly considered the odds. Sighed. Olivia is a force of nature, her spirit pure Olympic Gold. But there’s one problem. She’s tiny. Usain Bolt trapped inside a pipsqueak. “We should have heard by now.” Olivia flew to California alone. I’d

Some investors bought stocks. Others purchased bonds. The two in combination held certain appeal. 60% of the former and 40% of the latter seemed like good round numbers. So it went for decades. In fact, it still does. But we improve in all pursuits. And as we sought to enhance investment returns, we discovered the power of diversification. Our business schools taught every eager attendee that it represents their only

“The period between now and 2020 will be decisive in finishing the building of a moderately prosperous society in all respects,” said Xi Jinping to 2,200 comrades. “Building on this, China will see the basic realization of socialist modernization by 2035 after 15 years of hard work,” he explained, abolishing the constitutional 2-term limit for Presidents. China is now making its move. For decades, its greatest fear h

“All children are born artists,” said Picasso, “The challenge is to remain an artist as we grow up.” I was watching ‘Do Schools Destroy Creativity,’ Sir Ken Robinson’s brilliant TED Talk. One of my portfolio managers had suggested it, Kanzo, and felt its wisdom held certain crossovers to the investment process. Sir Ken told a story: A little girl was in a drawing lesson. She was six, at the back, and hardly ever paid