Tuesday, April 9, 2013

Bass Critique and Tyler Cowen talks

Continuing with the last post.
Something from Credit Writedowns here.

Very interesting criticism. There is a transcript of the Bloomberg Video at the CW link.
The Japan position is a hedge against the 90% long positions he has in the rest of his portfolio.
Furthermore, the risk reward is better than the subprime trade - the subprime trade was a loss of 10-11% a year and a 10x return possibility; the Japan trade is a loss of 1-2% a year and a 300x return. Very bold thing to say. I am interested.

I liked Bass' points about how quickly things can go from stable to unstable, and he cites Cyprus, Portugal, etc. for that.
Always difficult to time these things.
He also says that Gold should be higher and that he does hold Gold in the portfolio.

I like how he says that George Soros is a much better investor than he (Bass) is.

Going back to Japan, the 10 year yield has dropped from 1.5% odd to 0.5% odd in the last 3 years. Where to from now? With the Japan mandate of monetary expansion, one would suppose that the yield should start moving up; but things have a funny way of working.

Oh, and love the example he gave about activist investing.
He was involved in an activist role once; a regional airline and consolidation made the best economic and social sense
They got 2 board seats and managed to get an offer above their purchase price - but then they took it to the pilots union and the union made the uneconomical choice because of which they would go the way of the 'dodos', which they did, because the union turned it down.
Hayman lost money and that is activist investing 101.


And now, Tyler Cowen adds his 20 cents.

I like the first 2 points:

1. If I understand the announcements correctly, this is still only a two percent inflation target, so it’s not going to end in hyperinflation.  The arguments against this new policy simply aren’t that strong and there is a chance it helps.
2. Most of all, we sorely lack a better understanding of how money matters when it does matter.  Are we actually to believe that after decades of slow growth, nominal wages remain too high, even though most individuals have retired, changed jobs, died, changed job descriptions, and so on?  Wages do eventually get reset, even in sticky wage models.  The conditions of jobs change even when the nominal wage doesn’t.  So why should the notion of sticky wages be very relevant here?

No comments:

Post a Comment