Wednesday, September 5, 2012

The Lending Lindy

Investment Outlook

Not sure if this is bullshit or not, so I don't know if I hate it or not.  I put it up because he writes about something that I've noticed for a long time now.  It's a long term trend towards zero-interest rate, and that ain't good, kids.
If the dancing has slowed down, then the reason is not just an overweight partner. It’s that the price of money (be it in the form of a real interest rate, a quality risk spread, or both) is too low. Our entire finance-based monetary system – led by banks but typified by insurance companies, investment management firms and hedge funds as well – is based on an acceptable level of carry and the expectation of earning it. When credit is priced such that carry is no longer as profitable at a customary amount of leverage/risk, then the system will stall, list, or perhaps even tip over.

Well, that part of the essay ain't bullshit.  But I don't know about the rest.  I am about this close--- two fingers a millimeter apart--- to calling bullshit on this article.  But I won't.

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