Sunday, January 28, 2018

Edward Harrison — Grantham: The essence of every bubble is wonderful fundamentals, euphorically extrapolated

Jeremy Grantham sat down with Consuelo Mack at WealthTrack to expand upon his recent bullish comments about the US markets. However, far from being bullish, the essence of Grantham’s comments were extremely bearish, suggesting investors could expect only a couple of percent real return over the next couple of decades in US equities. The veteran investor also made bearish comments about the US bond market. His advice is to rotate out of US equities and pile into emerging markets, as much as you dare.
It must be noted first that Jeremy Grantham has called a few stock market bubbles — the tech stock bubble of the 1990s and the global credit bubble of the 2000s, to be sure. And he was spot on in timing the 2009 market bottom. See my February and March 2009, Jeremy Grantham: “Pull the trigger” and More bullishness from Jeremy Grantham.
So when Grantham, Co-Founder and Chief Investment Strategist at Boston-based fund manager GMO, talks of how to deal with a market melt-up, we should listen. In contrast to his written piece a couple of weeks ago, the views Grantham expressed in his WealthTrack interview show someone who is quite concerned about overvaluation in US markets, both in absolute and relative terms. I want to pick apart what he said and follow it with the video of his conversation.
Interesting tidbit.
He says,“the world has changed in many important ways I think,” suggesting he now believes corporate profit margins will not mean revert — that labor will not receive the same share of profits that it historically has done.
Demand problem that will be viewed as an over-supply problem.

Credit Writedowns
Grantham: The essence of every bubble is wonderful fundamentals, euphorically extrapolatedEdward Harrison

20 comments:

André said...

Where are the "wonderful fundamentals" in the bitcoin bubble?

Matt Franko said...

The wonderful fundamental is no authority...

Greg said...

Actually Matt the "no authority" line is a not quite true. Its a question of who the authority is and what rules they use. Someone decided how much bitcoin would be mined and how to mine it. Change either of those variables and price changes significantly.

Why that someone chose that particular amount and that particular method was probably an advantage for HIM. Every type of payment system has to have rules and rulers, its simply a matter of who and what.

Bitcoin simply bypasses the US Federal Reserve but puts someone else (or group) in that position. At least the Feds rules are published, discussed and changed quarterly. Whats the logic behind bitcoin and why?

Matt Franko said...

That’s not authority it is a technical parameter...

Matt Franko said...

Also there are many more of these things being created every week... when bitcoin is all mined there are more created...

Greg said...

Technical parameter is a rule and he who set up the parameter was an authority.

You can try to argue that these "authorities" and these "rules" are better but you cant deny what they are.

Matt Franko said...

Genie is out of the bottle...

Greg said...

Only until people find that the money they want to pay with on Monday is worth 20% less on Friday. As long as Bitcoin is listed as a price in some other terms those other terms will equally important

Bitcoin can handle 7 transactions a second... SEVEN!!!! They would have to add at least 20,000 other crypto platforms(operating at the same speed... quite an assumption) to match what VISA can handle right now.

Im not saying its going away but there is no way in hell it can replace the current payment system as it is currently being used


Why does it take so long to complete a transaction? Its like me giving you a hundred dollar bill and you having to show your supervisor to determine if its a fake and then he has to show his boss, and then he has to show his boss.... on and on and on until someone shows it to the guy at the mint and he says " Yeah I printed that last Tuesday ....its good"

Matt Franko said...

You don’t get paid with VISA/MC for days...

Matt Franko said...

Then they nick you for 2-3%...

Matt Franko said...

Here is ripple data:

https://ripple.com/xrp/market-performance/

They process in 3.52 seconds (not days) and take $0.0000X ...

Tom Hickey said...

Ripple is a real-time gross settlement system (RTGS), currency exchange and remittance network by Ripple. Also called the Ripple Transaction Protocol (RTXP) or Ripple protocol,[3] it is built upon a distributed open source Internet protocol, consensus ledger and native cryptocurrency called XRP (ripples). Released in 2012, Ripple purports to enable "secure, instantly and nearly free global financial transactions of any size with no chargebacks." It supports tokens representing fiat currency, cryptocurrency, commodity or any other unit of value such as frequent flier miles or mobile minutes.[4][5] At its core, Ripple is based around a shared, public database or ledger,[6] which uses a consensus process that allows for payments, exchanges and remittance in a distributed process.

The network can operate without the Ripple company.[7] Among validators are companies, internet service providers, and the Massachusetts Institute of Technology.[8][9]

Used by companies such as UniCredit, UBS and Santander, Ripple has been increasingly adopted by banks and payment networks as settlement infrastructure technology,[10] with American Banker explaining that "from banks' perspective, distributed ledgers like the Ripple system have a number of advantages over cryptocurrencies like bitcoin."[11]

As of January 26, 2018, XRP is the third largest coin by market capitalization.[12]...


Ripple Payment Protocol

Matt Franko said...

And Iirc I thought I read that SWIFT still runs under WindowsXP ?

Tom Hickey said...

Not unusual for networks to run older operating systems that are tested, stable and secure.

Some are still running COBOL. Now there is a need for COBOL programmers again to keep them going.

High transaction cost and considerable uncertainty involved with switching systems.

"Leave it alone if it isn't broken."

Greg said...

Here is something else about Ripple;



"In terms of interbank payments, many people mention Ripple as a promising way to transfer money between banks. Over the last 30 days it processed two billion dollars (as of this writing) worth of interbank and interpersonal transactions — about 40 seconds’ worth of volume on the SWIFT interbank network — after three years of being available to banks to trade 90% of the world’s high-volume currencies. This is like the proportion of US GDP comprised by toothpick sales. Why haven’t banks preferred this new technology? The answer is that setting up a Ripple Gateway isn’t actually much different than using the existing corresponding-account system — except that a lost password or security token can lead to much larger and more instant actual losses — which, as a reminder, has happened to more leading bitcoin exchanges than have managed to avoid it. The same features that make the banking system attractive to end users also make it attractive to banks. They already have ledgers, and don’t need to distribute them, anonymize them, encrypt them, publish them, and make them irreversible."





Tom Hickey said...

As always, tradeoffs.

Matt Franko said...

Greg from Tom's excerpt:

"The network can operate without the Ripple company."

Again, no authority, the f-ing thing can be on autopilot...

The system was created by man and left to run "free!!!" with no regulation ... its a libertarian wet dream come true...

If you read from Augustus epitaph, he wrote "when the taxes fell short, I spent from my patrimony..." iow he had authority and knew it to just issue more "money" when he felt it was necessary for his purposes ... no problemo...

The Lord: "be paying to Caesar what is Caesar's....." who is the "Caesar" in the bitcoin scenario?? Nobody as far as I can tell....

Who is in charge of any of these cryptos once they are created? iow if there is more bitcoin needed who is in authority to issue more? NO-BOD-EEE....

Perhaps you are conflating 'creation' with 'authority'.... they are two separate concepts... I agree they are being created by man, but I dont see any authority about them once they are created in fact I see the opposite...



Greg said...

Are you concerned about the cryptos usurping standard payment systems or are you just quibbling about the nature of them, cuz I’m not sure.
I agree that they are a libertard wet dream but I don’t think 1) they are nearly as politics free as they are purported 2) they will ever present much of a threat to national currency/payment systems

Matt Franko said...

Both, I don’t think their adoption may primarily be here in nations where we have decent systems but what about the shithole nations?

It could catch on out there as a better alternative to their incompetent/corrupt systems they have been dealing with for decades...

Tom Hickey said...

Business Insider
Ripple’s XRP sinks to its lowest levels since the cryptocurrency ‘bloodbath’
Graham Rapier

Ripple's XRP cryptocurrency is down 10% in the past day, trading at its lowest levels since the cryptocurrency bloodbath earlier this month.

These things are just too volatile.