An investor doesn't have a prayer of picking a manager that can deliver true alpha.
With less regulation, I think you would see growth come back. Of course, there are situations where you need regulation. Antitrust regulation, for example, is a good idea because you want competition. But beyond that, it gets very difficult.
The problem that people don't understand is that active managers, almost by definition, have to be poorly diversified. Otherwise, they're not really active. They have to make bets. What that means is there's a huge dispersion of outcomes that are totally consistent with just chance. There's no skill involved it. It's just good luck or bad luck.
After 2008, my brand of finance got a bad rap.
State constitutions typically provide that the state first has to service its debt, then make it pension payments, and then pay for services. What we don't know is whether that order will be enforced. And ultimately, the busted state is going to be looking to the federal government for a bailout. Think Greece, but on a much bigger scale.
I think bubbles are things people see with 20/20 hindsight. If you look at any particular period where prices go up and then they go down, you will always find people who predicted that they would go down. Those are the people you pay attention to.
Market timing doesn't work. If all the bubbles and all this mispricing really exist, how come so few people see it before it turns out that way?
Debates go on to this day about what caused the Great Depression. Economics is not very good at explaining swings in economic activity.
In an efficient market, at any point in time, the actual price of a security will be a good estimate of its intrinsic value.
In my junior year in college, I was getting kind of tired of French. So, I took an economics course, and I loved it. The rest of my two years in college I spent in economics.
After costs, only the top 3% of managers produce a return that indicates they have sufficient skill to just cover their costs, which means that going forward, and despite extraordinary past returns, even the top performers are expected to be only as good as a low-cost passive index fund. The other 97% can be expected to do worse.
People think rationally that the world really is more risky. Imagine in 2008 that investors thought there was a 10% chance we'd have a depression. That would partly justify the drop in prices.
Economies typically do not function well in hyperinflation. The real value of government debt might disappear, but the economy is likely to disappear with it.
Active investment is a zero-sum game. Passive managers don't play the game. They buy something resembling the market as a whole, or some segment of the market, and they don't respond to the actions of active managers.
