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Hmmm... I don't really like this comment and the fact that it's being upvoted. Regarding 1) Why are you going on over 6 sentences to explain that capital (just

Hmmm... I don't really like this comment and the fact that it's being upvoted. Regarding 1) Why are you going on over 6 sentences to explain that capital (just like labor) commands a return on investment in the marketplace, while the simple message being delivered is that in fact there is a perceived anomaly going on with these exceptional capital growth rates. If the system, of how the Fed hands out money to banks and creates the incentive for a false bubble, is the problem at hand, then an answer citing a lesson in capital markets is not helpful. Regarding 2) Again, I don't like this short-sighted smack-down. Actually, I like this quote. Well, if I buy an asset (own it) then I have made an implicit judgement to how I assess the value of the stock. So thereby the fluctuation compared against this base value does very well matter to me. Regarding 3) In a time of failure of capital markets the answer to the problem voiced here seems to be "self-interest". Again, a short-sighted smack-down with a resolve that sounds catchy. The answer to this whole financial mess does not lie in the private sector, for capital markets, as they have shown, are quite narrow-minded. Bad oversight has led to this. The solution lies in looking at long-term effective regulation, which goes beyond the perspective that narrow-minded self-interest can deliver. The Chicago school of thought in Economics truly has suffered in 2008. Sorry, reading the article again... the point is valid, that blind belief in non-educated financial advisors (basically the equivalent of used-cars salesmen) or profit-motivated pros is deadly.

HSO 17y ago
Sorry if I ranted but I went on for "over 6 sentences" because I am sensitive to this cliche of investors/speculators as nonproductive blood suckers. It was one of the images that was used in a certain historical catastrophe where I live (Germany). It's also a very popular image today, risking throwing the baby (capitalism) out with the bathwater (corruption, greed, ...). Regarding 2, I also like the quote. But the article misquotes it by leaving out the crucial part: independent valuation, based on economic fundamentals. I think you overestimate people's "implicit judgement". Many if not most people buy because the price recently went up, and vice versa, without reference to fundamentals or doing their homework. Leaving out the valuation part makes it read as if Klarman was simply inverting the trend-followers. But not so, the point was doing independent research and acting only when price deviates sufficiently far from one's own judgment.
- christofd 17y ago
  How ironic, I've lived a long time in Germany. Didn't expect a pure pro-market comment to come from there, which doesn't mean that there is anything wrong with a pro-market view (just to clarify). The historical context is interesting; in other countries speculators are pursued often with more vigor. Even more ironic, that after the downer the Chicago school of thought (Economics) received in 2008, the President's economic and intellectual team is, well, from Chicago.

HSO 17y ago

Sorry if I ranted but I went on for "over 6 sentences" because I am sensitive to this cliche of investors/speculators as nonproductive blood suckers. It was one of the images that was used in a certain historical catastrophe where I live (Germany). It's also a very popular image today, risking throwing the baby (capitalism) out with the bathwater (corruption, greed, ...). Regarding 2, I also like the quote. But the article misquotes it by leaving out the crucial part: independent valuation, based on economic fundamentals. I think you overestimate people's "implicit judgement". Many if not most people buy because the price recently went up, and vice versa, without reference to fundamentals or doing their homework. Leaving out the valuation part makes it read as if Klarman was simply inverting the trend-followers. But not so, the point was doing independent research and acting only when price deviates sufficiently far from one's own judgment.

christofd 17y ago
How ironic, I've lived a long time in Germany. Didn't expect a pure pro-market comment to come from there, which doesn't mean that there is anything wrong with a pro-market view (just to clarify). The historical context is interesting; in other countries speculators are pursued often with more vigor. Even more ironic, that after the downer the Chicago school of thought (Economics) received in 2008, the President's economic and intellectual team is, well, from Chicago.