Ghost stories are scary because they mean that you might have to live forever.


Beta is the New Alpha … or Whither (Wither?) 2 and 20?

Excellent post on active investment management’s Hobson’s choice – retreat to the sidelines or get your high-fee ass kicked by de minimis fee index funds.

From Heisenberg Report:

We – and plenty of others – have noted that active management has begun to throw in the towel when it comes to besting passive. How do you outperform a benchmark that’s being driven by a perpetual motion machine? You can’t. And especially not when you’re playing from behind by virtue of the fact that the people replicating that benchmark are paying as little as 5bps in fees to participate. And so, what do active managers do? Well, they just stop trading. They become passive investing vehicles themselves.

via ‘Passive Is The New QE!’: One Bank Admits We’ve Entered A ‘Black Hole’


“Sorry, I gotta go pick some stocks….”
“No, baby. That business is dead….”


Heisenberg Knocks at Ray Dalio’s Door

Heisenberg’s take on Ray Dalio’s new LinkedIn view on inequality. Bile ducts everywhere, rejoice.

See, it’s not that hedge fund managers are virtue signaling from the comfortable confines of their weird forest kingdoms, and it’s not that fake populist Presidents are feeding uneducated white Americans a big ol’ plate of steaming bullshit just so they can get elected and pass tax cuts that save their own families $1.1 billion, and it’s not that millionaire bloggers are just spewing outright lies and clickbait conspiracy theories in order to buy expensive toys and lounge around in their mansions with pet poodles. No, that’s not what it is. None of that is true. I swear.

The truth, rather, is that Janet Yellen is out to get you.

via Let’s Listen To Ray Dalio Explain How Janet Yellen Is Creating Inequality |

Latest Sign of Market Top: Talk of “Minsky Moment”

In early 2007, when I worked for Breakingviews, we worried a lot that the long period of prosperity had allowed massive risks to fester unheeded – a syndrome famously described by economist Hyman Minsky. A “Minsky Moment” is when all those chickens come home to roost at once, which happened soon after.

Now the head of China’s central bank, no less, is raising the same worry. From the FT:

US bond traders have begun a new trading day looking at higher prices for Treasury paper while Wall Street is set to open lower. The mood swing comes as the head of China’s central bank has summoned the spectre of a Minsky Moment.

Hyman Minsky is a economist famed for his theory about the risk of a sudden collapse in asset prices triggered by excessive debt or credit growth. The recent surge in global equity and credit markets has been accompanied by a number of strategists warning of a Minsky scenario and that chorus has elevated in tone by Zhou Xiaochuan, the PBOC governor.

He reportedly expressed concern that corporate and household debt are rising too quickly and said China need to defend itself from excessive optimism that could lead to a “Minsky Moment’’.

via US stock futures lower as China warns on ‘Minsky moment’