Quote for the Week
One of the pieces of advice that I’ve had in my books, going back ten years now, is that investors in bonds should invest only in “full faith and credit” securities. Bonds that have call options or bonds that have credit risks or bonds that are highly structured, like the asset-backed securities and CDOs, just don’t belong in the portfolios of sensible investors.
There’s just systematic mis-pricing of credit and options and complexity. Now it’s obvious when I say that. It wasn’t so obvious when I wrote it ten years ago, and then again in Unconventional Success, and now again in the new version of Pioneering Portfolio Management.
People on Wall Street who are structuring these securities are more sophisticated than the people to whom they are selling them. With that kind of dynamic, when really smart, highly compensated, very clever people are on one side of the trade, and less highly compensated, less clever people are on the other side, you know who’s going to end up in the soup. — David Swensen (source)
From the Archives
Last Call
- Crazy Days in the Stock Market – Owenomics
- The Stories We Tell Ourselves – MicroCapClub
- Should You Be Worried About Bonds? – BtBS
- TIPS Look Tempting. Should You Buy? – J. Ptak
- The Wealth Curve is Backwards – Spilled Coffee
- On 11 Other (More Important) Forms of Currency – Root of All
- Counterfactual Thinking – Critical Thinker
- 10 Steps on the Road to Efficient – S. Godin
- Beauty In My Backyard – Works in Progress
- ‘The Forgotten Empire’: When Russia Colonized California – BBC