Gold and Silver ALSO showing no signs of you and Jim’s expectation for prolonged inflation.
???
I said nothing about expecting prolonged inflation.
I am pretty agnostic on the subject, and if anything I probably expect lower prints sooner than most observers.
The problem is simpler:
Almost any plausible trajectory of inflation will leave almost any bond slate with a negative or laughably low real return.
The last time I bought bonds, German Bunds were paying over 8%.
I did fine on those.
Show me a yield and I’ll change my tune. Till then it’s a way of showing how silly you are.
I heard it a little differently. A job not worth doing well is not worth doing at all.
That’s a completely different saying, and in a different direction. It’s really the inverse of what Jim said.
The saying I knew, and I kept drumming into the heads of the junior programmers who worked under me – and to my kids – is
“If it’s not worth doing, it’s not worth doing well”.
I had one programmer who spent a whole lot of time & effort coding up a routine for sorting a component of our system. When I found out, I pointed to him that this component only ran once and only when the software was first installed. The sort wasn’t even worth doing at all.
I had one programmer who spent a whole lot of time & effort coding up a routine for sorting a component of our system. When I found out, I pointed to him that this component only ran once and only when the software was first installed. The sort wasn’t even worth doing at all.
The most extreme case of programmer incompetence I ever ran into was back in the days of large main frame computers with banks of magnetic tape drives each the size of a refrigerator. It ran in batch mode.
This programmer had to run the same job every day (with different data). One of the data files had to be in alphabetical order and it was a little scrambled, so she first ran a job to sort the tape file. The trouble is she wrote a sort program that was impossibly inefficient, so it took over 24 hours on the machine to complete. At first I thought to speed up her sort program.
Then I realized a magnetic tape sort program came with the computer and its OS, so I suggested she use that instead. It ran perhaps less than 2 hours.
Then I wondered why the tape needed sorting at all. It turned out that another job she ran daily inserted records into the tape file. and she inserted the new record just after the record where it should be inserted. And if she sorted the file of input records first, that program would run much faster too.
So if she fixed that, she would not have to sort the tape at all.
I cannot imagine how she ever got a job as programmer. She did not have 15 years experience: she had 6 months experience 30 times.
The most extreme case of programmer incompetence I ever ran into was …
Computer programming is funny that way.
For non programmers, it’s hard to convey the range of ability you see even among those who earn their salaries.
A measurable factor of 1000 in productivity isn’t that uncommon.
The only analogy I’ve been able to come up with to explain it to non-tech people is to imagine the difference between the city’s best singer and the city’s worst singer.
A bit more training or experience probably won’t close the gap, and better equipment certainly won’t.
She did not have 15 years experience: she had 6 months experience 30 times.
Nice phrasing!
Jim
Speaking of better equipment:
My lovely spouse is a photographer. (well, an artist who uses photography)
She mused the other day: “Why is it always someone’s first question to ask what camera I use?
Would you ask a writer what kind of typewriter they use?”
[I type using only the finest Cherry MX Brown switches, clearly the reason for my insightful posts]
Speaking of better equipment: My lovely spouse is a photographer. (well, an artist who uses photography) She mused the other day: "Why is it always someone’s first question to ask what camera I use? Would you ask a writer what kind of typewriter they use?"
Yes. I probably have a better camera than those Edward Weston and Ansel Adams used. Mine is certainly better than what Alfred Stieglitz used. Yet your wife probably heard of all of them, but not of me. There was a time when Stieglitz would exhibit photographs of others in his gallery, or publish them. Many submitted their photographs, and he rejected most of them. He even had a rejection slip printed to use. “Technically perfect; artistically rotten.” Mine are not technically perfect, though some are very good. But artistically, while not are rotten, most are boring, which is almost as bad.
Someone once remarked that anyone who took as many photographs as xxx (famous photographer) is bound to get some good ones. But an author remarked that some photographers take roll after roll of 36-exposure film and never get an artistically good one, where a good photographer usually gets quite a few good ones on each roll (if they use 35mm film; not all do.).
Imagine asking Julia Child what kind of spoon she uses to stir soup?
There are A rated preferred stocks available today that yield ~6%. Most of these have implicit government guarantees. They carry interest rate risk because they don’t mature (some are callable). Quite a few of these have coupons that float. Some are convertible. Most are tax advantaged (20% rate rather than individual income rate here in the states … not Monaco lol).
Because it doesn’t appeal to you, doesn’t make it a bad play. Most of these are trading 3-4 standard deviations in price from where they were months ago. Sure, they can do the same again, but the math on bonds is a little more obvious than the math on stocks:
100 / (.8 * .06) = ~ 21 years.
If these issues are around and have paid for that long, that’s your payback. If the bond goes to 0, you haven’t lost anything nominally. Nobody on earth can give any investor the same guarantee on a stock; all they can offer is price history projected forward.
My lovely spouse is a photographer… She mused the other day: “Why is it always someone’s first question to ask what camera I use?..”
As photography is my lifelong hobby I can assure her that this ignorant question actually is a big compliment. She should be pleased every time somebody asks her that.
A measurable factor of 1000 in productivity isn’t that uncommon.
Even that may be generous. Some difficult programming problems will never be solved by most people. Think of it like a 10ft pole vault. Easy for a competent athlete, but 99% of us will never clear it, no matter how long we try.
My lovely spouse is a photographer… She mused the other day: “Why is it always someone’s first question to ask what camera I use?..”
As photography is my lifelong hobby I can assure her that this ignorant question actually is a big compliment. She should be pleased every time somebody asks her that.
Edward Weston got so tired of this question that he bought a cheap lens (rapid rectilinear?) and used it. His pictures were still great.
Ages later, some photographers would buy a particular cheap plastic camera to make images. The cameras were so cheap one vendor sold them in lots of three to be sure the customer would get at least one that worked.
There are A rated preferred stocks available today that yield ~6%. Most of these have implicit government guarantees. They carry interest rate risk because they don’t mature (some are callable). Quite a few of these have coupons that float. Some are convertible. Most are tax advantaged (20% rate rather than individual income rate here in the states … not Monaco lol). Because it doesn’t appeal to you, doesn’t make it a bad play. Most of these are trading 3-4 standard deviations in price from where they were months ago. Sure, they can do the same again, but the math on bonds is a little more obvious than the math on stocks:
Well, as I mentioned, there are surely going to be some exceptions.
But with no inflation protection, callability, and so forth, it’s a very tough hunting ground.
Like the analogy on programmer skill:
Today it is perhaps 1000 times as hard to build a broad fixed income portfolio with a reasonable long term central expectation
of (say) inflation + 5-6%/year than it is to do the same thing with equities, even at today’s generally rich equity valuations.
That’s not to say it can’t be done, but why even try?
It’s certainly clear that pretty much all the obvious choices will lose you money in real terms if held to maturity, so it’s a negative sum game.
One key factor is that, except in times of inflation so high that the economy flat-out breaks, equity earnings are in effect inflation adjusted.
If all labour, materials, rents, and sales prices for products and services all go up 10% because of a shrinking currency, so will profits.
To differing degrees and with differing time lags for different companies, but on average it’s a wash.
Earnings yields are real yields. Statistically at the 92%+ level.
As has been said many times before, bond funds aren’t bonds. At best, they’re just a useful derivative that allows investors/traders to access asset classes that are hard for retail accounts to access directly, such as foreign sovereigns or emerging market debt. For other bond types, e.g., Treasuries, Agencies, Munis, or Corporates, it makes no sense to use funds --open-end, closed-end, or exchange–traded-- when the underlying is so easy to own directly.
The bond game consists in making bets on the level/direction of interest rates or on the level/direction of an issuer’s credit-worthiness. Either game offers money that is nearly always comparable --on a risk-adjusted basis-- to that offered by equities, or else the arbs step in to make it so. But even on an absolute basis, the money can be fabulous. E.g., look the gains offered by long zeros back in '94. Or --to cite a personal example-- buy Xerox’s 8’s of '27 at 34 and then get called a couple years later at par.
These days, the bond game isn’t worth playing due to the Fed’s interventions, the Treasury’s printing, and our dear government’s deficit spending. Ignore your newsletter’s advice. They just late-to-the-trade, asset allocators and don’t really understand the fixed-income game.
And as a former developer I’ll share a programming-related horror story about business incompetence.
A business unit spent $millions of the company’s money having contractors build a highly performing document generation system to meet a pre-set deadline to sell the documents. Literally within 2 weeks after completing the final user acceptance testing cycle involving nearly 50 people and validating that the entire system was operational in the production environment…
“never mind.”
They decided to drop it and let a different unit in the same company produce a similar document using a more dated system.
Programming incompetence?
A job not worth doing well is not worth doing at all - indeed!
There are A rated preferred stocks available today that yield ~6%. Most of these have implicit government guarantees. They carry interest rate risk because they don’t mature (some are callable). Quite a few of these have coupons that float.
I used to be very interested (and invested) in several mega bank issued floating rate preferreds. However, all the ones I know of are tied to LIBOR and thus have a risk of becoming affixed to the last published LIBOR rate, which will happen in the next year or so.
If you know of any non-LIBOR preferreds, I’d be interested in hearing about them.
For the purposes of calculating interest due on the Debentures during any floating rate interest period:
•
“Three-month LIBOR” means, with respect to any floating-rate interest period, the rate (expressed as a percentage per annum) for deposits in U.S. dollars for a three-month period commencing on the first day of that floating-rate interest period that appears on Reuters Page LIBOR01 as of 11:00 a.m., London time, on the LIBOR determination date (as defined below) for that floating-rate interest period. If such rate does not appear on Reuters Page LIBOR01,
S-17
three-month LIBOR will be determined on the basis of the rates at which deposits in U.S. dollars for a three-month period commencing on the first day of that floating-rate interest period and in a principal amount of not less than $1,000,000 are offered to prime banks in the London interbank market by four major banks in the London interbank market selected by the Calculation Agent (as defined below) after consultation with us, at approximately 11:00 a.m., London time, on the LIBOR determination date for that floating-rate interest period. The Calculation Agent will request the principal London office of each of these banks to provide a quotation of its rate. If at least two such quotations are provided, three-month LIBOR with respect to that floating-rate interest period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of such quotations. If fewer than two quotations are provided, three-month LIBOR with respect to that floating-rate interest period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of the rates quoted by three major banks in New York City selected by the Calculation Agent after consultation with us, at approximately 11:00 a.m., New York City time, on the first day of that floating-rate interest period for loans in U.S. dollars to leading European banks for a three-month period commencing on the first day of that floating-rate interest period and in a principal amount of not less than $1,000,000. However, if fewer than three banks selected by the Calculation Agent to provide quotations are quoting as described above, three-month LIBOR for that floating-rate interest period will be the same as three-month LIBOR as determined for the previous floating-rate interest period or, in the case of the interest period beginning on January 15, 2023, 0.31%. The establishment of three-month LIBOR for each floating-rate interest period by the Calculation Agent will (in the absence of manifest error) be final and binding.
Knowing what kind of camera or cameras a person uses actually tells you a lot about the type of photography they do, i.e. still, or action, a lot of depth of field or less.
Box cameras are for portraits, and still subjects for instance.
A brownie will give a particular look, as do polaroids.
Finding out that a person uses, “Tasty Trade,” told me a lot about him. He owns crypto and doesn’t want to know about Buffett because he could never do what Buffett does because he doesn’t have a billion dollars.
Mean to say that some information can be conveyed by asking seeming ignorant questions. Maybe these people love your dear wife’s photos and want to know how she did them?
That Buffett doesn’t use computers or complicated algebra to determine his buying and selling is good information–about reality, don’t you think?
Anyway, i’m sure you were just making conversation, so pardon the seriousness of my replies!
I asked Buffett a very stupid question when I fist me him: How do i learn about investing? He answered quite nicely, read The Intelligent Investor. I asked further, anything I should pay particular attention to? Chapter 8, he said.
For a beginner, that was good advice. I tell that story because he took me seriously and I appreciate it.
Come to think of it, that advice is particularly timely, again.
Guess I’m sticking up for stupid questions – and the people who ask them.