clifp
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Oct 27, 2006
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- 7,733
Bill Gross's newsletter aren't typically as folksy as Warren Buffett's, but this one with pictures of pigs in stockades is pretty close.
Of particular interest was his description of how important credit is in determining asset prices.
Emphasis his. FYI, PIMCO slightly increased their holdings of government bonds this year.
Of particular interest was his description of how important credit is in determining asset prices.
I find it fascinating the number of ways that investors approach the “value” of securities and other investments such as commercial real estate or homes. Many of them are legitimate and form a solid foundation in academic research or even common sense. “Natural” interest rates, P/E ratios, cap rates, risk and liquidity premiums, and even real estate’s “location, location, location” are ways to fundamentally price an asset. Add to that the emotional influence of human nature and you have a pretty good idea as to why prices go up and down; not necessarily a pretty good idea as to when they will go up and down, but at least the why part is partially visible.
But lost in this rather complex maze of why is the function of credit and credit expansion in a modern, financial-based economy that it dominates. Asset prices are dependent on credit expansion or in some cases credit contraction, and as credit goes, so go the markets, one might legitimately say, and I do most emphatically say that!
Emphasis his. FYI, PIMCO slightly increased their holdings of government bonds this year.