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The Dean of Wall St on gold-Paul Singer: Challenges of a long career in money management–He offers timeless money management wisdom: Paul Singer: Challenges of a long career in money management

Posted by Richard640 @ 14:26 on November 13, 2014  

With the often illogical power of market trends in mind, Paul Singer offers timeless money management wisdom:

“When markets are trending, they can appear unstoppable. Every sale in a rising market feels like a bad one, and every purchase in a rapidly falling market is punished by losses within minutes or hours. It is so much less painful to go along with the trend than to buck the trend – at least in the short or possibly medium term. Furthermore, in the modern world of super-leverage and group-think, valuations can go far beyond the estimates of every expert and practitioner. That is, of course, until they stop.”

Paul Singer and his team at Elliott have seen this movie before. In 1995 when stocks were trading at 22 times earnings, all time highs reached only in September 1929 and March 1972, both serious peaks, they logically thought the market trend would end. It didn’t, and stocks didn’t top out for another five years when in early 2000 they reached 40 times earnings.

Paul Singer: Expanse of mathematically illogical market trends

Today Paul Singer looks across the expanse of mathematically illogical market trends, many of them driven by artificial market manipulation that one assumes will explode like a child playing with gasoline around a fire.

“Today, one could be bullish on the long-term value of gold and be not only sitting on losses but also experiencing incoming ridicule and schadenfreude. In the same vein, based on the extraordinary monetary policy being practiced by the world’s central bankers, one could be completely convinced that medium- and long-term bonds are staggeringly overpriced, with nowhere to go but down in price (up in yield). But watching bonds persist in their long-term uptrend regardless of money printing, and watching gold prices languish with no understanding by investors that throughout history gold has always been considered the only real money in a world of monetary fakery, is concerning to say the least. Maybe history has stopped.”

In a recent letter to investors reviewed by ValueWalk, Paul Singer notes one of the main challenges of a long career in money management is making the correct call on a market that is trending in the opposite direction and waiting for that market to reverse. “The distance (in terms of time and cost) between an intelligent conclusion that prices are massively wrong in either direction, and the actual reversal of valuations toward the range of ‘reasonableness,’ can sometimes be too long to bear,” he notes.
See other Q3 letter highlights – Paul Singer Blasts “Krugmanization” of Economics, Paul Singer vows to hunt for Argentinian assets, George Soros And Kyle Bass Battle It Out With Paul Singer In London Court and Singer sees strength in commercial RE but weakness in residential

Such is the quandary as many quantitative investment managers eye unusual valuations in bonds, currencies and run the math on the forthcoming debt crisis that few seem to pay attention to other than certain hedge fund geeks. But when mathematical logic meets a strong market trend, often the trend wins in the short term.

 

 

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Post by the Golden Rule. Oasis not responsible for content/accuracy of posts. DYODD.