On this, I had a recent but very long read of "The Price of Time" by Edward Chancellor which does take a thorough look at money as a whole and how it has evolved and then has a few great chapters on what consistently happens to the economy when central interest rates hit 2% and go through it (both up and down) and makes a hell of a lot of sense.

You're teasing us Tim. What happens?

Total anarchy.

You're still teasing us!

@Stuey727 To paraphrase in an ineloquent way, 2% central rates on money over time is a psychological marker for humans to take on more leverage as it is no longer a good reason to stay cash heavy especially if inflation is sitting above that. Then there is an influx into markets will then morph into people taking more risk which will then create 'bubbles' of FOMO because everybody sees their neighbour getting rich, followed by pure speculative gambles and Ponzi schemes which just erode capital until such a point where people will either start losing money, faith or both.

Interest rates will have to be raised and as we all know sometimes it's not about the number, it can be about the rate of change (increase) but is likely to spook markets for some time. Especially in cases where there is an overreaction to the downside a "normal" market can remain stagnant for a lot longer than people think which in turn will eventually need to be stimulated by the lowering of interest rates.

(Quickly, also think of the scenario where you get a home loan at 7% in 2015 and then wake up in 2022 with a home loan of 5% you would think, "wow, I'm so glad my rates have gone down" while the rest of the market is freaking out because their loans have gone from 1.9% to 5%)

Because of the distrust in the system that is still fresh in peoples minds, a sensible person probably still won't take on much risk if their potential return is 8%p.a when the cash rate is 5%. You know? So it then isn't until rates drop back below 2% that all of this starts again. Onwards and upwards.

Another one of those incredible resources I feel like I should be paying for, but is free!

Once i had the idea of writing a book based on my 35 years as a professional investor. then i read HM book and realised its been done. maybe a book how he became a billionaire and i didnt..........hmmm

the part on PE i find particularly amusing. many years ago i used to joke. "how about we carry the stocks we buy at our valuations not MTM, and only move valuations when our analyst changes his valuation or we sell out". our lives would be much much easier. of course that was a joke not knowing that it would become the business model of a hugely profitable industry, of course i can see why.

One great thought in the recent memo was that of privately owned businesses "losing less value" compared to the broader market turmoil. That the only way to truly assess this is to compare backwards the growth trajectory from the eventual sale point and see if it lines up with said prior valuations.

The two sides are that 1) the PE firms don't want to show lower returns when they don't "have to" and I guess if it's not for sale then you don't need to advertise a price 24/7 (kind of like a house, right? and 2) that because the market is rarely accurately priced there should be a level of understanding that a private business with an agreed value of $100m might be considered by the open market to be worth $80m to $150m depending on how they feel about the latest quarterly results which does nothing to benefit the business, and more to entice traders rather than long-term co-owners of a business.

It triggers a thought I often have with Superannuation. It's all good unless everybody wants to retire at once and withdraw everything. An extremely unlikely scenario. But does warrant the question of how these companies value their assets that are privately held on behalf of their members. Say, Sydney Airport?

Maybe there is an argument to mandating a maximum revenue/profit multiple for assets held in super...? In theory, retirement investments would and should be based on the cash they can generate rather than pure growth. If I'm not mistaken, most super funds buy big and bulky assets with good yield rather than startups and companies with a short history. If there was a standard 10x revenue multiple attributed to each private asset owned by a super fund then surely they would do a Buffet style thing where they focus on buying companies which have potential to increase their sales/revenue/profits in order to increase the paper value of the business and in turn continue to grow the asset value in the fund.

Shooting from the hip here.

@tbra97 yes you are thinking as an investor, which you are, im thinking from a business point of view, and is implied in HM comments, imo. two of the best ways to secure your bonus, is to pick an easy beat benchmark, or do you own valuations. millions in bonuses will be paid to PE and the super fund managers before we know the truth 5-10 years later. insidious imo but not unexpected

For those that are fans of podcasts rather than reading search "The Memo by Howard Marks" in your podcast player. I have the latest in the queue and "bubble.com" was recently reviewed by Howard which was also valuable.