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too many people take a point of view which is too simplistic most people want to hear me say in or out buy or sell it's not that easy and it's never black and white every investor at virtually every moment should to some extent be afraid of being in the market and and of the potential for losing money and should to some extent be afraid of being out of the market and missing opportunities and how you balance those two uncertainties is really the key the balance we strike between the fear of losing money and the fear of missing opportunity should change over time based on where the market is in its cycle when the economy's been doing well as it has the companies have been doing well as they have the psychology is positive as it has been um the stock prices have been rising getting everybody very excited and the prices are high by most objective measures that is the time when you shouldn't worry that much about missing opportunity and you should worry more about losing money and when we're high in the cycle it's time to be defensive in my opinion so it's a relative thing it's a rolling adjustment that you should make obviously the higher the market goes in its cycle the higher prices go I would think the less you would want to have invested but that's just me the Booms that I've seen there have been common threads primarily too much optimism too little risk aversion too much money in the hands of people who are too eager to put it to work and if you think further it would be hard to imagine having a boom with those ingredients missing also remember that our asset classes are risky asset classes we're not investing in S&P stocks mainstream stocks we're not investing in high-grade bonds we invest in high yield bonds convertibles leverag loans distressed debt real estate infrastructure some private equities emerging markets Japan most of the things we do are risk markets and what we're not risk avoiders but I hope we're intelligent risk bearers who are highly conscious of risk operating in Risky markets but we are more cautious than usual today you're right about that because we think the market is elevated in its cycle and because we think there has been optimism risk tolerance and uh and uh money eager to get to work the central banks and the FED turned their attention to stimulating the economy and they engaged in massive rate cutting and interest rates went to zero negative in some places and we had massive stimulation in the form of quantitative easing which meant the central banks buying Securities which has the effect of number one raising their price and reassuring people about risk and number two putting money in circulation because when the C Bank buy Securities it pays for them with money and that money uh when it circulates in the economy lifts the economy so in the last 10 years we've had an unusual emphasis on stimulation of the economy but that it brings risks as well uh because it brings the risk of the economy overheating and thus of hyperinflation it's a complex uh dance that the central bank have to perform I don't describe what we're having now as a bubble people have gotten used to the concept of bubble and crash bubble and crash it happens that if you live through the last 20 years the last two cyclical episodes were bubble and crash we had the internet Tech bubble which crashed we had the subprime mortgage bubble which crashed that doesn't mean that every upswing becomes a bubble which which is an extreme upswing and crashes and I don't think that this upswing has been as dramatic as those two and I don't think the correction has to be as dramatic as those two that doesn't mean it's going to be fun because in those two I'm going to roughly speaking say stocks went down 50 odd per.
maybe in the next one they'll only go down 30% doesn't mean it's going to be fun uh but I don't think that we are as levered as a society today I don't think our essential financial institutions are as levered I don't think that we have anything in the mix which is as shall I say fraudulent as subprime mortgages and as a consequence I don't think we are riding for a bubble of the severity of the last one I am for more fiscal responsibility than is being shown at the present time I am opposed to running large deficits in Good Times to stimulate an economy that does need not need stimulation uh and and adding so radically to the debt as is being done at the present time um and yet I can't tell you where the debt reaches critical mass uh and what the impact is uh it's a it's a that'll be a matter of destructive testing we'll find out the answer uh when when these things bind um and unfortunately when as an if it'll be unpleasant
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