Confronting the Establishment in Financial Markets

Featuring Tim Price

Veteran fixed income trader and author, Tim Price, rails against most of the players in financial markets in his book, ‘Investing Through the Looking Glass’ and he pulls no punches in this interview, weighing in on the active versus passive fund manager debate, investment banks and central bank credibility, to mention a few. Tim combines his experience in the bond market with colorful cultural references for a distinctive perception on the world of finance as we know it.

Published on
5 January, 2017
Topic
Gold, Portfolio Management
Duration
45 minutes
Asset class
Commodities, Bonds/Rates/Credit, Equities, Cash
Rating
13

Comments

  • DS

    David S.

    9 3 2018 02:30

    0       0

    Maybe the market price is "right" when everyone is printing money. DLS

  • DS

    David S.

    9 3 2018 02:29

    0       0

    Excellent interview. I have watched several times. Learned more each time. One small point Marcus Aurelius' quote on how to be a good Stoic is "The universe is transformation: life is opinion. (IV:3)" Meditations. The "Everything" quote is useful but has another origin. DLS

  • TW

    Thomas W.

    15 1 2017 21:17

    6       0

    It doesn't get better than this. Who in hell's name votes this down? Are there some Keynesian or bankster trolls who've paid the modest subscription price just so they can cast a little doubt?

  • BL

    Barclay L.

    14 1 2017 23:01

    4       0

    Anyone who enjoyed this interview and Tim's cogent book may also enjoy this book: "Not My Grandfather's Wall Street"
    (www.notmygrandfatherswallstreet.com). The wealth management industry and the forced mal-investment at faux prices within is the next bubble/crisis in formation. May the passive indexers get what they deserve and may Tim's three pillars of value, trend-following, and gold work in the end. But imbedded in teen-following, what Tim really wants to say is that he wants to invest effectively in shorting markets, but trend-followers are still largely long stocks and bonds. They will disappoint Tim across any first leg down. Let's hope he makes it to the other side. Solid thinker but CTA managers are right in there now as part of the herd. I want discretionary macro shortens and vol positive convexity guys over CTA trend-followers. "Not My Grandfather's Wall Street" in one part nicely describes how the vampire squid of GS helped put CTA trend follower John Henry & Co. out of business. A really run read for anyone who has lived across markets for the past three decades .

  • SB

    Sergei B.

    13 1 2017 03:28

    1       0

    Tim Price advocates return to the sound economic and financial principles proposed by the Austrian school. The outsized role of the narrative in the economics and finance (and human civilization) is brought to bear on the interpretation of the current state of affairs. Grant brings up a theory that Trump has been "chosen" to be a fall man by the establishment. The is Real Vision for me!

  • de

    dale e.

    12 1 2017 16:15

    0       0

    Excellent interview.

  • SR

    Sean R.

    12 1 2017 04:30

    1       0

    BRILLIANT! Generation Snowflake, Mises, Austrian School, the failing EU all get a mention. I bought Tim's book and can't wait to read it. Many thanks, once again.

  • JC

    Joe C.

    10 1 2017 03:42

    2       0

    This video should be "V rated". Phenomenal conversation

  • NT

    Norman T.

    9 1 2017 21:14

    0       0

    Engaging conversation, grim situation.

  • MS

    Matt S.

    7 1 2017 23:55

    0       1

    Rocket surgery? Brain science...? :)

  • IZ

    Ignacio Z.

    7 1 2017 23:16

    2       0

    Aren't we all asking the same questions?

  • DD

    Derek D.

    7 1 2017 16:16

    1       0

    What if Trump, surrounded by the likes of Icahn and others surely red pilled about this bubble, as he himself described it: goes Voelker and drags the economy into rehab?

  • DD

    Derek D.

    7 1 2017 16:15

    1       0

    Finally someone said it: "do something" was letting all fail. Preventing such is precise reason for no recovery. Reset is prerequisite. Mises' central finding imo.

  • DD

    Derek D.

    7 1 2017 15:56

    0       0

    Btw why am I still limited to Tweet-length comments (which I prefer actually) while some appear to be writing dissertations here? I guess I'm a peon.

  • DD

    Derek D.

    7 1 2017 15:54

    0       0

    The true root of the evil is government co-opting gold/money and issuing first backed currency then fiat (the only way fiat can be created w/ any trust). Govt power and a legislated monopoly the root.

  • DD

    Derek D.

    7 1 2017 15:53

    1       0

    Commenter below is correct that this private banking cartel is evil, but the root is not its privatization. Private money (i.e. organic and decentralized---gold) is both efficient and moral.

  • ww

    will w.

    7 1 2017 12:24

    0       0

    @Klendathu - Interesting hypothesis on the only 6 different human story themes. Please enlighten the RV community about those 6 themes/ variations. Thanks.

  • DM

    Daniel M.

    7 1 2017 03:43

    2       0

    Two well spoken gents. Beautiful discussion!

  • TE

    Tim E.

    7 1 2017 00:35

    7       0

    I'm just waiting patiently for the bear market that's going to blow up indexers, ETFs, and closet indexers. An active manager who loses no money will look very good against that lot losing 30% or 40% in a hurry. But I wonder whether the powers that be will let it happen. Maybe they will shut the markets. They stopped making banks, brokers, and investment funds mark to market in the 2007-2009 crisis. The difference there was that the assets in question were unquoted, private, and often off balance sheet. Stopping Vanguard marking its funds to market to perpetuate the con would involve suspending trading on stock exchanges. Given the policies governments, regulators, and central banks have tried so far, I wouldn't put anything past them. And it's a given that if the market stays open they will ALL become like the SNB and BoJ and print large amounts of money and buy stocks directly. Nothing in their charter says they can't.

  • SS

    Sam S.

    6 1 2017 19:22

    3       0

    Straight-Up conversation, easy to digest and I love the euphemism's. Sweet.

  • HK

    H K.

    6 1 2017 17:14

    4       3

    Very interesting aspects in the interview. Just the talk about passive investing was a bit controversial in my view. They say owning the market is a clear way to lose money when markets go south. True that but guess what will happen to a stock picker? As they pick from the universe the passives own in its entirety, the actives on average go down equally before costs and after costs the odds are tilted clearly against you. Good luck finding the one in advance that outperforms consistently - and getting access to them.

  • GR

    Guido R.

    6 1 2017 11:23

    13       1

    Excellent. Getting close. But the evidence points to malfeasance, not, as is commonly believed, blundering. Central banks do not believe they are applying scientific principles. Granted a number of actors within the system must believe that. But, arithmetically speaking, it is plain to see that the system is geared towards transfer of wealth.

    If you agree that since the enlightenment of the 1600s Western society has developed along two guiding principles: 1) self determination and 2) the right to private property - then our current monetary system presents a major arithmetical problem.

    Since we established that individuals cannot morally be treated as chattel, it is reasonable to expect that upon exchanging one’s skills and abilities for money:

    1 – The exchange represents equal value

    2 – An individual should have the right to retain full possession of the money he receives in exchange for his efforts

    But in the modern state predicated upon presumed democratic principles that extend to individuals the right to self determination and to private property, money is the exclusive preserve of a politically and arbitrarily appointed authority that manages it as it sees fit.

    Throughout the past half century in particular and regardless of the political persuasion of successive governments, modern Western states adopted a policy of giving ownership of money to an arbitrary entity (the central bank) and, at the same time, adopting a policy of constantly increasing deficits and increasing sovereign debt. These are all symbiotic relationships between government and the central bank. This arrangement is directly responsible for the gradual erosion of the purchasing power of the currency thus resulting in an increase in the cost of living.

    But… The fact that the monetary authority arbitrarily, deliberately and constantly erodes the purchasing power of money, effectively means that when we exchange our skills and abilities for money, the exchange does not satisfy the two basic expectations of the exchange.

    Arithmetically speaking, since the skills and abilities of the individual are limited but monetary creation is infinite, effectively this means that inevitably, although gradually, individuals will be divested of all wealth.

    But monetary debasement is only one aspect of our socio/economic construct.

    By debasing the currency, the monetary authority guarantees that title to property will gradually flow towards itself. This is an arithmetical identity.

    Modern money is an artificial construct. Each new unit of money must be borrowed into existence.

    The borrowing is done first by the state.

    The state must therefore pay interest on the sums it borrows.

    As the state has adopted a policy of increasing deficits, borrowing must in turn increase accordingly to cover the short fall in funds.

    As the borrowing increases, so does the debt service.

    In order to cover the normal functions of the state AND to cover its debt service, the state must levy ever greater amounts of taxes from individuals.

    By exchanging one’s skills and abilities for money therefore, the individual is subject to:

    1 – An exchange that is not equal in value

    2 – Exchanging something the individual owns outright for something he does not own and has no control over

    3 – Further taxation over and above the debasement over which he has no control

    The above is not opinion. The above is an arithmetical reality.

    Below are some of the questions that reasonable individuals should ask:

    a) Why is there a monetary authority separate and independent from government?

    b) If the monetary authority can create money arbitrarily, why can’t government do it?

    c) If money can be created arbitrarily and deficits do not matter, why does government impose taxation?

    c) In countries predicated upon democratic principles, why must we use one type of unit of account that is imposed by government?

    d) In countries predicated upon democratic principles, why was there no vote nor debate as to what money to adopt?

    In closing, this is what you should take away from the above.

    These are arithmetical realities. Most importantly, these are arithmetical realities that compound over time. A compounding dynamic is something that starts out slow but then accelerates till it goes parabolic.

    This arithmetical reality has preordained ramifications that manifest at the political level, the fiscal and the socio/economic levels in society. Look around! Regardless of the political persuasion of successive governments throughout the West, the result for all individuals in Germany, France, the UK, Greece or Portugal is always the constant loss of purchasing power and the concomitant increase in the cost of living. No exceptions.

    When this dynamic goes parabolic, the world you have known prior to this situation going critical, is not a world you will recognise and war and/or any of the 7 plagues are not far off.

  • SD

    Stephen D.

    6 1 2017 05:04

    12       0

    An extremely engaging interview from two erudite and likable men. Tim raises an excellent point about real risk mitigation coming, not from endless diversifaiction in passive investing, but by increasing concentration in assets you truly understand. It's absolute heresy in terms on coventional risk management but in a world where 'everything is expensive' owning a concentrated portfolio of well understood assets might be the real portfolio risk management.

  • MC

    Minum C.

    6 1 2017 03:32

    12       0

    This was really good. I like that it gets philosophical in parts. SNB is creating CHF out of thin air, converting to USD, and buying AAPL. He says this is troubling. Definitely troubling, but perhaps more troubling that not many people are troubled by this (not so new) development.

  • KC

    Klendathu C.

    6 1 2017 02:18

    1       0

    Wonderful interview. Great point about narratives and their enormous and yet overlooked role in not only markets but human behavior. Humans, sorry Sapiens, only tell each other stories based on 6 variations. Understanding these 6 stories and their fractal nature may help investors deconstruct market narratives. As an amateur screenwriter/novelist I may be talking out of my ass. Just a thought.

  • TW

    Tom W.

    6 1 2017 02:08

    1       0

    Excellent interview!

  • CC

    Charles C.

    6 1 2017 01:06

    4       0

    A fun and insightful interview and in alignment with my own worldview. However, if Marcus Aurelius was right, is it "truth"? I fear the more I read and listen to this seemingly compelling truth the more my mind closes to other possible truths. I wish someone, anyone, would appear who could clearly and consistently explain why this narrative is not truth in order to provide an opportunity for better perspective, even it leads back to the beginning point.

  • kv

    keith v.

    5 1 2017 23:18

    8       0

    Can't get any better than that. Crystallized everything wrong with the current age - plus sound solutions (IMHO).

  • PV

    Peter V.

    5 1 2017 21:52

    10       0

    What a great interview. Thanks Grant, thanks Tim.

  • DS

    David S.

    5 1 2017 21:20

    2       0

    Marcus Aurelius(MA): “Everything we hear is an opinion, not a fact. Everything we see is a perspective, not the truth”. MA uses this quote to help him to make decisions and take action.
    I agree with Mr. Price that the the world economies and markets are far too complex to model, yet everyone tries including the Austrian School. Mr. Price's four pillar investment tries to put the odds in his favor. Even here he adjusts the percentage of high grade bonds when it seems advisable. Place your bets. Good Luck. DLS

  • AG

    Alex G.

    5 1 2017 20:45

    0       0

    Andrew Ross - to big to fail

  • GG

    George G.

    5 1 2017 19:51

    20       1

    Aha the root of the problem discussed FEDERAL RESERVE SYSTEM. Privately owned (by the banks) is a 'fox guarding the henhouse' situation. Metaphorically speaking they designed a system in 1913 to shear the anesthetized citizens and keep the wool for themselves..The perfect con

  • JM

    James M.

    5 1 2017 18:04

    4       8

    Austrian GOOOOOOD !!! Keynes BADDDDDD!!!! Growth GOOOOD!!! Efficiency BADDDDDD!!
    Pretty tired with the absolutes referred to in finance. IMO there are no absolutes and economics is a study of behavior not a science and even science lacks absolutes so how can their possibly be any in study of complex behavior . If the success of financial speculation and humanity as a whole is based on perpetual growth on a finite planet seems to me success how ever one defines it is unlikely .

  • RM

    Rainer M.

    5 1 2017 16:31

    9       1

    Great interview. I liked Grant picking up on Stan Druckemiller's comment "ALL the reason for holding gold have disappeared with Trump...." the pros and CONs if as George Soros his former boss opined, "Trump is a con-man" could have added even more color to this great interview in my view

  • ps

    phil s.

    5 1 2017 15:42

    38       0

    Tim is a breath of fresh air regarding asset managers and markets in general. Having spent my entire career in the investment business, the overwhelming army of people are asset gatherers and not managers. They provide no added value. Tim and the folks at real vision try to make this point. We need more of this type of discussion. Bravo

  • NH

    Nigel H.

    5 1 2017 15:23

    9       3

    Great interview Tim Price has stopped popping up so much in my inbox now so OK, but he is wearing a fleece, albeit with a corduroy collar. Uber bears will eventually be right, but between now and then we have to trade. Glad Tim he mentioned trend followers - Mulvaney is L/S and is heavy hard and soft commodities and USTs, so not just ‘diversified equities’. Diversification in equities is a nonsense. What happened to the book-cover references that came up on-screen in previous interviews? They would be helpful - at least two or 3 mentioned here I want to check. Thankfully RVTV have some education/ training category now starting with Dave Floyd. Would be great to have some momentum/ trend followers interviewed as well.