"In June 2004, I attended a meeting with a personal trust committee of a New York bank. A trust officer opened the discussion with an unqualified forecast: 'Ten-year Treasuries are yielding 4.73 percent this morning, but the yields are going higher.' Then he added, 'Everybody knows that.' ... [That] could not possibly be a correct forecast. If everyone knew that rates were going higher, why would any investor have been buying those bonds at 4.73 percent? ... There were only two possibilities under the circumstances: the buyers in the bond market did not know what they were doing, or our trust officer did not know what he was doing. Guess which!", Peter Bernstein in the NYT, 7 October.
I once was amazed with many financial peoples incompetence. Now I'm numb. Did the trust officer say, "I just shorted $10 million of 30-year Treasuries on 8% margin. When 30-year rates hit 6 percent, I'll cover the short and retire?". I doubt it. For example, I have heard hundreds of times things on the television like, "stock prices rose because there were more buyers than sellers". What does that mean? If 10 million shares of Exxon were traded yesterday, it means 10 million were bought and sold.
I once was amazed with many financial peoples incompetence. Now I'm numb. Did the trust officer say, "I just shorted $10 million of 30-year Treasuries on 8% margin. When 30-year rates hit 6 percent, I'll cover the short and retire?". I doubt it. For example, I have heard hundreds of times things on the television like, "stock prices rose because there were more buyers than sellers". What does that mean? If 10 million shares of Exxon were traded yesterday, it means 10 million were bought and sold.
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