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and,“I do know from my 59 years of experience, when the ice was very thin, it’s always good to be very cautious,” he said. “You can skate around the edges but you can’t go out to the middle.”
Maybe investor confirmation bias, but I sold my "middle of the pond" position in AGDYX about a month ago. His concerns about a lack of buyer of bonds and a higher risk of inflation paired with do nothing politicians is what you pay a bond manager to worry about. Bond index funds provide none of this risk management.“I‘m not trying to be an ‘end of the world person’ here, but it is a possibility,” he said. “It used to be one percent, now it’s a 15 or 20 percent possibility. Would you get on an airplane if there was a 15 percent risk? And that’s a good way to ask a person about risk,” he said.
A bit of a mouthful, but basically saying that if you undo your tax year 2017 Roth conversion by Oct 15, 2018, it's treated as if you'd just moved the money from your traditional IRA back into a traditional IRA in tax year 2017.if, on or before the due date for any taxable year, a taxpayer transfers in a trustee-to-trustee transfer any contribution to an individual retirement plan made during such taxable year from such plan to any other individual retirement plan, such contribution shall be treated as having been made to the transferee plan
WSJ: You’ve famously called profit margins the most mean-reverting data set in finance. What’s keeping them high now?
MR. GRANTHAM:Some outsized margins are structural—the brand power of large corporations. I think what is [also] going on is new-fashioned bullying, not the old-fashioned monopoly. Bully politicians into getting favorable legislation. Bully the Justice Department into going to sleep. Bully regulatory agencies. It’s the power of corporations—better regulations and favoritism for giant companies.
The two things he left out are technology and globalization. Quite frankly the social contract between corporations and labor in the U.S. has been broken for some time. Companies don't need most employees anymore, so they don't treat them well but as disposable parts. Some of the largest companies actually don't have so many employees or if they do only a handful are key people that aren't easily replaced or outsource-able overseas. Remember those lines in Death of a Salesman: "A man is not a piece of fruit. You can't eat the orange and throw the peel away." That is precisely what companies can do with tech and globalization. Almost everyone's an orange now, and I'm not sure how people push back locally when companies function globally. All of which is good for the stock market but rather bad for humanity--or at least developed nations.WSJ: Is this high-profit-margin situation an unusual one for capitalism?
MR. GRANTHAM: The U.S. form of capitalism has lost its way. The social contract was previously in good shape. Corporations looked after their employees. They were more paternalistic. Great pension funds were starting up. The CEOs were increasing income alongside their workers. CEOs earned more than 40 times workers. Today, that number is 350 times, and the system has gone to hell. Keynes, Schumpeter—and Marx, not to mention—thought, by their nature, corporations and capitalism would overreach simply because they could. Corporations would use their advantages to get more power and more money. Their share of the pie would increase, and cause society to push back. Sooner or later there will be a pushback.
© 2015 Mutual Fund Observer. All rights reserved.
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