Interesting Articles

Popular Delusions and the Big Short

Popular Delusions and the Big Short

The following articles explore some of the fragilities underlying the global investment scenario and look at some difficult but constructive options to secure the future.

Dylan Grice in Popular Delusions sets out the case for holding gold as an insurance policy in "environments characterised by monetary mischief". Grice looks at economic history where governments such as the Roman Empire, the Weimar Republic and the Thatcher government struggled (with different strategies and outcomes) with the need to contract expenditure and adopt strict fiscal policy to restore economic health and sustainability. He concludes that unless there is a crisis of magnitude (and that is not inevitable), a majority opinion and political will to accept that painful measures are unavoidable, will gold fulfil its purpose and value.

The second article, the interview between Erik Schatzker and Michael Lewis offers a personal insight into the world of Wall Street, tracing the seeds of the global financial crisis back to the eighties where a culture of short-term greed emerged combining with growing complexity in financial instruments and traders' efforts to profit at the expense of customers. Lewis's focus on specific players in the sub-prime crisis, those who became aware of the risk of the effects of credit defaults and traded them for vast profits provides readers an interesting insight into the psychology of investing. Of broader significance is Lewis's analysis of the current scenario where reform and change are vital to develop a system which is robust and responsible in serving a global economy.

These articles are timely and relevant for investors in the immediate post GFC period and particularly as political parties vie for popular support. We commend these articles for their intelligence and interest. 

Popular Delusions and the Big Short

Commentary by Kerr Neilson