Tuesday, May 18, 2010

Here Is One Investor Who Thinks Fighting Bubbles Is In Dr. Bernanke's Job Description!

Many still think Alan Greenspan walked on water.  Jeremy Grantham is not one of them.  The good Dr. Greenspan seemed to think that preventing bubbles was neither part of his job nor realistically feasible. Having suffered thorough the aftermaths of the high tech bubble and the housing bubble, has thinking on Constitution Avenue changed?  unfortunately not.  Pauline Skypala writes that "Mr Grantham sees Ben Bernanke, chairman of the Federal Reserve, following the same path as his predecessor." He and his firm have identified thirty two bubbles over the last ninety years. 

As to his own business, the investment business, does it add value?  "The business is a zero-sum game, he points out, and 'we collectively add nothing but costs'. Costs have grown because there is no fee competition, due to the agency problem and the information advantage the agent has over the client. Growing complexity has increased the client’s dependence on the industry."

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