From 600+ conversations with the world’s leading thinkers.
The point of maximum pessimism is the ultimate time to buy a stock because at this point, all the sellers are gone… and only buyers remain. How do you determine this point? Even Uncle John said it's impossible…. You never know until it has passed!
You get a raise, and for the first week it feels awesome, but then it doesn't have as much impact as you thought it would. Researchers call this the 'impact bias.'
The second big change I foresee is the continued convergence of the complex OTC derivatives market and the exchange traded futures and equity options market. Those lines will continue to blur due to regulation, legislation, increased capital and margin requirements, increased requirements for trade reporting, and increased pre and post trade price transparency in OTC markets.
Short-term vision does not allow one to build better businesses and create value. If we keep a long-term perspective in mind, we will go through the good cycles and the bad cycles and reach the other side.
The actual actions of the people in the market are the things that determine what happens next within the market. The 'standard' financial markets model is, effectively, based on a coin toss. That is how derivatives are priced and how every exotic financial instrument is seen- they are very fancy coins, where flipping creates price changes.
Central banks all around the world have essentially abused the power of printing money, and they have abused it by using quantitative easing, meaning creating new federal money to kit over fundamental problems, structural problems in the economy. So much of that acceleration in the wealth inequality has come from this quantitative easing.
We measure these flows entirely based on data filed by governments at the World Bank and the IMF. We apply two very established economic models. One is the World Bank's residual method, and the other is the IMF Direction of Trade statistical approach. These models have been used by economists for decades but we were the first group to apply these models to all developing countries.
There are three devils that inhibit economic growth. The first is that the government takes up too much of the economy. The second is that taxes take too much out of the economy. And the third is that there's too much regulation.
Governments need to use their money to develop the future, not recover the past. We have to take this chance, if we don't, we're really going to be in trouble.
You only get to really redesign markets root and branch when they are failing so dramatically that everyone acknowledges it. Markets are a little like language. It's hard to change the spelling of certain words in the English language, even though those spellings are dysfunctional.
Modern society, specifically the modern economy, is very mobile. Our friendships and social networks become very quickly dispersed. At any one time, we build friendships and relationships with people and, for example, due to work, move on.
If you look at the decade which ended in 2009, our estimate is around US$8 trillion. As previously mentioned, we believe this is a very conservative estimate because there are major parts of illicit flows that are not included in that figure.