Loud

I am sure someone will shout “20/20 hindsight”. That’s bullshit. Everything I am saying now was obvious five years ago, and lots of smart people knew and understood it. Some of us even bought into “arbitrage” fairy tales and tried to profit from getting our views “impounded into market prices”. We learned to take a different Keynes quote seriously, the one about markets remaining irrational longer than you can remain solvent. [Shlieffer and Vishny’s famous coinage, “the limits of arbitrage” is not strong enough, because it suggests that efficient arbitrage is the norm subject to some exceptions and limitations. It is more accurate to view efficient arbitrage as the unusual special case, in bond markets as well as in equity markets.]