Q: What’s surprised you as an investor over the past decade?
A: I think what surprised me most about the markets was how quickly they recovered and how quickly people forgot what happened.
Q: Why do you think that happened?
A: I think that’s a function of the fact that the Fed embarked on this great quantitative easing experiment. There were three Q/Es: QE1 took place in the spring of 2009 when markets were just dead. This was very successful and so the fixed income markets went back to normal. And then two years later, the Fed decided that, hey, interest rates are zero, the economy is really not growing, we’re worried we going to go back into a recession. So they went out and bought U.S. government bonds and mortgage bonds backed by Fannie Mae and Freddie Mac, and the idea was they were therefore removing trillions of dollars worth of risk-free assets from the marketplace with the idea that that would force both investors and companies to go out on the risk curve. The idea was that that would somehow get companies, for example, to build factories and hire people and that would get the economy growing faster.
Q: And that wasn’t as successful?
A: In my view it failed, 100 per cent. It caused the stock market to go up because people took all that liquidity and invested it in the stock market, but it did not cause the economy to grow even 10 basis points faster. I like to nickname quantitative easing “monetary policy for rich people.” You could quote me on that. You know, they took a shot; it didn’t work. And then they doubled down and did it again. Same result.