How much and what does it take to fully compensate one for taking on a specific risk?
Answering that is like getting a bunch of guys together to watch a Miss Universe pageant and getting everyone to agree which ladies are a 10. It ain't going to happen.
A similar situation exists today with the so-called new way of deciding which four teams should make up the playoff group to decide the national champion in college football.
What was supposed to be objective is, if any thing, about as subjective as it gets. Strength of schedule, nonsense about how many top 25 ranked teams did a team play are just two examples.
Top 25 ranked teams is like a sliding scale of insulin, it changes over time. Was the team played on the road or was it played at home and margin of victory are some more?
What's wrong with these so-called improved ways of selecting is the same thing wrong with those guys watching that beauty pageant--everyone has an opinion and everyone has a bias.
The pyrite of this system is the canard that a group of selectors--irrespective of their backgrounds or credentials-- just because they form a committee or commission suddenly grow a set of angelic wings and discard their humanness. It ain't going to happen.
And it's that same humanness that drives much of the market everyday. Like the market, big time college football is about big bucks. Like it or otherwise, wherever one finds big bucks one will also find big elements of humanness.
And that brings us back to how much is enough compensation for taking on a specific risk. Only you can decide. And for us we see some risk in the stock market with all the corporate buybacks providing much of the upside fuel for a market that is about as close to being overfed as overfed gets.
Perhaps nowhere is that more of a concern than in the credit market where corporate add backs roil the credit waters more than many investors may be aware. We will spare you the internals. Just know that optimistic projections, like those football polls and all those talking head commentaries every year, are one thing and reality another.
Rising credit costs usually accompany rising interest rates. And it's a known fact that in the corporate accounting world the term meretricious despite all the so-called regulations is alive and well.
We once knew a buccaneer with all the proper credentials and accoutrements who masqueraded as a surgeon.
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