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Occam Logic, Another... 31/01/2017, 22246292

  1. TheCapatilist

    1,095 Posts.
    Occam Logic,

    Another great post. I enjoy the level of sanity you bring to the threads.
    Assessing risk is something that many investors do poorly, whether out of ignorance or sheer exuberance . A person only has to look back to the bull market before the GFC to see the many risks that were overlooked. I remember companies like Babcock and Brown, Allco Finance, MFS, ABC learning, and the managed investment schemes into agricultural products. I will never forget people leveraged to the eyeballs, through margin loans, into companies that were also leveraged to the eyeballs. The years leading up to the GFC, particularly 2004 to 2007, in my view, saw the greatest "turn a blind eye" to risk that I have ever witnessed, and it certainly shows how people can be blindsided when they get greedy.

    I don't for one minute put HML in the same category as the companies above, but I do believe that the risk must be amped up to produce these sort of returns. To suggest that risk doesn't go up proportionately to the returns that they are producing goes against everything that I have ever learnt. If Stuart is some sort of freak genius that can continue to produce these returns year after year, there is plenty of time to bet the house. It will be interesting to see what happens in the future.

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