David Fuller's view -
From JK Galbraith's "The Great Crash 1929", the most urbane economics lesson in How The Cycle Ends:
"To the economist embezzlement is the most interesting of crimes. Alone among the various forms of larceny it has a time parameter. Weeks, months or years may elapse between the commission of the crime and its discovery. (This is a period, incidentally, when the embezzler has his gain and the man who has been embezzled, oddly enough, feels no loss. There is a net increase in psychic wealth.) At any given time there exists an inventory of undiscovered embezzlement in - or more precisely not in - the country's business and banks. This inventory - it should perhaps be called the bezzle - amounts at any moment to many millions of dollars. It also varies in size with the business cycle. In good times people are relaxed, trusting, and money is plentiful. But even though money is plentiful, here are always many people who need more".
The worst nightmare of a fund manager, worse than the ignominy of under-performance, is to fall victim of The Bezzle. (Poker-players call such folk the "Patsy" or "Chump"). In a long career, I have observed copious chumps, a fair few Patsies and a great many Bezzles. Think Japan in 1990, Technology after 2000, gold in 1980. Each debacle, each End of Cycle, left many "bezzlees" -my term- bereft of what they had assumed to be unassailable fortunes. Each debacle emerged over time from modest, facile infancy to titanic, arrogant imperiousness. Most surprisingly of all, each debacle was, with the infallible eye of retrospect, entirely predictable.
So when an asset class starts to exhibit early signs of The Bezzle, one worries about Cycle End.
I am sure Iain Little will touch on areas of potential liquidity problems for investors when he speaks at the Markets Now on 20th April, in addition to his comments on the performance of various investment trusts of general interest.
Iain Little's Fund Manager's Diary is posted in the Subscribers' Area.
This section continues in the Subscriber's Area. Back to top