Altius Capital

I read this the other day, and think it is very relevant

John Hussman of Hussman Funds on "The folly of ruling out a collapse"

‘It may be the greatest collective error in the history of investing to pay extreme multiples for extreme earnings that reflect extreme profit margins and extreme government subsidies, while imagining that those multiples also deserve a “premium” for depressed interest rates that reflect depressed structural economic growth.’ Or it may not.

Risk v Return....simples

Why we are all being forced up the risk return curve

If I want to buy the newsagent business, the first thing I need to do is to work out what my RETURN on investment will be.

In other words, if the newsagent makes $10 a year after tax and he wants $100 to sell the business it’s simply a price times earnings multiple of 10….. a PE of 10.

Now if I am getting 10% interest on my bank deposit there is no way I am going to give the Newsagent his $100 simply because of RISK.

The money in the bank has minimal risk and requires no effort.
Now if I am getting 1% on my bank deposit it means I’m getting 10 times more for my money by buying the newsagent.

Risk simply starts from the lower end with Government bonds and rises to highly speculative (eg new mines) investment.

Low risk should equal low return!