market folly

At Invest For Kids Chicago yesterday, Michael Milken of the Milken Institute gave his thoughts on capital markets, credit, and a variety of other topics.

Be sure to check out all notes from Invest For Kids Chicago where numerous high profile hedge fund managers shared their latest investment ideas.


Thoughts on Capital Markets

Milken said that people "hardly ever learn anything" from history as it's nothing new in finance. History reflects "confirmed unteachability of mankind." He argues it was easy to predict where we are today due to unit labor costs.

The American Dream comes down to equal opportunity and equal access. Access to capital is based on ability. Prosperity = sum of finantical tech * (human capital + social capital + real assets). He says human capital is the US' largest asset and there's 3 ways to increase it: education, lifestyle, and integration.

Credit Nature

He also talked about how credit is not leverage. Most real estate loans are not investment grade and sovereign debt is the worst of all credit. Greece (recently) was in default 1 of every 2 years historically. 4th century BC Temple Delos took an 80% haircut on loans to Greek city states. Only 4 companies are AAA in the US. More money is lost on AAA investments than any other investment. No loan to real estate is a good loan.

You can view full notes from Invest For Kids Chicago here.