Welcome to our latest issue of ValueWalk’s hedge fund update. Below subscribers can find an excerpt in text and the full issue in PDF format. Please send us your feedback! Featuring Point72 Asset Management losing about 10% in January, Millennium Management on a hiring spree, and hedge fund industry's assets under management swell to nearly Read More
Discussing the good that comes out of companies like Goldman Sachs and the need for financial innovation, with Robert Shiller, Yale University, who explains why financial markets can be apart of the good in society.
Full video and text below:
we’ve talked about complicated financial products. our next guast argues financial innovation is necessary to create safer products to promote the public good. his new book provides a defense so called financial engineers and systems of defense that have been set up there. professor shiller, this t is great to see you this morning. it’s a pleasure. you are the man that people know for housing, for irrational exuberance. you called the housing market bubble and the stock market bubble and now you’re out there with this book about finance. why don’t you tell as you little bit about why you wrote this book. this book emerged from my teaching. i have a course on financial markets, which you can take. it’s free online through open in that course i’m training young people to go into finance. so i think i have to — young people are often idealistic, they want to do good, they want to make an impact. i wanted to psent the way our financial capitalism is going. and there’s some hard and important realities that i’m trying to convey about where our society is going in a framework of financial capitalism. but professor, you are zigging when the rest of the world seems to be zagging. this is a time — obviously you started this book before the whole controversy with goldman sachs erupted. what we heard just over the last couple of weeks with the gentleman who stepped down from goldman sachs and said it was basically a bad place that doesn’t do anything good for society, what do you say putting all that in context? well, i’m sure there are bad people in every business so i don’t want to — i don’t know what’s going on right now in goldman sachs but i know that goldman sachs has a history which has been extolled by many people, people admire goldman sachs. tell us what good they’ve done — not just goldman sachs but in terms of finance, what good things come out of finance. there are a lot of people who think that wall street is a bad place right now. we are going through a revolution in the world, which is bringing up the emerging world to modern levels of — it’s the — this will be the greatest half century in the history of the world if it continues to play out. and how is china, india and a whole bunch of emerging companies suddenly seeing rapid economic growth? it’s because they’re adopting institutions of financial capitalism. it’s a dynamic process. and that’s what i wanted to convey. and there’s a future to this process, which is very interesting. but can you tell us specifically, what does finance do, things that are done that wouldn’t be done without it? you know the answer to this question. but maybe it’s a little bit subtle. you can’t see it as much. if a young person goes into medical school, he’ll have grateful patients, you know, that know that the cure was done by some modern technology. but you don’t see it in finance so well because a lot of the benefits are difused. for example, mortgage securitization is criticized widely because it seemed to be the source of this crisis. well, it was part of the source of this crisis. it wasn’t done exactly right. but the concept of mortgage securitization is very powerful because it makes housing available to people. professor, it’s great to hear you. i wasn’t necessarily sure that you would, you know, be promoting that side of it as much. last week the journal had a piece on hayek. i guess he died exactly 20 years ago last week and draghi said the social experiment in europe has ended, it’s just not working. are you frustrated we are once again examining whether some type of social democracy is the best way to go in this country again? we’re at this point looking for some type of neocapitalism because in the mainstream media there is a — they are positing that capitalism has failed because of the financial crisis. joe, i’m going to send you a copy of my book because and i are in some ways kin dread spirits. you wrote a book about capitalism — yes, the paper back comes out tomorrow. we’re going to have an ad in the wall street journal and we even changed the subtitle. it’s so important. and we didn’t plan this, honestly. it’s important to start telling our children that it’s great to go into the giving fields, that’s fine, that’s a wonderful thing to do, to go into social work or charity work but if you start a company and give someone a job or give a hundred people a job and entrepreneurialship and innovation, it’s not a dirty word and i see it again, in this latest movie, it’s a universal picture, a guy says — one of his songs is don’t make fun of me, i’m helping the economy or something, i’m not a bad guy. it’s absolute business bashing from beginning to the end of this movie. did you see it yet? it a universal picture and — i like dr. suess. you’re not going to get me to see anything bad. the kid love it. my daughter loved it. but it was noticed again how business and — but i don’t want to be an apologist for everything that goes on. there’s good people — there are people. some of them are good and some of them are bad. i think both kinds go into all different walks of life. some go into government, too. that’s right. i’m curious when you look at the regulatory environment, what’s going on on wall street right now, are they doing the right things? the wrong things? how do you thinkut it? government isn’t perfect either. i’m inspired by what’s happened over the last couple years. the dodd-frank act was on balance a good thing and now we have this new jobs bill, which i think is exciting from the idea that it’s working with, to have, you know, crowd funding to become a more important part of our — that’s democratizing capitalism. that’s the kind of thing that i think may well be in our future, which will even — the left is hammering. thepeople hate that, say we’re opening the door for all the charltons to come out and the boiler room bill. they’re hammering it. that’s the same thing that people said in 1811 when the new york securities law started this whole thing. in 1811 they allowed anybody to set up a company and they allowed free purchases of stocks by anyone with limited liability and people were shocked and they said that’s going to create all sorts of shenanigans. it did create shenanigans but it also created economic growth. professor, while we have you here, let’s ask you about housing, too. we’ve had a number people come on our air over the last six, seven weeks from warren buffett to donald trump and said they think home prices are nearing a bottom if they haven’t already what do you think? i say this knowing that the number is going to be hitting a little later this morning and the expectation is numbers came down again. the numbers are coming out tomorrow. tomorrow, tuesday. i haven’t seen them yet so i’m not going to talk about them. what we did notice for the last four months is prices have been falling, at the same time indicators are looking stronger. permits are up, the housing index is up and the economy, the confidence is up. so there are signs that it could be a turn around. i give it a chance that this could be a turning point but i’m not saying it is. i think it’s still too uncertain to call a turning point and it could continue to go down. professor shiller, i want to thank you very much and wish you the best of luck with your new book. thank you.
ValueWalk’s August 2021 Hedge Fund Update: Point72 Suffers Loss; Hedge Fund Assets Hit $4 Trillion