December 15th, 2015

The Worst Risk/Reward In History?…and Why I Still Love Venture Capital

Charlie had a great post titled titled ‘The Worst Risk/Reward In History?‘. In it he explains that the yield on investment grade bonds have moved down to 2.35% on their way to the lowest monthly close in history. The gist: Why is this important? Because the single best predictor of future returns for bonds are its starting yield. On average, the higher the starting yield, the higher the future return, and vice versa. Continue reading The Worst Risk/Reward In History?…and Why I Still Love Venture Capital at Howard Lindzon.

Charlie had a great post titled titled ‘The Worst Risk/Reward In History?‘. In it he explains that the yield on investment grade bonds have moved down to 2.35% on their way to the lowest monthly close in history. The gist:

Why is this important?

Because the single best predictor of future returns for bonds are its starting yield. On average, the higher the starting yield, the higher the future return, and vice versa.

So with yields at all-time lows, one should expect future returns to be at all-time lows as well.

I have had trouble explaining to people that follow me on Stocktwits why I have been so light on stocks the last few weeks as the Nasdaq continued to 10,000.

I listened to a great podcast with Patrick O’Shaughnessy and Jeremy Grantham a couple days ago and one term stood out which I shared in my post yesterday – ‘Uniquely Risky’.

This market is ‘Uniquely Risky’.

I was most surprised in the Grantham interview to hear him talk about his very high allocation to Venture Capital. Patrick shqred the clip here.

Like my partner Charlie above…I think in risk/reward with my money and in the public markets that starts and ends with prices.

Because I don’t do much shorting of stocks or hedging, I express my concerns with cash.

Venture Capital is the one area of the markets that continues to make sense to me in risk/reward during this ‘uniquely risky’ period.

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