Things that I know now that I did not know on September 12....
- Nominal interest rates can become negative.
- There is no riskfree asset.
- Equity risk premiums can change dramatically even in mature markets.
Things that I thought I knew on September 12, that I am not so sure about now...
- Large companies in developed markets can always raise new capital.
- Bank runs are things of the past, with the regulatory oversight, accounting rules (mark to market) and risk management tools that we have today.
- Value investing (investing in low PE , high dividend yield and low PBV stocks) is less risky than growth investing.
- Dividends are sticky.
- Diversification across asset classes provides protection.
- Debt is a double edged sword. (The costs and likelihood of distress can be much higher than I thought...)
- A large cash balance is not just a wasting asset but protection against danger.
- The line between hedging and speculation is a very fine one... and easy to cross...
- Main Street and Wall Street are co-dependent. One cannot be healthy, if the other is not.
- We are in a global economy.
- Ignore illiquidity at your own peril.... Its cost can vary across time and across markets
- Risk is not just a number.
- Stocks don't always win in the long term.
- Smart money is not that smart!!!
- Even great investors make mistakes!
In fact, I have been collecting ammunition for each of these points, by scouring news stories from the the last three months. Sometime over the next year, I will sit down and start putting it down on paper. All I need is a good title!
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