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if this is such a terrific thing why do
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markets think it's so terrible for the
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american economy maybe the market's just
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completely wrong but job of markets is
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to look forward it's to look past the
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immediate it's to see what the long run
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consequence are going to be and markets
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are making a pretty devastatingly
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negative judgment not true not true so
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let's just establish a couple facts
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about quote unquote the markets number
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one there are two markets and they
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behave totally differently and sometimes
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inversely to each other there's the
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stock market and there's the bond market
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with respect to the stock market what
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they are debating and you're right larry
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is what is the effective long-term rate
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of return a dollar needs to generate in
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order to pay me back that dollar that is
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what the fundamental stock market does
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and what we've seen for many years with
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train imbalances trade deficits and
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close to zero interest rates of which
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more of that happened under democrats
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and republicans we have allowed the
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stock market to inflate past historical
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averages what we've actually seen happen
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in the last week is what most people
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would call mean reversion the stock
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market is still way above where it was
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last year 2 years ago 3 years ago what
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has happened is that the forward
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multiples have compressed so that's
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number one that's a fact and then with
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respect to bonds what we are seeing now
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is there are two very complicated issues
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in the last 2 days we saw one part of
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the bond market totally get out of whack
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and what we know is that the yields
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changed materially in a very acute way
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which is atypical of how the bond market
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typically digests a philosophical change
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in approach to policy what we heard in
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the last 24 hours is a lot of this move
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may have been attributed to an enormous
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levered bet on us treasuries by a
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japanese hedge fund it will take three
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and four and five and 6 weeks for us to
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really know separately what we do know
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though where the structural complexity
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of the market and this is where larry i
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agree with you is acute and important to
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observe is in the credit markets for
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private companies and that is where you
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have to pay a lot of attention
