The Ledger
Every statement that passed quotation and attribution checks. Mix any filter with any other: certainty 1/5, debate potential 5/5, or both at once.
why aren't all 33 resolved? a statement only gets an assessment when the public record can support or contradict it. opinions and what-ifs never can, and 0 checkable ones are still open, waiting for their date. predictions held up or didn't; assertions are supported or contradicted. on every card: ▮▮▮▮▮ certainty · ▮▮▮▮▮ debate potential. speakers are clickable
Neither quantitative nor qualitative models can reliably forecast currency markets
“I never wanted my views on the dollar to be more than a five-minute discussion, because if there's anything I've learned in my career, the quantitative models don't work, the qualitative models don't work, there is a random stochasticness associated With curre…”
Cembalest: Managing currency risk does not sustainably generate positive returns
“I've never seen sustainable efforts to reliably manage currency risk as a way to generate positive returns in portfolios.”
Cembalest: US municipal restructurings will rise continuously without federal intervention
“But absent intervention from the Fed or the Treasury, which I have a 95% confidence won't happen, we're gonna have Can you continuously rising stream of restructurings at the municipal level over the next few years?”
Bondholders lose more than pensioners in every US municipal restructuring to date
“And in the seven or eight restructurings that have happened so far at the municipal level, that's exactly what's happened. Every time there's been a pensioner and retiree healthcare write down, the bondholders lost more as a percentage of par.”
U.S. entitlement to discretionary spending ratio will hit 5:1 within a decade
“Because in 1970, the country spent the same amount on entitlement spending As it did on all of the rest of the non-entitlement discretionary spending. And so that one to one ratio became one and a half to one, then two to one. And now it's three to one, and it…”
A Bernie Sanders-style tax plan would barely dent the U.S. entitlement ratio
“And secondly, even if you do a Bernie Sanders level tax plan, which is basically taxing everything that moves, it only brings that ratio from five to one back to baby three and a half or 3.8 to one.”
Cembalest: Decarbonizing transport and industry matters more than grid decarbonization
“Decarbonizing transportation and decarbonizing industrial energy use is really where it's at if you're trying to get a handle on this problem. I mean, grid decarbonization is good, but people make a mistake by over-inflating what the consequences of success th…”
Active managers have three years to prove outperformance over passive ETFs
“So the industry basically has three years starting now to prove it can do it. If three years from now, we still have meeting an active manager below the ETF, the story will ride itself.”
The buy side is an eight on meritocracy, the sell side two
“The bottom line is the buy side On a scale of one to 10 is a meritocracy is an eight, and the sell side is maybe a two or a three.”
Cembalest: 2000s equity crash was mostly unrelated to US economic performance
“Because we were all picking up the pieces of an equity collapse that was really, for the most part, unrelated To the performance of the U.S. Economy. It had everything to do with risk-taking, and not even so much leverage, it was just ridiculous risk-taking an…”
J.P. Morgan rejected Madoff in 2008 over front men and impossible returns
“So we met with some front guy, and we had this 19 page questionnaire that we go through as part of our due diligence process, and the very first one is, when can we meet the principal that's making the investment decisions? And they told us, That we wouldn't b…”
Cembalest: Trump administration will post severe midterm losses despite strong economy
“I think this is the first administration that's going to post a double bogey At a time of strong stock markets and strong employment with respect to the losses they sustain in the midterm election.”
Except for 1973, market impacts of military conflicts dissipate within four months
“With the exception of the 1970 to 73 Arab-Israeli conflict which led to an oil embargo and a stagflation, almost every single military conflict was gone from the markets within three to four months. Where the business cycle was at that point the primary driver…”
Cembalest: 2017 tax bill spent twice as much on individual cuts than corporate reform
“So what's amazing is that a tax bill that started out as something to rationalize the competitiveness of the U.S. Corporate sector, they spent twice as much money on individual tax cuts, and so that, that's disappointing as well.”
Electricity accounts for just 17% to 18% of global energy consumption
“Electricity is only 17 or 18% of all global energy consumption.”
Cembalest: Elon Musk's Tesla Pay Is an Outlier Compared to Major Indices
“Last week, I did a post on Tesla, a story in pictures, which was kind of a brutal and cruel assessment of everything you're going on at Tesla, including, by the way, a chart on CEO compensation that shows how much Elon Musk gets paid for a loss-making enterpri…”
The U.S. has experienced negative real interest rates in only four eras
“Since, when the United States starts as a republic, there have been four periods when the cost of money is below the rate of inflation for an extended period. The Civil War, World War I, World War II, and the last 10 years.”
More than half of Italian high-yield bonds yield less than U.S. Treasuries
“More than half of all the high yield bonds issued in Italy have yields that are tighter than U.S. Treasuries.”
Sovereign lending theories fail because countries can simply refuse to tax
“You know, for example, Walter Riston was famous for saying, well, lending to countries is better than companies because countries can't default. They have infinite power of taxation. Yes, they do until they decide not to exercise it. And so all of these kind o…”
Cembalest: Mexican Assets Became Top Performers in Decade Post-1994 Devaluation
“And in 1994, after the Mexican peso devaluation, you couldn't sell a peso denominated asset or a dollar denominated asset with exposure to Mexico to anybody, and over the subsequent decade, all sorts of Mexican denominated assets were among the best performing…”
Cembalest liquidated $5 billion from J.P. Morgan's emerging markets portfolio in 1998
“And in the summer, in May, June, July of 1998, I sold five out of that six billion.”
Cembalest: J.P. Morgan warned clients away from Puerto Rico debt in 2014
“We warned our clients aggressively away from everything having to do with Puerto Rico, you know, in, in, in 2014 or wherever they did that long-term debt placement because the fundamentals are awful.”
Cembalest: When making giant mistakes, write them off and restore solvency
“And that was a signal that the industry had learned that when you make a giant mistake, you gotta write it off and move on. And the best thing to do is put issuers Back in, in at least the possibility of being solvent.”
Cembalest: J.P. Morgan Rejected Leveraged Structured Notes Despite Competitive Pressure
“You know, as a global firm with a global reputation and with fiduciary mindset on, there were a lot of times when I said that we're just not going to do that. And I understand this puts competitive pressure on you, but these things don't make sense.”
Cembalest: Institutions rebalance far more systematically than private clients
“On the other hand, investment committees for institutional clients are much more religious about rebalancing. So, As equity, as asset prices go up, they are religiously rebalancing back to normal, and are also adding risk when markets go down, which is a much,…”
Cembalest: Bank recapitalizations speed market and employment recoveries faster than bad-loan purchases
“When governments recapitalize banks, the recovery and the equity markets and employment tend to happen more quickly than when governments simply buy their bad loans.”
Cembalest: Municipalities can legally alter retiree healthcare, but pensions are inviolable
“Municipalities can unilaterally make changes to retiree healthcare obligations that are unpopular, but a judge will allow, whereas unfunded pensions are inviolable.”
Cembalest: Electricity is only 10% to 15% of industrial energy use
“I think electricity is maybe 10 or 15% of overall energy consumption by industry.”
Exposing false data reversed a J.P. Morgan management decision within a month
“Within a month, the decision was reversed, and some people were gone.”
Cembalest: Mexican government bond underwriting fees fell from 200 bps to zero
“If you were underwriting a Mexican government bond, you could still get paid a point and a half to two points in underwriting fees. Now you don't do it for anything except leave cable credit, and there's no fees”
Hedge funds generate massive short-term capital gains for taxable clients
“Hedge funds for clients that are taxable versus non-taxable because hedge funds generate enormous amounts of short-term capital gains to ordinary income.”
Cembalest: Trump tariffs are largest in 50 years from 100-year low base
“It's the biggest tariff increase in 50 years, but from the lowest tariff level in a hundred years.”
Cembalest: Senior Leaders Must Reassure Investors After Well-Founded Losses
“Sometimes just an email, or asking a very senior person, hey, you know what, somebody just lost a bunch of money today. Can you give them a pep talk? Can you send an email? Tell them it's okay. We need investors to be able to take risk. And this risk was well-…”