I can't evaluate all of the arguments made in this article, but one thing thing caught my eye:
Zink also points out that, by investing in equities, institutions
are investing in leverage, as all companies are leveraged, which is why
returns are high.
No evaluation of the leverage of a portfolio (say of a hedge fund) is complete without an evaluation of the leverage contained within the positions of that portfolio. Managers frequently advertise their low portfolio leverage without also disclosing the average leverage of the companies whose stocks comprise the portfolio.
From a WSJ article about getting rejected from your first choice college:
The truth is, everything that has happened in my life...that I thought
was a crushing event at the time, has turned out for the better," Mr.
Buffett says. With the exception of health problems, he says, setbacks
teach "lessons that carry you along. You learn that a temporary defeat
is not a permanent one. In the end, it can be an opportunity."
I wish I could tell you that I was a value investor from the start, that I came out of the womb with a cold-eyed knack for evaluating any investment.
The truth, I'm now reminded, is that I was a total sucker. I guess just about everyone has their first bubble and mine was baseball cards. There was a classic bubble in baseball cards in the late 1980s and early 1990s and I fell for it completely.
All the stars aligned: the New York Mets, my favorite team, won the World Series in 1986, when I turned 8. They contended again in 1988, when the bubble really got going. About two years later I started to go through puberty, which clouded my judgement even further. I don't know how much money my parents ended up spending on my baseball card collection, which is probably worthless today, but I shudder just thinking about it. It hurts even more to know that during the 1988-1998 period, the S&P 500 returned an average of 28% per year. That was an expensive hobby. Lesson learned.
The funny thing is that as I look back, I don't remember even once thinking about how quickly the supply of baseball cards was increasing into order to cash in on the bubble. To my 10-year old brain, all that mattered was that the 1951 Mickey Mantle rookie card was worth $50,000, and that Mark McGwire was clearly the next Mickey Mantle (actually that wasn't such a terrible prediction, even steroid-adjusted), therefore the Mark McGwire rookie card I just bought for $4 would one day be the greatest investment ever. The scarcity of the Mantle card, and the gross abundance of the McGwire card, were two facts that did not come naturally to me.