Michael Milken has some terrific insights posted at Nasdaq.com on the credit markets in general and the supremacy of a diversified porfolio of junk bonds versus mortgage securities and most loans.
As a side note, I had the opportunity to briefly meet Mr. Milken at a wedding recently. Pretty cool as the guy’s a living legend in the brokerage business and obviously brilliant.
Anyway, I assume this was written in connection with this spring’s Milken Institute event…
A recent book about financial markets said “real estate prices collapsed, credit dried up and house building stopped.” That’s not a description of 2008 or 2009. It refers to 1792, during the administration of George Washington. More recently, stock markets dropped sharply, banks curtailed lending and unemployment rose to double digits. That was 1974.
Live long enough and you begin to appreciate what remains constant through cycles of history. More than 40 years ago as a student at Berkeley and then at Wharton, I developed a formula for prosperity that applies in any economic cycle:
P = Ft (HC + SC + RA)
It says that prosperity equals the effect of financial technologies acting as a multiplier on the total value of human capital, social capital, and the real assets – cash, receivables, land, buildings, etc. – typically found on balance sheets.
Read the rest: