My croupier pal the other day wanted to understand passive trackers and it was easy. I said you know the gamblers who walk around the tables and see who's winning and backs their box.
He said "yeah but their streaks always end".
I said "past performance is no guide......." And we laughed.
Simple concepts like the law of diminishing returns.
I explained to a window cleaning pal about what would happen if you cleaned a window 10 times. Pointless, exactly. At worst it would be clean after the 2nd or 3rd time. If it's still dirty you've the wrong tools he laughed.
The croupier asked me why is there no investment in actual things? Why is all the money getting loaded up on funds tracking funds.
I replied are you asking me why SSE or National Grid can announce massive rights issues and they get swallowed so easily by the markets. Why government can borrow so much when they clearly have no assets. Have governments got themselves into more debt than households in the 1990's. I laughed and said you'll need more than AI and a few economists.
The level of capital invested and the amount of end assets is at an unrealistic gearing ratio, just ask the croupier.
