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You hop from place to place, forgetting where you are. What you are.

The only constant is waking up to the ceiling of some Marriott. A marriage of convenience. These few weeks I’ve been all over and quite frankly I’m too tired to put together a well-structured piece so here it goes:

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This post is part of Unearthed.

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• Risk Perception During Bubbles:

  • In 2004, only 19% believed there was "little or no risk" of home prices falling.

  • In 2009, during a severe recession, this belief dropped to 17.2%.

• Psychological Nature of Bubbles:

  • Bubbles stem from public inattention to falling prices, not firm beliefs in price stability.

  • "New era" stories justify actions rather than being strongly held convictions.

• Challenges in Controlling Bubbles:

  • Bubbles are subtle social-psychological phenomena, making them difficult to regulate.

  • Regulatory actions post-financial crisis may reduce future bubbles, but effectiveness is uncertain.

• Market Limitations:

  • Lack of liquid markets for short-selling homes limits skeptics' influence on prices.

  • Efficient market theory is undermined without short-sale options.

• Investor Influence:

  • Large groups or institutions can drive prices up without short-selling constraints.

  • High-tech institutional investors like Blackstone may alter bubble dynamics.

• Nature of Speculative Bubbles:

  • Bubbles can deflate and reflate, rather than popping suddenly as the term suggests.

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STOCKS, HISTORICALLY

• Irrational Exuberance

  • Psychological basis of a speculative bubble, a situation in which news of price increases causes enthusiasm, which spreads from person to person, and, in the process, amplifies stories that might justify the price increase.

  • This draws in a larger and larger class of investors, who, despite doubts about the real value of the investment, are drawn to it partly through envy of others’ successes and partly through a gambler’s excitement.

• The Millennium Boom

  • The Millennium Boom (1982–2000) saw a 7.7-fold increase, surpassing previous booms like the 1920s (5.2-fold) and 1949–1968 (5.1-fold).

  • This was irrational exuberance (at least in part) because from 1994 to 2000, stock prices surged without proportional economic growth (GDP rose <40%, corporate profits <60%).

    • S&P Composite earnings grew rapidly in the late 1990s, more than doubling from 1992 to 1997, but this was partly a recovery from a recession.

    • Historically, rapid earnings growth has often followed economic depressions, as seen post-1920s, 1930s, and WWII.

• CAPE Ratio

  • CAPE peaked at 47.2 in March 2000, the highest ever. Previous high CAPE periods include June 1901 (25.2), September 1929 (32.6), and January 1966 (24.1).

  • Author’s Note: not to be a “new era guy,” but CAPE of S&P has been sustained high for a long time now (2024).

• Real S&P Stock Price vs S&P Earnings (1870 - 2014)

• Real Stock Prices in Ten Countries (1995 - 2014)

• CAPE Ratio vs. Interest Rates in U.S. (1881 - 2014)

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BONDS, HISTORICALLY

• Fed Model:

  • Popularized in the late 1990s and early 2000s to justify rising stock prices amid falling interest rates.

  • Evidence for the model is weak; during the Great Depression, low interest rates did not correlate with high stock market valuations.

  • After the 2000 market peak, both price-earnings ratios and interest rates declined, contradicting the model's predictions.

• Criticism of CAPE Ratio

  • Bill Gross of PIMCO highlighted that discussions of CAPE often neglect the impact of low interest rates post-crisis (e.g. 1.43% 10-year yield in July 2012.)

  • Instead, his "new normal" or “new neutral” view suggests lower likelihood of a bond market collapse, though overpricing concerns persist.

  • Shiller thinks he underestimates the probability of a bond collapse (due to increase in inflation and withdrawal of quant easing), but admits overpricing should be compared with other markets.

• Inflation and Interest Rates

  • Historically, there is practically no relation between long-term interest rates and future long-term inflation—the type that matters.

  • U.S. Long-term Inflation vs. Interest Rates (1871 - 2014)

• Real Interest Rates

  • Introduced by John Bates Clark in 1895, defining real as nominal less inflation

  • The term "real interest rate" wasn't common until after 1960, suggesting a slow adoption of Clark’s concept.

  • Inflation-indexed bonds, which show real rates, didn't exist in major countries until the 1980s.

  • Theorists argue stock market ratios should relate to expected real rates, not nominal, assuming investors understand real vs. nominal rates.

  • Show a long-term decline in real interest rates, reaching low levels by 2012.

  • U.S. and U.K. real bond yields turned negative in 2012, indicating investors accepted guaranteed negative real returns.

• Inflation-Indexed Bond Yields for Four Countries (1985 - 2014)

• Implications for the Equities:

  • Negative real bond yields suggest higher stock market valuations.

  • Financial theorists like John Campbell and Luis Viceira emphasize long-term indexed bond yields as the true riskless rate.

• Investor Misunderstandings:

  • Many investors overlook the importance of indexed bond yields and misunderstand inflation protection.

  • Inflation indexation, contrary to some beliefs, protects against price-level risks without introducing new risks.

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REAL ESTATE, HISTORICALLY

• Unfinished — largely academic book that isn’t very applicable. Don’t see a value in writing more other to satiate my compulsion to finish before proceeding.

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I mean, it’s hard to think of anything more useless than sitting and doing nothing. Even drinking, in social contexts, can get you a job or something.

Then, one day, I sat in the park for a very long time. And it changed my life.

When I came home, I set a reminder in my calendar app called “ferment.” I knew I had to make “intentional unintention” daily practice, and I soon began to crave its solitude and silence.

And it was good . . . while it lasted.

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Our mind, like a mahout, makes a lot of plans:

• I want to be present in daily life

• I want to perform each action with full focus

• I want to face each day with gratitude and serenity

Unfortunately, he isn’t going anywhere until the elephant decides to move his fat ass.

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I felt really awful this morning.

It’s always the times you think you “should” feel most happy that things feel the most odd. You grab an opportunity, it slips between your fingers, and you eventually make peace with that. Then, months later, everything floods back—all at once.

Worldly things have a funny way of dragging you back. You feel restless. Or decide against it—God can wait until I build a business and find a wife. Next thing you know, your quiet time is a particularly long line at Trader Joe’s.

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Most people think yoga is synonymous with stretching.

The first images that pop into my head are hot moms, white wine, and alo leggings. But yoga is far more that—it’s a path to God. In fact, yoga comes from the root word yuj, meaning “join” or “unite.” Physical training and asanas are helpful guides in this.

Swami Sarvapriyananda explains yoga is present in every action of an illumined one—from sweeping the floors to tying his shoes. The Swami’s description of the four types of yoga also resonate with my own experience:

1. Karma Yoga: Action without attachment to the results. The path of wu wei.

2. Bhakti Yoga: Love for the divine. The path of Faith.

3. Jnana Yoga: Using reason to find One. The path of Understanding.

4. Raja Yoga: Meditation to experience God. The path of fermentation.

All of these are tough elephants to tame, but let’s focus on the training the last for now. The first key to getting our elephant in shape is to:

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1. Make it daily

Meditation, like lifting or any other skill, needs progressive overload. Our elephant won’t start sprinting overnight, but if he walks an 1% further each day, he’ll go 37.7x faster after a year. Or 1427.6x after two.

But if my elephant gets trained only when he feels like it, he’ll never go anywhere. Swami Ashokananda gives us three tips on this process:

• Meditate daily. Preferably 2 to 3 times.

• Meditate at a fixed time

• Meditate in a designated auspicious place.

I used to think of these as unnecessary crutches. Part of this is true—they absolutely are crutches—but I’m certainly in great need of them.

For auspicious places, I prefer the sunlight and fresh air of park benches. But quiet spots in the City are few and far between. I’ll find a spot by a big window and sit there up to three times a day: after waking, during the 2pm slump, and before bed.

No excuses; when life gets busy, we should be more protective of our quiet time. As Martin Luther writes:

I have so much to do that I shall have to spend the first three hours in prayer.

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2. Take out the trash

Think of your mental oasis as an apartment in another city. If you are bogged down in worldly things, you won’t go there very often. So when you do, all your copper pipes are gone and your silver spoons now have a higher use—literally.

We need to purge bad company, negativity, and chatter from every part of life. There’s a reason why temperance, regimen, and silence form the foundation of all virtue.

One drastic change for me was music. I’ve averaged 20,000 hours per year on Spotify for the past 7 years. Now I work in silence, but my appreciation for music has actually increased. I listen with intention, and not as background noise.

The same is true for news. Papers, commentators, and “experts” can overload us with data, leading to less informed decisions. Getting a separate phone for work also helped. I deleted all unnecessary apps, blocked all non-work people, and leave my fun-phone at home when I need to focus. Some people call me “boring,” but I’m ok with that.

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3. Trust the process

Imagine your mind as an ink well. When you first start washing it, the pot seems to spew out an never-ending stream of black. But over time, the water runs clear and you can see details previously obscured.

We also face many little sorrows. An ache in your back, a recent failure, illness, and countless other pests that try to distract you from yourself. On any given day, one or two are probably present. But instead of using them as an excuse to skip the session, we should look forward to overcoming them, as the reward is even greater.

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4. Find your mantra

From Patanjali to Zhuangzi, there are a lot of guides to meditation. The key is finding what works for you.

One of the biggest supports, recommended by Shankara, is holy company. I was a bit skeptical since I’ve had bad experiences with organized religion (i.e. argued with a pastor as a kid) but after meeting an enlightened man, it truly is eye-opening.

Another support is a point of focus. The bindu, mantra, and om are common tools for this purpose. I use a form of each in my process:

1. Renounce labels: What is one is one. What is not one is also one.

2. Renounce edges: Feel the floor under your legs and the air on your skin. Imagine the edge between them wiggling. Then blurring. And finally, melting together.

3. Renounce ego: Imagine yourself as a drop of ink in the ocean.

Think of meditation as a gas station. It’s not the only period of peace in a worldly day, but a way to refill your tank of serenity. Ease into it and ease out of it.

I sat in a room with big windows today. Air and sun poured in. Thirty minutes in half-lotus and my world was back at peace.

This will be a short one:

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