EXCHANGE-TRADED FUNDS (ETFs)
"I don't think passive investing itself is a bad thing, and especially with ETFs. My main concern is whether investors are counting on their ETFs to be highly liquid, and whether they might be disappointed.
"If you found a buyer of a high-yield bond ETF and you said 'Why did you buy that?', he is going to say 'The great thing is, I can get out any time'.
"But... at what price?"
"I don't claim to be an expert in bitcoin. I don't see any intrinsic value behind it. Anyway, whatever intrinsic value it had at the beginning of the year, I don't think it has increased six times.
"Or you can look at it as a currency or medium of payment. That may be totally valid in the sense that two people can agree to do business in bitcoin. But I don't see anything in that, that will make it go up six times.
"So I just conclude that it's a speculative mania."
LIQUIDITY AND PSYCHOLOGY
"Liquidity is extremely situational. If you want to sell when everybody else is buying, it is very easy. If you want to sell when everybody else is selling, it is impossible.
"So liquidity is situational and directional. A given security is not either liquid or illiquid. It depends on what you want to do, compared with what everybody else wants to do.
"It is kind of the herd (mentality). When the herd stampedes in one direction, it is very easy to go with it and it is dangerous to stand against it.
"So if you want to sell something, and your ability to sell it depends on whether other people will buy it, then clearly it depends on their state of mind. It is highly psychological.
"In (the fourth quarter of 2008), after the Lehman bankruptcy, if you had credit instruments, they were extremely hard to sell. And six months later, it was easy.
"What changed? The economy did not change that much. The fortunes of companies did not change that much. The mechanisms, the pieces of paper did not change.
"People changed their minds. So liquidity comes and goes as a market phenomenon.
"Usually what happens is, when the market starts to collapse, people with the money start to say 'It is a falling knife, so I am not trying to catch it'. So liquidity does not develop."