On the heels of when smart people do stupid things we provide an example of when smart people say smart things.  Today it’s Dr. Mohamed El-Erian.

Read his comments focusing on the importance of the big picture – of the road traveled instead of what’s at the end of it.

The implications are huge.  It isn’t simply ROR but how it’s achieved.  Asset prices can’t be accepted as a given.  It’s about understanding the forces driving them.

Such arguments are deemed heresy – shunned and mocked in a world seeking to commoditize thinking and dumb down process.  We’re bombarded with messages promoting low costs and indexing.  We’re supposed to believe that asset prices are a true reflection of their value.  Investors drinking this Kool-Aid are the ones most prone to chase return – to buy high and sell low – and typically in the least favorable position to withstand the outcome of their decisions.

Heed Dr. El-Erian’s message.  Asset prices are in many cases divorced from underlying fundamentals – a message Apollo has shared with clients during “QE” and the “Trump trade.”  Will fundamentals improve to justify prices or will prices fall to those justified by fundamentals?