Investment Management Associates

I grew up hating America. I lived in the Soviet Union and was a child of the cold war. That hate went away in 1989, though, when the Berlin Wall fell and the cold war ended. By the time I left Russia in 1991, the year the Soviet Union collapsed, America was a country that Russians looked up to and wanted to emulate. Twenty-three years later, a new version of cold war is back, though we Americans haven't realized it yet

Math and physics are rooted in equations that spit out precise answers; vagueness there is dangerous for the right reasons. That is why they are called exact sciences. Investing, despite being taught as an almost exact science, is far from it. It is a craft that falls somewhere between art and science.

I started writing my first book, Active Value Investing: Making Money in Range-Bound Markets, in 2005; finished it in 2007; and published the second, an abridged version of the first (The Little Book of Sideways Markets), in 2010. In both books I made the case that there is a very high probability that we are in the midst of a secular sideways market a market that goes up and down, with a lot of cyclical volatility, but ends up going nowhere for a long time.

The world today is riddled with unique economic, political, and demographic risks. Finding attractively priced assets that will perform well in spite of these challenges is excruciatingly difficult. For investors, though, one segment of the market ? the highest-quality stocks ? still offers attractive risk-adjusted returns.

The popping of both the Chinese and Japanese bubble economies will lead to higher interest rates. The Japanese government will probably not be able to intervene in the economy for much longer, and so rates in that country will rise and there will be little they can do about it. China's government, meanwhile, seems to be mulling another multi-hundred-billion-dollar stimulus over the next few months. The Chinese government's actions are thus the wild card that will determine the duration and the magnitude of the bubble's pop - the longer they intervene, the direr the consequences will be.

Vitaliy Katsenelson of Investment Management Associates got snowed in at the airport on the way to Bermuda. He says choosing flights is like picking stocks: We are constantly making decisions based on imperfect information.