yadayada

you don't produce more and don't need it. Increased productivity means that goods and services become cheaper. For example 40% of population worked in farming early 1900. The fewer people have to spend time on something to get the same output, the higher productivity is, the cheaper those things will be, and there is more room to spend on other things. So there is more disposable income. Early 1900 most people could not afford much more then food and housing. If babyboomers go in retirement they will still spend, so GDP wills till be helped. And if they run out of money, they will start working again if they can. This shows the nice correlatioon between productivity growth and GDP growth http://www.financialsense.com/sites/default/files/users/u673/images/2012/0727/world-average-annual-growth-rates-gdp-and-population.jpg Note how before industrial revolution GDP trailed population growth, and after that it started to outpace it. I think what helps to understand this is to relate value created to the time it cost to create that. And just ignore money for a second. money is used to exchange that value, and has no value in itself. Improved productivity allows to create the same amount of value as 100 years ago in a lot less time. And money keeps track of how much value is created. That is why GDP goes up. For example if now 4% of population is in farming to provide the same amount of food, that means 36% of the population now has to spend very little time to get food and have more time to create additional value. Because fewer people need to be compensated for their time, food is now 'cheaper'. That is why third world countries that provide basicly no value to the world and have low productivity in everything have poverty and hunger, even though there is no shortage in food.

productivity going up, that was an important reason for the economic boom of the 90's . More output per worker, so goods and services become cheaper to produce. Which means more disposable income.

I think with productivity it is a race. The first guys getting there make a boat load of money. Just look at companies like altisource. Huge margins. But when others catch on, margins get squeezed and more value goes to the consumer. I think there are three large area's that take most people's budget: healthcare, education and housing. I don't see how cost of housing will go down, but healthcare and education have room for improvement. Increase in preventative medicine, move to online more centralized education.

http://www.hedgefundwisdom.com/wp-content/uploads/2014/05/HFW-Q1-2014.pdf Interesting read, and some interesting idea's in there.

Hmm is mr Gordon a computer scientist? No? Maybe don't talk about things yo don't know anything about then. Also ironic how he basicly lists a bunch of inventions, and then states, nah no more inventions now, I can speak for all the physisicsts engineers and scientists in general. No more inventions, nothing to see here guys! BTW I think debt collectors of badly performing loans are a very nice hedge on all this. Especially some of Erbey's companies. You put 10-15% of your portfolio in one of those things and you have upside either way. But a lot more if things turn sour!

I think it goes like this, 60 trillion total debt. 9 trillion corporate, 12 trillion consumer (mortgage student credit card etc). and about 20 trillion federal? I think you make an interesting point about what that 20 trillion in federal debt does not include. How big are those unfunded liabilities? That is social security and health care right? Im not sure where the other 20 trillion goes to though.

Gio, can't you fix it up a bit, make some really nice pictures and put it on Airbnb? They seem to get pretty good rates. And if you make sure to make some really nice pictures, im sure you could rent it out a few months a year as a vacation rental for a nice rate? If you do it like that, then you could use some leverage, and then flip it after a few years for a nice return?

canadianinsider.com Not sure for japan. By TSE you mean canada right?

how about playing this by buying certain stocks? Some way to get a bit of upside even if it does not happen.

Gio I would use leverage if the properties are really cheap. It is really low risk (as properties are at bottom prices anyway) and you jack up your return. And the money your not putting in the property can be invested.

why is a certain level of debt not sustainable? Why should it go from little debt to medium debt to little debt? And why is the 50's our prime example here. It seems the only level of debt that seems much on the high side, is government debt. I think government jobs make for little over 10%. ALlthough services and goods bought by government also produces jobs probably. But it seems at some point they cannot borrow more, so then is the choice, big inflation or just cut budget and delever? It seems cutting budget and delever is more likely. Allthough looking at elections, it seems to be a popularity contest between idiots now. What is a normal level of debt? It seems consumer debt is probably at normal levels now. Government debt is the one that is inflated. Also corporate debt includes debt held outside of the US right? This does not add to GDP, so it might look too high? I think I agree with petec here. Probably after a few years consumer debt goes up again, and then government debt would go down. But the two cancel each other out and you just see sub par growth for a longer period.

I think you guys fail to make a difference between consumer debt and government debt. And the fact that the US is still very competitive, and generates steady tax income for the government. I think there is a healthy average ratio of debt. And in the 50's people were overly pessimistic. I think we are slightly over that now. But we are moving down. So in the 50's people were losing value by being underlevered, and we are slightly overlevered right now. Note that the overwhelming majority of this debt is long term and mostly replaces another cost (rent). And then there is government debt, which is unsustainable. But if you look at the difference between what will tax income likely be in 5 years, and what will spending be, it looks like there is a lot of room to go down. With hyper inflation you usually saw a cratering economy and no tax income to pay off debt. But the US does not have that problem. I think what you will see is a delevering economy, and a slowly levering government. But when spending turns up again when delevering has happened on the public level, there will be more tax income for the government. And if you have a sensible president for once in the next 10-20 years you will see a government delevering too. Im not too optimistic about the future, and we will likely not see a economic boom. But the ingredients for hyperinflation just are not there. You would need to see a crappy economy and increasing levels of consumer debt. Lack of productivity, sky high commodity prices compared to income, etc. Germany in the 30's was being squeezed by europe as a punishment of the war. Zimbabwe was basicly a complete mess. A lot of these hyperinflation scenario's you see some external element or the country had serious problems besides debt. You don't see that in most of the western world now.

To be honest the crisis is not to blame on money printing... Just look at Japan, bubble with massive crash and then deflation resulting in a slow and shitty economy for over a decade. The bubble is to be blamed on insured bank deposits and a completely idiotic and irresponsible government wanting everyone to have houses and making laws to facilitate that. Can't really blame banks that much here. The moment you insure bank deposits you gotta guarantee them and that requires strict regulation. The money printing is what happens when it all goes wrong, but is not the instigator imo. The weakness here is really stupid or crooked politicians.

I don't get how he thinks it trades at 12x earnings though. I would snap buy it at those multiples, but public shareholders only get 10% of earnings. It seems to trade at more then 20x earnings. that seems a bit rich.

Budget deficit was 700 billion in 2013 and shrinking. so if GDP grows a few years, it is probably 19 trillion. And then you get 3.4 billion in tax income. if budget does not grow by then, the deficit is gone. And there is probably a lot of waste. So I seriously doubt we see hyperinflation before some sensible budget cuts (almost 700 billion to the military??!) . Given that a lot of government spending does not add much value, I think that is a good thing. Even if inflation is ramped up a bit, then GDP grows faster, debt is worth less, and deficit is gone in no time with some sensible leaders. By that time the non government part of the US is done deleveraging, so that fills up the gap. http://constantgeography.files.wordpress.com/2011/02/budgetchart1981_2007.png So if governemnt cuts out some fat, things turn up again, they could have a 3-400 billion surplus. do that 8 years and debt gets back to 2000 levels, probably lower since inflation.

The American public went through delevering the past 5 years. And it seems the us government can easily cut spending in the military and still have a massive army. So whe us public levers up again and some of that pent up demand is released they have more tax income and hopefully a smart president that cuts some waste.

thanks for the link. I think that is because it is easier to explain a smart argument in favor of something. But it is far more time consuming to argue against a inferior argument or way of doing something. Kind of like explaining evolution in 5 minutes. But if you want to explain why the bible is likely a myth you have to spend far more time to build that argument effectively. Just look at that bill nye argument vs the religious dude. He is really struggling to quickly explain in a simple way why a lot of bible stories are likely myths. You suddenly need to have a bigger understanding of science to see that. I guess that is why inverting so important to better understand something, to explain why a certain way of doing things in a certain system would very likely not work, you would have to truly understand the system. So i guess if you have one smart person, and a bunch of idiots. The smart person has to spend a lot of time explaining things he probably spent years to understand. So a lot of time and energy is wasted if the idiots in the group are not willing to take his word for it. In scandinavia you have a form of democracy where complicated decisions are made by small groups of experts and the politicians just take their word for it. I think this is the best way of doing things, you have a democratic system, but as soon as there is too much divide they outsource to experts and just take their word for it.

I love how doomsday preppers are always overweight. You would think the first huge thing to increase your odds of survival would be to lose weight and be mobile.

http://www.businessweek.com/articles/2013-08-08/the-shrinking-federal-deficit-hurts-a-gop-argument It seems the budget deficit is shrinking. This is kinda disturbing though: https://static.nationalpriorities.org/images/fb101/2014/presidents-proposed-discretionary-spending.png It seems this can be easily fixed by putting a knife in the military budget? It seems with the massive debt outstanding it would be better to run a surplus for a while. And removing some R&D money and taking some of the military bases from europe could be a good start. Also this: http://1.bp.blogspot.com/-qGmmVhZXlMg/UwOp7ySZ1zI/AAAAAAAAY7Q/5jaLRzvghDs/s1600/Household+Debt+2013Q4A.png Does look like deleveraging. But it looks like student debt is about to go in a bubble. I don't see autoloan debt ballooning really.

Pete, agree with you on the london thing. But on average, especially in the US, mortgage debt is probably productive. Also what do you mean by the government stimulating the economy? Not contesting it or anything. Is this by hiring more public servants that are not productive? Because the Fed is basicly creating money to stimulate already, this is not really the government right? They are doing it to prevent deflation and make the deleveraging process more smooth. You can make an argument for that. Because if you don't have a smooth deleveraging a lot of value can be destroyed. There is no money for science projects, expansion and increasing of productivity. As for GDP, that is basicly what everyone spends in an economy right? So if productivity goes up, GDP does not necesairily go up much? If you have a mini economy. 5 people produce something and sell that to eachother 5 times in a period for 100$ each, then gdp is 500$. But if it costs less to make, gdp goes down basicly. Because they now only have to pay each other 80$. so now gdp is 400$. If you keep printing money though, it will feel like things are not getting cheaper despite increasing productivity. And there is probably more tax revenu if a government borrowed against this. I feel like im out of my dept now though, gotta study this some more.

so he is basicly building a berkshire hathaway like buffett? Investing the float? Market cap is only a bit more then a billion$. That looks interesting.

if you think about it, we spend so much more time and money on science, in a much more efficient way now then 50 years ago. There are almost 3x as much people on the planet now. And with internet and improved communication it is much easier for smart people to find each other and work together. So technological breakthroughs should happen at a much accelerated pace then in the 50's . Im pretty optimistic for the next 10-20 years. In the past you also had geniuses writing some paper on something and then having it burried. Only to be found like 30 years later and cause breakthroughs (wasn't this the case with information theory?). with improved efficiency in information exchange, that should happen much less now. Now 200 IQ genius in mongolia can find a library and internet connection and teach himself anything. And then easily connect with scientists around the world. That was much harder 50-100 years ago.

yeah but money supply is 11.5 trillion. Fed balance sheet went from 1 trillion to 5 trillion. But 1.5 trillion of that were Mortgage backed securities that were mostly worthless. So technically it increased from 1 to 3.5 trillion, by 2.5 trillion. So compared to 11.5 trillion it is not that much. Also looking at M2 money velocity, it went down to like 30 year lows: http://research.stlouisfed.org/fred2/series/M2V Seems like the increased amount of money was just invested in low yield things and is sitting in people's accounts? So this is why you saw no inflation. So how in this picture do you get hyperinflation? They would have to print an insane amount of money over the next years. Also isn't some level of debt sustainable? Like mortgages for example. Monthly payments basicly replaces rent. So you don't need to see a deleveraging of mortgages. And that is the largest part of consumer debt. You either pay 1200$ a month in rent or in mortgage payments... http://www.zerohedge.com/sites/default/files/images/Household%20Debt%207.31.09.jpg As you see the non productive 'waste' debt has not increased much and is only a small part. Same with some level of student debt. 20k$ of debt per student on average seems normal. So if you have 50 million students with an average debt of 20k$ then that is 1 trillion $. In theory this debt should help a country become more productive. This is also tracking inflation basicly and can be paid off over long periods of time.

I think i see several mistakes here. I think to do well (decent shot at 10-20% IRR) over 10 years time you need to see: -growth -high return on capital -some operating leverage -monopoly/duopoly , nothing worse then that, and moat needs to be obvious and rock solid. So crap like blackberry was obviously a bad pick 10 years ago. -great capital allocator not restricted by size (this can replace the monopoly/duopoly). So things like BRK are not an option. Needs to be a shot at 15-20% IRR. So things like financials BAC and KO are not an option. Also no dividends. Since your not reinvesting them. If you have a obvious growth runway, high return on capital and a monopoly/duopoly structure, it is hard to overpay. This means there is no institutional imperative. It means management is not pressed to spend enourmous amounts on R&D because growth is lacking etc. Just look at how much money microsoft pissed away on R&D. So I think Liberty media, mastercard, Schibsted and google would be a perfect combo. I like google because it is basicly a free option on technology and larry page will make sure to keep away bureacracy in the next decade. If i had 4 million, id put 3 million 25% each in those 4 I think. I think the risk with guys like Einhorn is that they have been around for quite a while. And generally a lot of fund managers tend to quit between 10-20 years in the business. So if you pick someone that has been around for 10-15 years odds are too high 1-2 will quit after 3-4 years. Or that you invested in someone who was lucky and wasn't that good.

I would buy google, massive moat, lottery tickets in new tech , v high roic. And still a sizable growth runway for online advertising Also MasterCard , high roic , much growth ahead and large moat. Also fair bit of operating leverage. Schibsted , huge moat, often if they take no1 competitors move out altogether . Large monetization growth runway ahead . This one is cheaper then the other 2. Also a disciplined and skilled management team which will likely stay on for most of the decade. Amazon, bezos will stay on for some time. Also a large moat I think 4 most important things are moat roic and management and growth runway. Need all 4 of them.