The US Ponzi Economy and Bernanke leading the masses right off a cliff

[UhuruPeak]

Parsard -- it pains me to say this given your passion.

... you come across as a complete blowhard...

 

This is getting bad... Munger, do you need to use this kind of language? It frankly doesn't do much for the discussion!

 

Prechter and the long wave & all... I agree it is not technical analysis; in my mind, it really derives from Schumpeter's K-wave; the guy was a Russian macro-economist who paid dearly for arguing that capitalism wouldn't implode but just heal itself back in the 1920.  So, this is macro-economy, right? but then, long waves of 17 years (or 35 yrs round-trip) also correspond to the amount of time we spend working/accumulating. In other words, by the time we learn something, we won't use it again until we are too old - that's where I think this aligns with investment psychology, which more and more folks seem to believe in, the theorists like Richard Thaler and the practitioners like James Montier or Michael Mauboussin. No it is not fundamental analysis, but a basic understanding helps a lot to make decisions (or to know that a 'bubble' (e.g., gold) may have yet to run much higher). Value investors always buy too early and sell to early, right? Basic understanding of human & market psychology could help. Does it make us "technical analysts" just because we don't only believe in value investing? perhaps it does, but we can still be good people.

Sanj, I hope I didn't lose you on this ;) Munger, please no blowhard-thingy anymore.

 

 

Best,

UhuruPeak

[Munger]

UhuruPeak

 

The vast majority of the book is a fundamental analysis, detailing the huge fiscal challenges we face and how they were created.  He then goes on to a wave theory, which I have already said I'm highly skeptical of...  The fundamental analysis was very good.

 

Would have never said anything re blowhard if Parsard had not unfairly and incorrectly come at me.  And no intention of engaging in any similar dialogue in the future -- it is nonsense, I agree.

[tooskinneejs]

munger said: "a lot of rhetoric disagreeing but NO ONE can refute the analysis"

 

If I were to summarize in layman's terms the position argued by the author of the article, it would be as follows:  We (as a nation) are in for a whole lot of trouble because we are bettering our financial position by paying down debt.

 

Apply that same logic to a individual person: Sally is in for a world of pain because she is improving her financial position.

 

To me, that doesn't make any sense.

 

Now let's say that Sally wasn't paying down her debt/consuming less, but rather was doing what America did 5 to 10 years ago and was overconsuming/leveraging up.  In that situation, I would say that Sally is in for a world of pain.  And I would be correct in worrying about Sally's future.  And I probably wouldn't want to invest in the near-term future of Sally given the direction she is heading.

 

I work with a couple of folks who follow Prechter's views.  They are as bearish on our economy as anyone could possibly be.  They literally think that the worst economic collapse is just around the corner.  And there is no convincing them that there is even a remote chance that things might not turn out so bad.

 

Ironically enough, these are the same folks that were care free back in 2005 when I was very concerned about the US housing market and what appeared to be serious overconsumption by consumers (I couldn't figure out how everyone seemed to be able to afford the Land Rovers, BMWs, huge flat screen TVs, etc.).  At that time, they saw what appeared to be prosperity and, therefore, saw only a bright future ahead.  It was "different this time." When I was selling my house to become a renter, they were buying at the peak.

 

Now the situation is the complete opposite.  These Prechter followers see the recent difficult times as neverending.  They think things will get much worse before they ever get better and that, even though stock prices are low, that they will surely get lower.  They look at the recent pain and see only pain ahead.

 

Meanwhile, I look at the fact that overconsumption has eased and consumer debts are being paid down as a positive sign.  I look at the fact that most people are gloomy on the economy as a sign that, once again, the masses have got it all wrong.  As always, people are using the current weather conditions outside their window to predict the weather next week, whether that makes any sense or not.

 

Back to Sally.  To say that we should worry more about Sally's future now that she is improving her financial position than when she was running up her bills seems completely illogical to me.

[Parsad]

Prechter's fundamental analysis is not based on technicals AT ALL.  And the vast majority of his book is a fundamental analysis.  And this wave he talks of has nothing to do with technicals or charts.  What a blowhard.

 

The book may have some fundamental analysis, but Prechter is known as a technical analyst.  He says it himself.  He's on the board of the Market Technicians Association.  

 

Now Munger, I don't know if you're some eager college student with a massive ego or what, but I've refrained from any name calling.  Your previous post suggests you need to calm down a bit.  I would recommend you take a break and come back, or move on to another thread.

[Munger]

Holy cow...where to start

 

If I were to summarize in layman's terms the position argued by the author of the article, it would be as follows:  We (as a nation) are in for a whole lot of trouble because we are bettering our financial position by paying down debt.

 

Toosk -- the paradox of thrift; especially painful when debt is at 93% of GDP

 

 

Back to Sally.  To say that we should worry more about Sally's future now that she is improving her financial position than when she was running up her bills seems completely illogical to me.

 

If household debt had already declined to 20% of GDP, you might have a point.

 

On Prechter -- I am not a "follower."  I have read his book.  I read many books.  Some of his work is very good.

 

[Munger]

Parsard -- you should be the one taking a break.  You initiated the pettiness based on an uninformed attack.

 

And you still have trouble with the facts -- PRECHTER's FUNDAMENTAL ANALYSIS (which was my initial reference in response to a question) CONTAINS NO TECHNICAL ANALYSIS -- NONE.  And his fundamental analysis is very good in many areas.  And the book is not based on ANY technical analysis.  You were 100%, UNEQUIVOCALLY, COMPLETELY WRONG in your comment toward me.

[tooskinneejs]

munger said: "Prechter's fundamental analysis is not based on technicals AT ALL.  And the vast majority of his book is a fundamental analysis.  And this wave he talks of has nothing to do with technicals or charts.  What a blowhard."

 

To keep things honest, here is a link to a recent interview with Prechter himself:

 

http://www.nytimes.com/2010/07/04/your-money/04stra.html

 

"Mr. Prechter is convinced that we have entered a market decline of staggering proportions — perhaps the biggest of the last 300 years.  In a series of phone conversations and e-mail exchanges last week, he said that no other forecaster was likely to accept his reasoning, which is based on his version of the Elliott Wave theory — a technical approach to market analysis that he embraces with evangelical fervor."

 

To summarize, Prechter's "reasoning...is based on...the Elliot Wave theory - a technical approach to market analysis."

 

Munger, given the above came right from the horse's mouth, I find it extremely ironic that you are criticizing others for not having read Prechter's book or understanding how he comes up with his wacky theories.

[Munger]

1) Read the book before taking a sentence in an interview as rep of the book.

 

2) I am already on record (before anything Parsard said) that I'm highly skeptical of his wave theory, which he extrapolates from the fundamentals

[Munger]

I would agree that this has devolved -- not what I'm looking for either.

 

Enjoyed the banter -- even with Parsard, who I think does a very good job with the blog.

 

I may periodically check in but time to get back to work.

 

Best to all.

 

And remember -- MARGIN OF SAFETY.

 

 

[roundball100]

Parsard -- you should be the one taking a break.  You initiated the pettiness based on an uninformed attack.

 

...

 

Munger - I don't post much, but really enjoy all the thoughfulness and intelligence displayed by those on this board.  You seem to be really wrapped up in your opinion here, which is fine.  But please at least take the time to properly spell the name of the man kind enough to facilitate this whole board.

[Eric50]

Here is a quote from the real Munger: "Spend no time arguing with people whose idea you know to be stupid."

 

Thanks Parsad for organizing this board and for sharing your opinions. There is incredible value here.

 

Eric

[oec2000]

Let me ask you something?  And this is coming from the guy that worships at the feet of Buffett and Watsa...do you think Prem could be wrong?  Do you think there is the possibility that Hamblin-Watsa's thesis could be wrong, or at the very least, not a prolonged deflationary period?  Personally, I don't think Prem even knows for sure by any means.  I think he's got an idea, and they've seen first hand what has happened in Japan, so his natural instinct is to protect the capital because he's not going through another God-damn "seven lean years!"

 

Then also ask yourself, exactly what does Prem have to lose if he is wrong?  The hedges cost 1-2%, he has tons of high-yield muni bonds that will produce plenty of interest income, and much of the equity portfolio he holds will also yield 2.5-3.5% in growing dividends annually.  He is leveraged 3.5 to 1, so all he has to do is get about a 4-4.5% yield from his entire portfolio and he's laughing.  Why would Prem invest in equities when he doesn't even have to!  Now let me ask anyone here if they operate with 3.5 to 1 leverage...outside of your home or any other real estate?  Cheers!

 

Please reread my post. I did not suggest that Prem was right or that I even agree with his view. I was merely questioning your premise that he put in the hedges primarily because of their leverage. Their balance sheet is much less leveraged today vs. a year ago and their equities exposure is much lower. The need to hedge is not as strong as before yet they are almost fully hedged compared to being unhedged a year ago.

 

They have a much bigger exposure to bonds than to equities and are therefore very vulnerable to inflation (claims costs) and higher interest rates (bonds). If they were primarily concerned with leverage, the more logical risk to hedge would be inflation. Contrary to what you suggest, he has a lot to lose if he is wrong about inflation. Why is he not hedged for inflation?

 

Some posters have suggested that the deflation insurance is a hedge for their real assets. Their equities are already hedged; apart from that they don't have much real assets. Bonds do well in deflation - they don't have to be hedged for that outcome.

 

I'm simply making a deduction from the facts as to Prem's mindset.

[Guest ValueCarl]

Roundball, nice catch on Munger's lack of attention to important details like the proper spelling of the board host's last name.

 

How odd for a man who steals another great name in the world of finance, Mr. Charles T. Munger. 

 

He must have missed the Larry King subject thread, where according to Larry, 13 alphas in a full name meant for specially gifted, or "noteworthy characters" while paraphrasing one of his lifelong observations, i.e., PATTERNS.  

 

Not to blow too hard using Mr. Parsad's own horn, but I have watched him long enough to be sure he's no novice nor amateur. He's damn smart for ones own money, and will benefit his underlying partners immensely over time. The resultant facts are already accumulated for inquiring minds to read.  

 

I do have a question for Munger at this time though. Mr. Munger, have you read or studied "Martin Armstrong," Princeton Economics' founder, and what do you think about his incarceration?  tia