Charlie Munger, the outspoken octogenarian sidekick of Warren Buffett, recently called America's perceived obsession with energy independence silly, according to an article at Motley Fool.
Munger noted that the black gold "is absolutely certain to become incredibly short in supply and very high in price." Imported oil is not a villain. In fact, Munger claimed it's a friend. For more here's a link to Munger's comments.
http://www.fool.com/investing/general/2013/08/09/charlie-munger-on-our-crazy-obsession-with-energy.aspx
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It's 1987 and the stock market's been on a tear throughout the summer.
October lazily rolls around and Ferderal Reserve Chairman Alan Greenspan boards a plane for Dallas where he's later scheduled to speak. But a urgent phone call from Washington disrupts everything as the stock market drops 565 points in one trading session, a record one-day decline.
Fasten your mind on that scenario and you'll get an idea of what Marc Faber, the noted equity world pessimist, is talking about in a recent interview.
http://blogs.marketwatch.com/thetell/2013/08/09/marc-wolf-faber-still-thinks-an-1987-style-crash-is-coming/
Central banks should consider a name change.
Target fund would be an appropriate choice as more and more set specific goals to explain their policies making them quasi-target funds.
The latest example is the Bank of England under its new chief Mark Carney. Carney, the former head of Canada's central bank, unveiled the change in policy yesterday. The move from first glance is designed to allay investor fears about rising interest rates, something much in news since Bernanke raised the Spector a while back with his comment about putting theFed's QE policy to bed.
The move is not, however, without possible peril. It's like treating a lab number in medicine without considering the total patient. It can lead to mixing the big picture.
http://online.wsj.com/article/SB10001424127887323477604578653434040606850.html
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BABBLING TIMES
From time to time one comes across an article worth recommending. We have written before about debasing the language. The definition surely has different meaning to different folks. Babble is to debase in our view about as close as gray is to white and black.
So enjoy this read if you indulge an interest.
http://epsilontheory.com/wp-content/uploads/2013/07/7_14_13-The-Market-of-Babel.pdf
Longtime Wall Street denizen and now an adviser at Blackstone Advisory Partners, Byron Wien takes the other in the to-taper-or-not-to taper discussion.
Wien zeroed in on soft inflation and weak employment numbers, saying neither of the Fed's so-called targets had been hit.
http://www.cnbc.com/id/100942829
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Why would anyone trust government data?
You shouldn't and here's a link to why. Revisions used to be minor adjustments. Now, however, despite so-called more sophisticated collecting means like computers and super computers, these revisions have become suspect if not indeed an outright joke.
But that's not the only problem. The data is often flawed even before it's collected. Few people want to look bad especially if it's going to affect their source of income.
We once knew a fellow who was responsible for tallying the number of lost man hours owing to injuries on the the job for the US Post Office. He said the local people routinely fudged the numbers to look better.
Our own investigation substantiated that claim. That was the good news. The bad news was by how much they routinely fudged.
http://www.marketwatch.com/story/government-pulls-rug-out-from-under-us-2013-08-06?dist=lbeforebell
You'd have a hard time assembling a group who are wrong more often than economists.
The
late Laurence J. Peter, most remembered for his book The Peter
Principle, said: "An economist is an expert who will know tomorrow why
the things he predicted yesterday didn't happen today."
Never
approach an economist without a model in your hand. In his recent
tirade about David Stockman, Paul Krugman, the NYT's economic gofer,
wrote, he was "...disappointed (in Stockman's) gee-whiz,
context-and-model free numbers embedded in a rant..."
An economist without a model is like a severe ED sufferer without Viagra. They both can't get it on.
Harry
S. Truman, the nation's 33rd president, spent a good part of his term
looking for a "two-handed economist." It seemed every time he'd ask for
an opinion his economic advisors would answer with "On the one hand..."
and then conclude with "on the other hand."
An
acquaintance who worked at The Federal Reserve several years ago told
me he once asked a cute female economist there for her phone number and
she quickly gave him an estimate.
In
1998 William A. Sherder's The Fortune Sellers: The Big Business of
Buying and Selling Predictions landed in bookstores. A business
consultant, Sherder spent years tracking the predictive accuracy of
several important areas that impact our lives from meteorology to
economics to investments to technology and futurology.
Back
then it was a $10 billion a year business. You can guess what today's
take is. But just how accurate are they and just how much are people
getting for their money. Not very and not much.
Meteorology,
Sherder acknowledged, has a scientific basis, but it's hardly reliable.
Studies have shown the orange juice concentrate futures market more
accurate at predicting Florida weather patterns than meteorologists.
Sorry Dallas.
Then
there is the University of Iowa presidential futures market. It's
seldom wrong in predicting the eventual winner. But Sherder reserved
some his most damning findings for members of the dismal science.
He
cites a 1985 article from Economist magazine that compared the accuracy
of the predictions from UK sanitation workers with the heads of several
top-drawer UK economic firms about the country's future economic growth
The result: they tied.
Closer
to home Sherder tracked data from 1975-1995 about economic forecasts
predicting major turning points in the US economy. Forty-six of the 48
he tracked were incorrect.
Economists,
God bless their dismal souls, profess to love data. To put some further
bite into Sherder's economic data bark, in July, 1982, with the prime
rate at 16.5% the WSJ surveyed leading economists about their outlook
for interests rates. Most claimed the prime rate would finish the year
at 15%. Their take on equities no less gloomy.
One
of the economists, a former clarinet player in a Benny Goodman-wanna-be
band, then toiling away on Wall Street, Alan Greenspan, predicted rates
would finish the year at 16%. By mid-October, however, the prime rate
had been cut 7 times and wound up 1982 at 11.5%.
The dramatic reversal pumped new juice into the stock market and the DJIA rallied 34% by year end.
Now
for those who might argue these examples were then but what about now?
Even a cursory search of the literature will show plenty more timely
examples that the predictions of the dismal science are at best pretty
much, well, dismal.
Greenspan for those who might not recall preceded Big Ben. Depending on one's point of view, some say it's indeed difficult to find two Fed chairman who have screwed things up more than these two.
Risk your personal portfolio on their calls at your peril.
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"People at the high end tend to use very little debt relative to their incomes, and the debt has accumulated in recent decades at the lower end."
David Levy
Levy is a principal in the economic firm Jerome Levy Forecasting Center in New York. His comment occurred in an interview in the recent edition of Barron's. We cite it here not so much to focus on his outlook about the US economy (He's suggesting investors need to be aware another recession could be in the offing.) as it makes an important distinction about human behavior, something politicians never seem to get.
Debt, like most things in life, doesn't come into one's balance sheet uninvited. And the idea that people are either unable or incapable of saying no to all those credit card inducements is absurd. Much of the previous debt was accumulated at higher interests rates.
Refinancing it at lower rates as many would discover in this last recession isn't always possible. They have a name for it on the Street, liquidity crunch.
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The Wall Street aphorisms "Straw hats in December" and "Skis in July" have been around nearly as long as the stock market.
The implication should be clear: it matters what you buy and when. And so too does it matter what and when you sell. Now some heavy-hitting private equity firms, Apollo Group (APO) run by noted billionaire Leon Black, Fortress Investment Group (FIG) and Blackstone Group (BX), are by all indications putting out the word: It's a good time to sell.
With the S&P 500's move into 1700 Land, US equities are up 20% on the year. This is the same Blackstone firm we told you (Financial Engineering) is preparing to bundle foreclosed real estate they've been accumulating the last couple of years into a bond offering backed by rental income. In other words, they're selling into a hot market hungry for yield.
Here's a link to the rest of the story.
http://www.bloomberg.com/news/2013-08-01/fortress-to-blackstone-say-now-is-time-to-sell-on-rally.html
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Some people have known for a while that QE in all of its glory has pretty much been one giant economic ruse.
Recall the comment by Larry Summers, one of Obama's favorite choices to replace Helicopter Big Ben. The artful scrambling that took place to undo the damage of that little ditty would make an H-back proud in an Urban Myer's generated offense for those who follow college football.
Here's a interesting viewpoint.
http://www.dailyspeculations.com/wordpress/?p=8540
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IT ALL DEPENDS
It all depends on who's doing the counting.
The new jobs numbers for July came out Friday and they provide fodder for pundits all, pessimists, optimists and the in between. To call them "slightly negative," as one economist did is akin to damning with faint praise, the way academics do when one of their choice candidates turns out to be less than choice and requests a letter of recommendation so he or she can transfer.
In the hierarchy of academic medicine it's a staple technique. When an intern's or fellow's fund of medial know how turns out to be less than the dude driving to local roach coach, this is how they pass him or her along. It's a mini-version of too-big-too fail.
http://news.investors.com/newsfeed-ap/080213-467065-us-employers-add-162k-jobs-rate-falls-to-74-pct.aspx?ref=HPLNews
