Google Reader...

UPDATE: There's a great comparison of all of the new reader options HERE.

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As most avid Google Reader users are aware, Google Reader goes away tomorrow. I believe you might have an extra week to save your feeds, but just in case, you may want to do so today. To do that, log into Google Reader and click on the settings tab (top right), and go to Reader Settings, Import/Export, and then click on 'Download your data through Takeout'. It should then save your feeds in a zip file, which will contain a 'subscriptions' file that will have your feeds.

Many of the alternatives will also allow you to log into their service with your Google account and will import all of your feeds for you automatically. Here is a summary and links to the main alternatives:

Digg
NewsBlur
Feedly
AOL
Netvibes
The Old Reader
Feed Wrangler

I'm been experimenting with several of these, which is what I also suggest you try if you are still undecided. I think they will all evolve over the next few months as they get feedback, so I'm waiting to see exactly how that process goes before making a final decision. I really like NewsBlur and my experience with it on a PC, my iPhone, and an iPad. Digg seems like it is trying to get close to the Google Reader experience, but it still needs a bit of work, though I think they'll move fast on getting it in shape. I wasn't the biggest fan of Feedly when I tried it a couple of months ago, but after trying the iPad app last night, I really liked it and may give it another try, as well as at least a couple of the others, if not all of them. If you have any thoughts on your experiences, feel free to send me and email and let me know.

And if you work at any of these companies, please make it easier to move feeds up and down to reorganize them. Google Reader made it very easy to just drag and move feeds up and down to prioritize the sites I wanted to read first, but this quality has been lacking in my experience so far from the time I've spent on the other readers (though maybe once I spend more time on it I could figure it out).

Nassim Taleb quote (collaboration)

“Collaboration has explosive upside, what is mathematically called a superadditive function, i.e., one plus one equals more than two, and one plus one plus one equals much, much more than three. That is pure nonlinearity with explosive benefits—we will get into details on how it benefits from the philosopher’s stone. Crucially, this is an argument for unpredictability and Black Swan effects: since you cannot forecast collaborations and cannot direct them, you cannot see where the world is going. All you can do is create an environment that facilitates these collaborations, and lay the foundation for prosperity.” –Nassim Taleb, Antifragile

The Intelligent Investor: Saving Investors From Themselves - By Jason Zweig

I was once asked, at a journalism conference, how I defined my job. I said: My job is to write the exact same thing between 50 and 100 times a year in such a way that neither my editors nor my readers will ever think I am repeating myself.

That’s because good advice rarely changes, while markets change constantly. The temptation to pander is almost irresistible. And while people need good advice, what they want is advice that sounds good.

The advice that sounds the best in the short run is always the most dangerous in the long run. Everyone wants the secret, the key, the roadmap to the primrose path that leads to El Dorado: the magical low-risk, high-return investment that can double your money in no time. Everyone wants to chase the returns of whatever has been hottest and to shun whatever has gone cold. Most financial journalism, like most of Wall Street itself, is dedicated to a basic principle of marketing: When the ducks quack, feed ‘em.

Nassim Taleb quote

“The sociologist of science Steve Shapin, who spent time in California observing venture capitalists, reports that investors tend to back entrepreneurs, not ideas. Decisions are largely a matter of opinion strengthened with “who you know” and “who said what,” as, to use the venture capitalist’s lingo, you bet on the jockey, not the horse. Why? Because innovations drift, and one needs flâneur-like abilities to keep capturing the opportunities that arise, not stay locked up in a bureaucratic mold. The significant venture capital decisions, Shapin showed, were made without real business plans. So if there was any “analysis,” it had to be of a backup, confirmatory nature. I myself spent some time with venture capitalists in California, with an eye on investing myself, and sure enough, that was the mold.

Visibly the money should go to the tinkerers, the aggressive tinkerers who you trust will milk the option.”

–Nassim Taleb, Antifragile

James Grant on CNBC

Link
 

Albert Edwards: The Economic 'Ice Age' Isn't Over

Zero Hedge also has some excerpts HERE.

It is worth repeating the very simple point that an integral part of the Ice Age thesis is lower lows and lower highs for nominal economic quantities in each cycle. So, for example, in the chart below we see progressive steps down in each cycle almost unnoticed unless you take the longer view. It is this process that drives the Ice Age re-rating of government bonds and the de-rating of equities each recovery bringing a partial reversal to the process and each recessionary phase taking us to shocking new lows, both in bond yields and in equity multiples. I do not believe this process is complete, especially as I do not see the economy as reaching exit velocity of GDP in excess of 3%. Indeed, growth is still anaemic and vulnerable.

We note that, amid the carnage in the government bond market, implied inflation not only remains subdued but has fallen decisively. Maybe that reflects an acknowledgement that the economy is indeed nowhere near exit velocity. Certainly the divergence between the ISM and inflation expectations has been unusual and history suggests it is inflation expectations that eventually catch up with the economic reality ... And with events unfolding in emerging markets as they are, I see a good chance of a repeat of 1998 where a deflationary wave of manufactured goods washed up from Asia. Deflation risks remain high.

But where does that leave us in terms of QE. I fully concur with the legendary Marc Faber who when asked during a Bloomberg TV interview if Bernanke meant what he said on starting to taper sooner rather than later, responded "If you say that if he means what he says, then you believe in Father Christmas. He said if the economy does not meet the expectations of the Fed in one years' time, they will consider additional measures. In other words, if the economy has not fully recovered by mid-2014, more QE will be forthcoming. As I said already three years ago, we are going to go with the Fed to QE99."

I tend to agree with that view. The economic reality in the West will force further rounds of QE. And in addition do not forget one over-riding structural trend towards fiscal insolvency and unlimited money printing; the latest BIS annual report highlighted the fiscal Kilimanjaro that has to be climbed due to rapidly aging populations in a number of countries, most notably Japan, the US and the UK.

Neil deGrasse Tyson on the cosmic perspective

Link 

Bill Gross – July 2013 Investment Outlook: The Tipping Point

Tipping Point Speed Read

1) Yields and risk spreads were far too low two months ago.

2) Global markets were too levered and now they are derisking.

3) The bond market ship is not sinking. Expect low but positive returns in future years.

4) Don’t panic. Yell at someone!

Whitman, Diz quotes

From the book Modern Security Analysis: Understanding Wall Street Fundamentals (which you can also view, though not download for free, HERE):

The analyst relying on earnings to evaluate a business or a common stock will be helped if he has some appreciation of the difference between the role of earnings in a static equilibrium approach and the role of earnings in a dynamic disequilibrium approach. It has been our experience that many analysts fail to distinguish between static equilibrium and dynamic disequilibrium. 

….. 

The generation of reported net income and the creation of wealth are related: the creation of reported net income is just one method of creating wealth. There are many other ways of creating wealth that are separate and distinct from the generation of net income from operations, which we group under resource conversion activities. Where businessmen not involved with OPMI [outside passive minority investor] stock markets have choices, the generation of reported earnings from operations tends to be the least desirable method for creating wealth, simply because reported earnings from operations are less tax sheltered than are other methods of wealth creation. This is one of the reasons why resource conversion activities and financing activities by corporations seem to have grown in importance at the expense of ordinary going concern operations. Publicly held corporations, however, frequently attempt to report the best earnings possible, not because businessmen think that current earnings per se are so all-important, but, rather, because the ability to report favorable current earnings may have the most favorable impact on stock prices and access to capital markets, which in turn may provide the greatest potential for wealth creation. Although difficult to generalize, in buoyant markets the main influence on the common stocks of companies that are strict going concerns seem to be the following: reported earnings, reported estimates of future earnings, sponsorship, and industry identification. These factors are used by conventional analyses to price common stock relative to others with the same characteristics (static equilibrium) or relative to forecasts of future earnings (dynamic disequilibrium). Given the varied economic definitions of earnings, it may be wise to distinguish between earnings and earning power.

Tomorrow’s Retail World – speech by Matt Atkinson, Chief Marketing Officer, Tesco

I’ve worked in retail for many years. But never before has there been such rapid and profound change as we see today.

A fundamental change not just in how people shop, but how they live their lives, and what their expectations are of the companies they spend their money with. These are seismic shifts, and require all retailers to look again at all aspects of how they serve their customers.

Change in the way people shop is being driven by the digital revolution. It is highly disruptive but that disruption creates extraordinary opportunities, and I’m going to talk today about those opportunities – not just in terms of what retailers sell and how we sell it, but how we communicate and behave as organisations, and how we can use those opportunities to make a difference to the world around us.

The most important principle of retailing remains the same. And it is this: the best retailers have always been built around their customers. Logic which is as true today as ever.

There is a big change though: the number of ways we can interact with consumers has grown exponentially. In tomorrow’s retail world the customer is in charge, and will choose how and when they interact with us from a wide range of options.

Nassim Taleb: 'The Black Swan' author in praise of the risk-takers

The writer and former options trader Nassim Taleb talks to Margareta Pagano about banking, Babylon and birdsong

Ned Goodman’s Letter to Shareholders

Found via csinvesting.

For those of you who have read the previous Annual Report messages of our company you will know that I have been concerned about a global currency war outbreak for some time. But in particular, my reference to James Rickards and his book, ”Currency Wars”, in last year’s review. Well today, one year later, we remain living in the biggest debt bubble in the history of the world and the evidence of currency wars is beginning to be very globally evident. The use of excessive monetary stimuli and artificial ultra low interest rates are creating the ultimate “bubble” in money itself. Central banks – while quietly increasing their gold holdings – are also creating the money bubble. We now are in the biggest debt bubble in history. Country leaders know that each time that they face deflationary forces they require offsetting inflationary forces (monetary stimulus of some form); and they are required to become even more aggressive. The necessary avoidance of the deflationary waves that the world is facing is causing the incubation of the coming wave of future inflation. Most conventional economists do not really accept the lack of “global demand pull” and the yet inflationary moves that will likely be felt.

As a confirmed skeptic about almost everything I accept the fact that I may not always have all of the necessary information. We skeptics may not know much but what we do know we seriously rely upon. We know for example, as Jim Grant once said: “markets can do anything they want and will”. Markets can also make opinions for its participants. The actual pricing for financial assets of all kinds, including real estate, does not occur in a vacuum, without the application of some well known investment analysis, technique and strategy and must operate within the world of the real economy which always resembles a hall of mirrors.” Facts affect perception and perception affects facts. If the attainment of equity capital can come essentially free, smart people will always help themselves to it. When capital is free or cheap, people tend to use too much of it, creating redundant investments which can lead to excess, easy to achieve productive capacity which leads to – as Grant said – “instantaneous levitation they present as revealed truth”.

There are always new eras, times when precedent does not apply because someone believes that it shouldn’t, while aberrations do appear in the financial markets and while they last they do feel good, but eventually they must pass the test of supply and demand. New eras tend to be eventually cut short by the very financial condition and behaviour that they create. The current era of yield and capital gains that are created by an understated inflation calculation along with zero interest rates, will soon come to an end.

Leucadia 2012 Letter to Shareholders

The Last Hurrah

Forty-three years ago, the two of us met at Harvard Business School and thirty-five years ago was the beginning of a remarkable partnership — the results of which are tabulated on the opposite page. The end of 2012 marks the end of this partnership and the last letter from the two of us. In terms of financial results and as “LUK” would have it, 2012 was also our most successful year. Earnings before tax for 2012 were $1.371 billion, a record.

As the years sped by and we got older, a succession plan became more and more essential. For several years, we argued, explored many alternatives, argued some more and spoke with anyone and everyone we believed worthy of our shareholders’ trust to guide the good ship Leucadia. On March 1, 2013 our succession plan culminated with the acquisition of the Jefferies Group, Inc.

Carl Sagan - Pale Blue Dot

Link

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Here's the story to the video above (Source):

On October 13, 1994, the famous astronomer Carl Sagan was delivering a public lecture at his own university of Cornell. During that lecture, he presented this photo:

The photo above was taken by Voyager 1 in 1990 as it sailed away from Earth, more than 4 billion miles in the distance. Having completed its primary mission, Voyager at that time was on its way out of the Solar System, on a trajectory of approximately 32 degrees above the plane of the Solar System. Ground Control issued a command that directed the distant space craft to turn around and, looking back, take photos of each of the planets it had visited. From Voyager's vast distance, the Earth was captured as a infinitesimal point of light (between the two white tick marks in the image above), actually smaller than a single pixel of the photo. The image was taken with a narrow angle camera lens, with the Sun quite close to the field of view. Quite by accident, the Earth was captured in one of the scattered light rays caused by taking the image at an angle so close to the Sun. Dr. Sagan was quite moved by this image of our tiny world. Here is an enlargement of the area around our Pale Blue Dot and an excerpt from the late Dr. Sagan's talk:

"We succeeded in taking that picture [from deep space], and, if you look at it, you see a dot. That's here. That's home. That's us. On it, everyone you ever heard of, every human being who ever lived, lived out their lives. The aggregate of all our joys and sufferings, thousands of confident religions, ideologies and economic doctrines, every hunter and forager, every hero and coward, every creator and destroyer of civilizations, every king and peasant, every young couple in love, every hopeful child, every mother and father, every inventor and explorer, every teacher of morals, every corrupt politician, every superstar, every supreme leader, every saint and sinner in the history of our species, lived there on a mote of dust, suspended in a sunbeam. 

The earth is a very small stage in a vast cosmic arena. Think of the rivers of blood spilled by all those generals and emperors so that in glory and in triumph they could become the momentary masters of a fraction of a dot. Think of the endless cruelties visited by the inhabitants of one corner of the dot on scarcely distinguishable inhabitants of some other corner of the dot. How frequent their misunderstandings, how eager they are to kill one another, how fervent their hatreds. Our posturings, our imagined self-importance, the delusion that we have some privileged position in the universe, are challenged by this point of pale light. Our planet is a lonely speck in the great enveloping cosmic dark. In our obscurity -- in all this vastness -- there is no hint that help will come from elsewhere to save us from ourselves. It is up to us. It's been said that astronomy is a humbling, and I might add, a character-building experience. To my mind, there is perhaps no better demonstration of the folly of human conceits than this distant image of our tiny world. To me, it underscores our responsibility to deal more kindly and compassionately with one another and to preserve and cherish that pale blue dot, the only home we've ever known."

The Manual of Ideas: Interview with Brian Bares, Chief Investment Officer, Bares Capital

I had posted an excerpt of this interview earlier (HERE), but the entire interview is well worth watching. If you don't have time for the entire 53:09, then I suggest at least making time to watch the first 16:48. A big thanks to Brian Bares for the great answers, and to John and the team at The Manual of Ideas for asking great questions.

Link
 

TED Talk - Peter Attia: What if we’re wrong about diabetes?

Link

On the Difference between Binary Prediction and True Exposure, with Implications for Forecasting Tournaments and Prediction Markets – By Nassim Nicholas Taleb and Philip E. Tetlock

Abstract:

There are serious differences between predictions, bets, and exposures that have a yes/no type of payoff, the "binaries", and those that have varying payoffs, which we call the "vanilla". Real world exposures tend to belong to the vanilla category, and are poorly captured by binaries. Vanilla exposures are sensitive to Black Swan effects, model errors, and prediction problems, while the binaries are largely immune to them. The binaries are mathematically tractable, while the vanilla are much less so.  Hedging vanilla exposures with binary bets can be disastrous--and because of the human tendency to engage in attribute substitution when confronted by difficult questions, decision-makers and researchers often confuse the vanilla for the binary.

Graham and Dodd quote (adjusting assets in calculating book value)

From Security Analysis, 1940 edition:

A company’s balance sheet does not convey exact information as to its value in liquidation, but it does supply clues or hints which may prove useful. The first rule in calculating liquidating value is that the liabilities are real but the value of the assets must be questioned. This means that all true liabilities shown on the books must be deducted at their face amount. The value to be ascribed to the assets, however, will vary according to their character. The following schedule indicates fairly well the relative dependability of various types of assets in liquidation.

Collected Commentaries and Conundrums Regarding Value Investing: Essays of Murray Stahl - Volume 1: Books I, II & III

Book III, “The Worst Investments in History”, looks especially interesting.

Link to: Collected Commentaries and Conundrums Regarding Value Investing

Clayton Christensen: Still disruptive

Thanks to Will for passing this along. Christensen’s answer the question excerpted below is especially interesting, and echoes what John Templeton wrote in 2005: “Most of the methods of universities and other schools, which require residence, have become hopelessly obsolete. Probably, over half of the universities in the world will disappear as quickly in the next 30 years.”

What does this mean for universities?

Historically there has never been competition on the basis of price. Colleges would compete by adding professors, enhancing programmes or building nicer facilities. So they competed by making institutions better. This initiates retribution [from other colleges] which make things better and better. And every step adds cost. So the cost of higher education has increased faster than healthcare. And there just isn't any more space in the budget to do this. So this year you are seeing, in a fixed cost environment, that colleges need to fill all their spaces. And there are fewer people applying. So this year for the first time there is real competition on price. For online universities, like Liverpool and the University of Phoenix, if prices drop by 60% they still make money. But for the vast majority of traditional universities, if the prices fall by 10% they are bankrupt; they have no wriggle room. So I'd be very surprised if in ten years we don't see hundreds of universities in bankruptcy.

Zombies roam the animal kingdom — and some of them may be after us

Found via the RDFRS:

The zombies in "World War Z" are just actors — but in the animal world, zombies are a fact of life. Evolution can come up with some fiendish twists: For example, there are some species that bend other creatures to their will to keep their bizarre life cycles going. Or just to feast on their delicious braaaains.

To celebrate the premiere of "World War Z," here's a top-ten list of zombies from the animal kingdom, finishing up with a particularly pernicious parasite that can pose a risk to humans:

AOL Launches Its Own News Reader

Another one to consider as a Google Reader replacement.

Link to: AOL Launches Its Own News Reader

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Related previous post: Google Reader alternative...

The Intelligent Investor: Going Dutch — Could Fee Hurdles Come Down Everywhere? - By Jason Zweig

With markets in turmoil, investors need good advice even more than usual. But investing advice remains confusing, costly and opaque—and that needs to change.

New rules in the U.K., the Netherlands and Australia show one drastic way to tackle the problem. Starting this coming week, commissions on popular investments like mutual funds will be banned in Australia. Later this year, the Dutch government will finalize a law that will ban commissions as of Jan. 1, 2014. A similar prohibition already went into force in Britain as of Dec. 31, 2012.

These changes provide a glimpse of one possible future for U.S. investors: a market in which “what the adviser gets paid is no longer linked to which product the adviser sells to the client,” as Mark Wiedman, global head of iShares, the largest manager of exchange-traded funds, puts it.

Seneca quote

Posted earlier on Twitter (HERE)...

 "...isn't it the height of folly to learn inessential things when time's so desperately short!" -Seneca

Start me up: Helping youngsters to sell stakes in their future

Thanks to Will for passing this along.

WHEN Matthew Kulp graduated from the Rhode Island School of Design last year, he became part of an intriguing financial experiment. To help pay back student loans and fund a new design company, Mr Kulp raised $38,500 via Upstart, an American firm that helps youngsters, or “Upstarts”, find wealthy investors willing to give them hard cash in return for a stake in their future earnings. This novel application of crowdfunding promises to be both popular and controversial. 

Buffett Deputies Join Heinz Board as Lynnn Swann Departs

Thanks to Will for passing this along.

Gregory Abel and Tracy Britt, two of Warren Buffett’s deputies who have been adding responsibilities at Berkshire Hathaway Inc. (BRK/A), were selected by the billionaire to join him as directors of HJ Heinz Co.

Jorge Paulo Lemann, whose 3G Capital bought the ketchup maker this month with Berkshire for $28.8 billion, also is on the board with two representatives of his firm, Alexandre Behring and Marcel Herrmann Telles, according to a regulatory filing last week. They replaced directors including Lynn Swann, the former wide receiver for the National Football League’s Pittsburgh Steelers.

The board oversees Chief Executive Officer Bernardo Hees, who announced a management shakeup yesterday, including the departure of Heinz’s North America CEO David Moran. Britt is chairman of at least two Berkshire units that replaced their CEOs last year, and Abel has been building the company’s energy business through acquisitions.

“For Greg Abel, it broadens his exposure, and it certainly now raises the question, ‘Is he high up on Warren Buffett’s list’” for succession, said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business, who has accompanied students to meet the billionaire. 

The Federal Reserve’s Framers Would Be Shocked - By Roger Lowenstein

ONE hundred years ago today, President Woodrow Wilson went before Congress and demanded that it “act now” to create the Federal Reserve System. His proposal set off a fierce debate. One of the plan’s most strident critics, Representative Charles A. Lindbergh Sr., the father of the aviator, predicted that the Federal Reserve Act would establish “the most gigantic trust on earth,” and that the Fed would become an economic dictator or, as he put it, an “invisible government by the money power.”

Had the congressman witnessed Ben S. Bernanke’s news conference last week, he surely would have felt vindicated. Investors, traders and ordinary citizens listened with rapt attention as Mr. Bernanke, the Fed chairman, spoke of his timetable for scaling down stimulative bond purchases. “If things are worse, we will do more,” he said of the nation’s economy. “If things are better, we will do less.”

In 1913, few of the framers of the Fed anticipated that the institution would do anything of the sort. The preamble to the act specified three purposes: to furnish “an elastic currency,” to provide a market for commercial paper so that banks would have more liquidity, and to improve supervision of banks. Regulating the economy was not among them. 

Marcus Aurelius quote

“Be not perturbed, for all things are according to the nature of the universal; and in a little time thou wilt be nobody and nowhere, like Hadrian and Augustus. In the next place having fixed thy eyes steadily on thy business look at it, and at the same time remembering that it is thy duty to be a good man, and what man's nature demands, do that without turning aside; and speak as it seems to thee most just, only let it be with a good disposition and with modesty and without hypocrisy.” –Marcus Aurelius, The Meditations

Bono, Founder, ONE Campaign on Charlie Rose

I'm a bit late getting to this, but it was pretty interesting, and includes some good business, investing, and political process tidbits here and there.

Link to: Bono on Charlie Rose

 

Hussman Weekly Market Comment: Market Internals Suggest a Shift to Risk-Aversion

Market internals deteriorated sharply last week, following an extended period of overvalued, overbought, overbullish conditions where interest-sensitive sectors have been under considerable pressure. At present, the line of least resistance appears downward. That will change. It may change quickly, and while we haven’t seen a material retreat in valuations, a firming of market internals even here might support a somewhat more constructive outlook. Still, investors should also recognize that the sequence of conditions we’ve observed – strenuous overvalued, overbought, overbullish conditions, followed by distinct weakness of interest-sensitive sectors (Treasury bonds, corporates, utilities), broadening internal dispersion and reversals in leadership (new highs/lows) and breadth (advances/declines) on both longer-term and high-frequency measures (e.g. another Hindenburg on Wednesday) – these are conditions that have historically preceded panics and crashes. They are indicative of a shift from risk-seeking to risk-aversion.

Make no mistake, last week’s decline was not because of a hawkish Federal Reserve, but in spite of a dovish one. On Wednesday, Ben Bernanke essentially promised that the Fed would continue to expand the size of a balance sheet that is already leveraged nearly 60-to-1 against its capital, regardless of market distortions. Though the Fed might possibly reduce the rate at which it expands that position, Bernanke indicated that the Fed will not stop adding to it until at least 2014 (stopping only on the basis of economic improvement that we view as implausible). Anyone who understands the relationship between short-term interest rates and the amount of monetary base per dollar of nominal GDP also understands that Bernanke has promised that short-term interest rates will be repressed as far as the eye can see. There was no talk of risks. Not a whisper about diminishing benefits. No – Bernanke came in full-metal dove. Perhaps shaken by the market reaction on Wednesday afternoon and Thursday, Bernanke evidently dispatched the Wall Street Journal’s Jon Hilsenrath to suggest that the markets were ignoring all those dovish signals from the Fed.

In short, the only thing that happened with Fed policy last week was that Bernanke reiterated a dovish stance. While QEternity will become QEventualTaper, the Bernanke Fed does not actually contemplate stopping until the unemployment rate comes down, even though that objective is almost entirely detached from Fed policy itself. Investors who believe that “QE makes stocks go up” – with no other condition required – just got a handwritten, perfumed note from Bernanke to keep buying.

The fact that we are instead seeing broad internal deterioration here is of some concern, because it smacks of something more afoot. It might be the increasing credit strains in China. It may be growing expectations for disappointing earnings preannouncements. It may be economic weakness that finally catches up to the general (though not uniform) deterioration that we’ve seen across leading measures of economic activity. My own litany of concerns is well-known (see Closing Arguments – Nothing Further, Your Honor). But whatever the reason, investors appear to be shifting from risk-seeking to risk-aversion. 

John Mauldin: Austerity is a Four-Letter French Word

The France that I see as I look out from the bullet train today is far different from the France I see when I survey the economic data. Going from Marseilles to Paris, the countryside is magnificent. The farms are laid out as if by a landscape artist – this is not the hurly-burly no-nonsense look of the Texas landscape. The mountains and forests that we glide through are glorious. It is a weekend of special music all over France, and last night in Marseilles the stages were alive and the crowds out in force. The French people smile and graciously correct my pidgin attempts at speaking French. I have found it diplomatic not to mention that I think France is in for a very difficult future. Why spoil the party?

But for you, gentle reader, I will survey the economic landscape that I see on my computer screen. It shows a far different France from the one outside my window, one that resembles its peripheral southern neighbors far more than its neighbors to the north and east. The picture is not all bad, of course. There is always much to admire and love about France. But there are a lot of hard political choices to be made and much reform to be undertaken if this beautiful country is to remain La Belle France and not become the sick man of Europe. This week, in what I think will be a short letter, we'll look at a few of the problems facing France. 

Robert Greene quote

"The need for certainty is the greatest disease the mind faces." -Robert Greene, Mastery

Marcel Proust's answer to a question on what to do if the world were ending...

I heard the story pasted below from listening to the book How Proust Can Change Your Life.

In August, 1922, the Parisian newspaper L'Intransigeant posed a question to a group of celebrities:

An American scientist announces the end of the world, or at the very least the destruction of such a large land mass, and in such a sudden fashion, that death would be the certain for hundreds of millions of people. If this prediction were to become a certainty, how do you think that people would behave between the time when they acquired this news and the moment of apocalypse? And what would you do before the final hour?

Marcel Proust responded:

Life would suddenly seem wonderful to us if we were threatened to die as you say. Just think of how many projects, travels, love affairs, studies, it--our life--hides from us, made invisible by our laziness which, certain of a future, delays them incessantly.

But let all this threaten to become impossible for ever, how beautiful it would become again! Ah! if only the cataclysm doesn't happen this time, we won't miss visiting the new galleries of the Louvre, throwing ourselves at the feet of Miss X, making a trip to India. 

The cataclysm doesn't happen; we don't do any of it, because we find ourselves back in the heart of normal life, where negligence deadens desire. And yet we shouldn't have needed the cataclysm to love life today. It would have been enough to think that we are human and that death may come this evening.

Nassim Taleb quote

“Knowledge formation, even when theoretical, takes time, some boredom, and the freedom that comes from having another occupation, therefore allowing one to escape the journalistic-style pressure of modern publish-and-perish academia to produce cosmetic knowledge, much like the counterfeit watches one buys in Chinatown in New York City, the type that you know is counterfeit although it looks like the real thing. There were two main sources of technical knowledge and innovation in the nineteenth and early twentieth centuries: the hobbyist and the English rector, both of whom were generally in barbell situations.” –Nassim Taleb, Antifragile

Fund Star from Crisis Looks to Raise Money Again

Michael Burry, the Bay Area hedge-fund manager who gained attention for his profitable bet against subprime mortgages, is looking to raise between $100 million to $200 million from investors after returning outside money in his Scion Capital in 2008, according to a person briefed on the matter.

Video Interview with Dr. Peter Pronovost on Checklists & Patient Safety

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Related book: Safe Patients, Smart Hospitals: How One Doctor's Checklist Can Help Us Change Health Care from the Inside Out

The first central banker...

Via Charles Gave at the 2013 Strategic Investment Conference:

“I think that we should all agree that the first central banker in history was probably Christopher Columbus. Because when he left he didn’t know where he was going; when he arrived he didn’t know where he was; and he did that with somebody else’s money.”

Excerpts from Seth Klarman’s latest letter to investors...

Found via Whitney Tilson (who got from Zero Hedge). I guess these are from Klarman's Q1 letter:

Most U.S. investors today have a clear opinion about what everyone else has no choice but to do. Which is to say, with bonds yielding next to nothing, the only way investors have a chance of earning a return is to buy stocks. Everyone knows this, and is counting on it to remain the case. While economist David Rosenberg at Gluskin Sheff believes government actions could be directly or indirectly responsible for as many as 500 points in the S&P 500, or 30% of its current valuation, traders have confidence in Ben Bemanke because betting that his policies will drive equities higher bas been a profitable wager. Bernanke, likewise, is undoubtedly pleased with these speculators for abetting his goal of asset price inflation, though we all know that he will not call them first when he decides to reverse direction on QE. Then, the rush for the exits will be madness, as today' s "clarity" will have dissolved, leaving only great uncertainty and probably significant losses. 

Investing, when it looks the easiest, is at its hardest. When just about everyone heavily invested is doing well, it is hard for others to resist jumping in. But a market relentlessly rising in the face of challenging fundamentals--recession in Europe and Japan, slowdown in China, fiscal stalemate and high unemployment in the U.S.—is the riskiest environment of all. 

… [O]nly a small number of investors maintain the fortitude and client confidence to pursue long-term investment success even at the price of short-term underperformance. Most investors feel the hefty weight of short-term performance expectations, forcing them to take up marginal or highly speculative investments that we shun. When markets are rising, such investments may perform well, which means that our unwavering patience and discipline sometimes impairs our results and makes us appear overly cautious. The payoff from a risk-averse, long-term orientation is--just that--long term. It is measurable only over the span of many years, over one or more market cycles. 

Our willingness to invest amidst failing markets is the best way we know to build positions at great prices, but this strategy, too, can cause short-term underperformance. Buying as prices are falling can look stupid until sellers are exhausted and buyers who held back cannot effectively deploy capital except at much higher prices. Our resolve in holding cash balances--sometimes very large ones--absent compelling opportunity is another potential performance drag. 

But we know that in a world in which being anti-fragile is good, what doesn't kill you can make you stronger. Short-term underperformance doesn't trouble us; indeed, because it is the price that must sometimes be paid for longer-term outperformance, it doesn't even enter into our list of concerns. 

Patience and discipline can make you look foolishly out of touch until they make you look prudent and even prescient. Holding significant, low or even zero-yielding cash can seem ridiculous until you are one of the few with buying power amidst a sudden downdraft. Avoiding leverage may seem overly conservative until it becomes the only sane course. Concentrating your portfolio in the most compelling opportunities and avoiding over diversification for its own sake may sometimes lead to short-term underperformance, but eventually it pays off in outperformance. 

…Is it possible that the average citizen understands our country's fiscal situation better than many of our politicians or prominent economists? 

Most people seem to viscerally recognize that the absence of an immediate crisis does not mean we will not eventually face one. They are wary of believing promises by those who failed to predict previous crises in housing and in highly leveraged financial institutions. 

They regard with skepticism those who don't accept that we have a debt problem, or insist that inflation will remain under control. (Indeed, they know inflation is not well under control, for they know how far the purchasing power of a dollar has dropped when they go to the supermarket or service station.) 

They are pretty sure they are not getting reasonable value from the taxes they pay.When an economist tells them that growing the nation's debt over the past 12 years from $6 trillion to $16 trillion is not a problem, and that doubling it again will still not be a problem, this simply does not compute. They know the trajectory we are on. 

When politicians claim that this tax increase or that spending cut will generate trillions over the next decade, they are properly skeptical over whether anyone can truly know what will happen next year, let alone a decade or more from now. 

They are wary of grand bargains that kick in years down the road, knowing that the failure to make hard decisions is how we got into today's mess. They remember that one of the basic principles of economics is scarcity, which is a powerful force in their own lives. 

They know that a society's wealth is not unlimited, and that if the economy is so fragile that the government cannot allow failure, then we are indeed close to collapse. For if you must rescue everything, then ultimately you will be able to rescue nothing. 

They also know that the only reason paper money, backed not by anything tangible but only a promise, has any value at all is because it is scarce. With all the printing, the credibility of our entire trust-based monetary system will be increasingly called into question. 

And when you tell the populace that we can all enjoy a free lunch of extremely low interest rates, massive Fed purchases of mounting treasury issuance, trillions of dollars of expansion in the Fed's balance sheet, and huge deficits far into the future, they are highly skeptical not because they know precisely what will happen but because they are sure that no one else--even, or perhaps especially, the policymakers—does either.

Wilbur Ross on Bloomberg (video)

June 20 (Bloomberg) -- Billionaire Wilbur Ross, chairman of WL Ross & Co., discusses Federal Reserve monetary policy, U.S. shale gas production, U.K. banks and the outlook for the container shipping industry. He speaks with Anna Edwards on Bloomberg Television's "The Pulse."

Niall Ferguson on Charlie Rose

Link to: Niall Ferguson on Charlie Rose

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Related book: The Great Degeneration: How Institutions Decay and Economies Die

Nassim Taleb quote

“Aside from the non-narrative view of things, another lesson. People with too much smoke and complicated tricks and methods in their brains start missing elementary, very elementary things. Persons in the real world can’t afford to miss these things; otherwise they crash the plane. Unlike researchers, they were selected for survival, not complications. So I saw the less is more in action: the more studies, the less obvious elementary but fundamental things become; activity, on the other hand, strips things to their simplest possible model.” –Nassim Taleb, Antifragile

Richard Nikoley: 6-Years of Self Experimenting: My Fully Integrated Approach To Paleo / Primal Eating, Real Food and Vibrant Health

His book, also recommended by Nassim Taleb, is Free The Animal.

I likely would not have done much beyond a simple low carbohydrate, Paleo / Primal diet—combined with intermittent fasting, some supplementation of fat soluble vitamins and a mineral or two, and brief workouts at the gym—if it had worked as anticipated once I had dropped from the 235-240 down to 175 in the first couple of years. But I didn't feel right. Cold hands & feet, mostly. A dulling of the sheen on the thing. Less well being, not more. Back at around 185 I felt better, kinda ideal, actually. Anyway, that's when other troubles began. I took up the Leangains protocol with Martin Berkhan, but due no fault of his, of course—and I was making good progress—I injured myself pretty badly and worlds came tumbling down. In spite of a desire to manage it better, recurrences of the thing over the next two years just kept me out of much of the game, both physically and mentally.

Lots of problems and drama resulted and ensued. Oh, well. The one thing I did, however, was take the opportunity to do a lot of experiments of short duration. Here's a look at my general take on everything going way back, in several categories from most effective to least.

Whitman, Diz quote

From the book Modern Security Analysis: Understanding Wall Street Fundamentals:

"Loans made at interest rates greater than the risk-free rate of money are substantively equivalent to credit insurance and put options. The extra interest rate is equal to insurance premiums paid to the lender for taking credit risks. The extra interest can also be viewed as having the lender sell a put option. The lender collects a premium for the right to put to the borrower, or require the borrower to buy, certain assets in certain events."

Kyle Bass Presentation and Interview from SIC 2013

Found via Zero Hedge. Links to other SIC 2013 videos are available HERE.


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How Quincy, Florida Became a Town of Secret Coca-Cola Millionaires

"Cash combined with courage in a time of crisis is priceless." -Warren Buffett

In the 1920′s and 1930′s, a banker named Pat Munroe in the small town of Quincy, Florida noticed that even during the depths of the Great Depression, otherwise impoverished people would spend their last nickel to buy a glass of Coca-Cola.  With good returns on capital and a once-in-a-century valuation where the business was trading for less than the cash in the bank, “Mr. Pat”, as he was called, encouraged everyone he knew to buy an ownership stake in the firm.  He would even underwrite bank loans, backed by Coca-Cola stock, for his responsible depositors to encourage people to acquire equity.

Coca-Cola had gone public at $40 per share but a conflict with the sugar industry resulted in a 50% crash shortly thereafter, when it reached $19 per share.  Focusing on the bottom-line profits, and the power of the brand, Pat Munroe kept buying.  And he kept telling everyone else to buy, too.

That one observation, and Mr. Pat’s business skills in convincing others to buy assets that produced cash irrespective of short-term market fluctuations, not only changed lives, it saved the farm town during the Great Depression as the local economy was supported by Coca-Cola dividends.  It has also supported the town in “every recession since”, according to the man who now runs the trust department in the bank that was once headed by Munroe.

Chris Mayer: Investing with Owner-Operators

Link to: Investing with Owner-Operators

Letters from Warren Buffett on Walter Schloss

Found via Mungerisms.

Link to: Letters from Warren Buffett on Walter Schloss

TED Talk - Didier Sornette: How we can predict the next financial crisis

Nassim Taleb wrote this review (5 stars) for Sornette's book Why Stock Markets Crash: 

The author aside from the problem of crashes presents an insightful exposition of tipping points. I don't know why his approach makes it clearer and deeper than those of Watts and Barabasi --is it due to his using financial markets as a base? or his being an expert at fat-tailed dynamics? His work builds on the "abyssus abyssum invocat" (panic begets panics) and the dynamics of compounding disequilibria. In addition the notion of "CRITICAL POINT" is made very clear. Honestly I don't care for the idea of crashes; the same concepts can apply to sudden and unexpected euphorias. I learned more from this book than any other on disequilibrium.

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THE RELATION OF SCIENCE AND RELIGION: Some fresh observations on an old problem – by RICHARD P. FEYNMAN

The 3 paragraphs in the second excerpt below relate a lot to investing, and many other things in life.

In this age of specialization men who thoroughly know one field are often incompetent to discuss another.  The great problems of the relations between one and another aspect of human activity have for this reason been discussed less and less in public.  When we look at the past great debates on these subjects we feel jealous of those times, for we should have liked the excitement of such argument.  The old problems, such as the relation of science and religion, are still with us, and I believe present as difficult dilemmas as ever, but they are not often publicly discussed because of the limitations of specialization.

But I have been interested in this problem for a long time and would like to discuss it.  In view of my very evident lack of knowledge and understanding of religion (a lack which will grow more apparent as we proceed), I will organize the discussion in this way: I will suppose that not one man but a group of men are discussing the problem, that the group consists of specialists in many fields – the various sciences, the various religions and so on – and that we are going to discuss the problem from various sides, like a panel.  Each is to give his point of view, which may be molded and modified by the later discussion.  Further, I imagine that someone has been chosen by lot to be the first to present his views, and I am he so chosen.

…

For the student, when he learns about science, there are two sources of difficulty in trying to weld science and religion together.  The first source of difficulty is this – that it is imperative in science to doubt; it is absolutely necessary, for progress in science, to have uncertainty as a fundamental part of your inner nature.  To make progress in understanding we must remain modest and allow that we do not know.  Nothing is certain or proved beyond all doubt.  You investigate for curiosity, because it is unknown, not because you know the answer.  And as you develop more information in the sciences, it is not that you are finding out the truth, but that you are finding out that this or that is more or less likely.

That is, if we investigate further, we find that the statements of science are not of what is true and what is not true, but statements of what is known to different degrees of certainty: "It is very much more likely that so and so is true than that it is not true;" or "such and such is almost certain but there is still a little bit of doubt;" or – at the other extreme – "well, we really don't know."  Every one of the concepts of science is on a scale graduated somewhere between, but at neither end of, absolute falsity or absolute truth.

It is necessary, I believe, to accept this idea, not only for science, but also for other things; it is of great value to acknowledge ignorance.  It is a fact that when we make decisions in our life we don't necessarily know that we are making them correctly; we only think that we are doing the best we can – and that is what we should do.

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Related video: Richard Feynman - The Pleasure Of Finding Things Out

Analysis and rules...

Excerpt from the book What I Learned Losing a Million Dollars:

Analysis is simply that: analysis. It doesn't tell you what to do, or when to do it.

In order to translate your analysis into something more than mere commentary, you need to define what constitutes an opportunity for you. That's what rules do; they implement your analysis. Rules are hard-and-fast. Tools (i.e., methods of analysis) have some flexibility in how they are used. Fools have neither rules nor tools. You must develop parameters that will define opportunities and determine how and when you will act. How? By doing homework (i.e., research, testing, trial-and-error), and defining the parameters with rules. Your homework determines what parameters or conditions define an opportunity, and your rules are the "if ... , then ..." statements which implement your analysis. This means entry and exit points are derived after you have done your analysis.

If the opportunity-defining criteria aren't met, you don't act. This doesn't mean a particular trade or investment which you pass up won't turn out to be profitable. It might have been an acceptable and profitable trade based on someone else's rules. Remember, participating in the markets is about making decisions, and as Drucker reminds us, "There is no perfect decision. One always has to pay a price which might mean passing up an opportunity." You have to accept the fact that profitable situations will occur that you won't participate in. Don't worry about the ones you miss; they were someone else's. Your rules will only enable you to participate in some of the millions of possible opportunities, not all of them.

Speculating and planning...

Excerpt from the book What I Learned Losing a Million Dollars:

“Speculation is forethought. And thought before action implies reasoning before a decision is made about what, whether and when to buy or sell. That means the speculator develops several possible scenarios of future events and determines what his actions will be under each scenario. He thinks before he acts. The sequence of thinking before acting is the exact definition of the word plan. Therefore, speculating and planning are the same thing. A plan allows you to speculate with a long time horizon (as an investor), a short time horizon (as a trader) or on a spread relationship (as a basis trader or hedger).”

THE GIFT OF DOUBT: Albert O. Hirschman and the power of failure. – By Malcolm Gladwell

Hirschman made his arguments without mathematical formulas or complex models. His subject was economics, but his spirit was literary. “The only way in which we can bring our creative resources fully into play,” he wrote, “is by misjudging the nature of the task, by presenting it to ourselves as more routine, simple, undemanding of genuine creativity than it will turn out to be.”

Charlie Munger on high quality businesses and management

This is from Munger's speech "A Lesson on Elementary, Worldly Wisdom As It Relates To Investment Management & Business". A couple of things that stood out to me reading it this time around, that maybe I didn't pay enough attention to before, were "...if a business earns 18% on capital over 20 or 30 years, even if you pay an expensive looking price, you'll end up with a fine result." and "Occasionally, you'll find a human being who's so talented that he can do things that ordinary skilled mortals can't....These people do come along—and in many cases, they're not all that hard to identify. If they've got a reasonable hand—with the fanaticism and intelligence and so on that these people generally bring to the party—then management can matter much....very rarely, you find a manager who's so good that you're wise to follow him into what looks like a mediocre business." The latter excerpt reminded me of a quote (HERE) from Bill Gates on about how the world's best companies are built by fanatics.

We've really made the money out of high quality businesses. In some cases, we bought the whole business. And in some cases, we just bought a big block of stock. But when you analyze what happened, the big money's been made in the high quality businesses. And most of the other people who've made a lot of money have done so in high quality businesses. 

Over the long term, it's hard for a stock to earn a much better return than the business which underlies it earns. If the business earns 6% on capital over 40 years and you hold it for that 40 years, you're not going to make much different than a 6% return—even if you originally buy it at a huge discount. Conversely, if a business earns 18% on capital over 20 or 30 years, even if you pay an expensive looking price, you'll end up with a fine result. 

So the trick is getting into better businesses. And that involves all of these advantages of scale that you could consider momentum effects. 

How do you get into these great companies? One method is what I'd call the method of finding them small get 'em when they're little. For example, buy Wal-Mart when Sam Walton first goes public and so forth. And a lot of people try to do just that. And it's a very beguiling idea. If I were a young man, I might actually go into it. 

But it doesn't work for Berkshire Hathaway anymore because we've got too much money. We can't find anything that fits our size parameter that way. Besides, we're set in our ways. But I regard finding them small as a perfectly intelligent approach for somebody to try with discipline. It's just not something that I've done. 

Finding 'em big obviously is very hard because of the competition. So far, Berkshire's managed to do it. But can we continue to do it? What's the next Coca-Cola investment for us? Well, the answer to that is I don't know. I think it gets harder for us all the time.... 

And ideally and we've done a lot of this—you get into a great business which also has a great manager because management matters. For example, it's made a great difference to General Electric that Jack Welch came in instead of the guy who took over Westinghouse—a very great difference. So management matters, too. 

And some of it is predictable. I do not think it takes a genius to understand that Jack Welch was a more insightful person and a better manager than his peers in other companies. Nor do I think it took tremendous genius to understand that Disney had basic momentums in place which are very powerful and that Eisner and Wells were very unusual managers. 

So you do get an occasional opportunity to get into a wonderful business that's being run by a wonderful manager. And, of course, that's hog heaven day. If you don't load up when you get those opportunities, it's a big mistake. 

Occasionally, you'll find a human being who's so talented that he can do things that ordinary skilled mortals can't. I would argue that Simon Marks—who was second generation in Marks & Spencer of England—was such a man. Patterson was such a man at National Cash Register. And Sam Walton was such a man. 

These people do come along—and in many cases, they're not all that hard to identify. If they've got a reasonable hand—with the fanaticism and intelligence and so on that these people generally bring to the party—then management can matter much. 

However, averaged out, betting on the quality of a business is better than betting on the quality of management. In other words, if you have to choose one, bet on the business momentum, not the brilliance of the manager. 

But, very rarely, you find a manager who's so good that you're wise to follow him into what looks like a mediocre business.

Bill Gates: Three Things I’ve Learned From Warren Buffett

I’m looking forward to sharing posts from time to time about things I’ve learned in my career at Microsoft and the Gates Foundation. (I also post frequently on my blog.)

Last month, I went to Omaha for the annual Berkshire Hathaway shareholders meeting. It’s always a lot of fun, and not just because of the ping-pong matches and the newspaper-throwing contest I have with Warren Buffett. It’s also fun because I get to learn from Warren and gain insight into how he thinks.

Here are three things I’ve learned from Warren over the years:

Stan Druckenmiller on China

Found via ValueWalk.

Stan Druckenmiller: The growth in credit at a time when GDP growth is slowing is a problem for China. And I think this is the 2009-11 stimulus coming back to bite. I understand that it had to be done to fund entrepreneurs and the private sector, but it’s easier said than done if you’re channelling funds through local government investment vehicles. I’m a believer in markets. A few men sitting around a table and deciding how to allocate capital goes against everything I’ve ever believed. Not only are they not great at capital allocation, such an exercise also needs to deal with a lack of property rights and corruption. In essence, the frantic stimulus China put together at the end of 2008 sowed the seeds of slower growth in the future by crowding out more productive investments. And now, the system’s building enough leverage and misallocation of resources to warrant risks of a financial crisis, but the timing of that is still uncertain in my mind. What we’ve seen in China since 2009 is similar to what happened in the US in 2005, in terms of credit growth outpacing economic growth.

I think ageing demographics is a bigger issue in China than people think. And the problems it creates should be become evident as early as 2016.

You also need to keep in mind that for China to grow and evolve further, it will need to compete with a more innovative Korea and now a more competitive Japan. I don’t think China can do that with where its exchange rate is today. I think productivity is a key concern too. And I think that could be one of the reasons why the US has been so supportive of Abenomics.

People mention lack of infrastructure as a constraint. But when I go over there, it looks like they have a lot of infrastructure. It seems ahead of the population, not behind. I see expensive apartments in empty cities that 300 mn rural Chinese are expected to migrate to. That looks very unbalanced to me. Nobody’s ever had investment to GDP at 47%. Japan and Korea peaked at 36%-38%, so as a result I think capacity is way ahead of demand in some areas in China.

Leithner Letter No. 163-166

Link to: Leithner Letter No. 163-166: 26 July - 26 October 2013

Whitman, Diz quote

From the book Modern Security Analysis: Understanding Wall Street Fundamentals:

"How one views businesses has a profound effect on how one analyzes businesses."

“This bird thinks!”

A BIG thanks to Peter for passing this story/excerpt along. From the book Fear of Physics by Lawrence Krauss:

No two physicists could have been more different than Dirac and Feynman. As much as Feynman was an extrovert, so much was Dirac and introvert. The middle child of a Swiss teacher of French, in Bristol, England, young Paul was made to follow his father’s rule to address him only in French, in order that the boy learn that language. Since Paul could not express himself well in French, he chose to remain silent, an inclination that would remain with him the rest of his life. It is said (and may be true) that Niels Bohr, the most famous physicist of his day, and Director of the institute in Copenhagen where Dirac went to work after receiving his Ph.D. at Cambridge, went to visit Lord Rutherford, the British physicist, some time after Dirac’s arrival. He complained about his new young researcher, who had not said anything since his arrival. Rutherford countered by telling Bohr a story along the following lines: A man walks into a store wanting to buy a parrot. The clerk shows him three birds. The first is a splendid yellow and white, and has a vocabulary of 300 words. When asked the price the clerk replies, $5,000. The second bird was even more colorful than the first, and spoke well in four languages! Again the man asked the price, and was told that this bird could be purchased for $25,000. The man then spied the third bird, which was somewhat ragged, sitting in his cage. He asked the clerk how many foreign languages the bird could speak, “none.” Feeling budget conscious, the man expectantly asked how much this bird was. “$100,000” was the response. Incredulous the man said, “What? This bird is nowhere near as colorful as the first, and nowhere near as conversant as the second. How on earth can you see fit to charge so much?” Whereupon the clerk smiled politely and replied, “This bird thinks!”

Hussman Weekly Market Comment: The Price of Distortion

The central issue in the current financial markets, in my estimation, is distortion. Because monetary distortion dominates the financial markets here (helped by fiscal distortions that have temporarily elevated profit margins about 70% above their historical norms), the only certainty is that short-term market fluctuations will be dominated by the vagaries of the near-criminal mind that dictates how far those distortions will be pushed. Investors cannot control that decision. Still, I don’t have a single doubt that over the full course of the present market cycle, investors will be better served by adhering to informed discipline than by tying their destiny to predictions about what the Fed will or will not do next.

John Mauldin: Economists Are (Still) Clueless

The economic forecasts of mainstream economists are quite positive, if not enirely optimistic, reflecting the current data. Should we not take heart from that? Alas, no. I have been working the last few months with my co-author of Endgame, Jonathan Tepper, on a longer paper in which we discuss the economic affairs of the world. One of our pet amusements is to research just how bad economists really are at forecasting. (Of course, we ourselves get branded with that economist label from time to time, although most serious economists would rather not be associated with us.)

This week we look at some of our recent musings on that topic, triggered by a letter from a very serious economist who took umbrage when I wrote disparagingly about economists and forecasting a couple months ago.