John Mauldin does express opinions in the book (and I think that Jonathan Tepper has opinions in there as well, although they only took the trouble to specify when an opinion originated from John).
However, the book is primarily devoted to reporting what the mainstream economic community is thinking about the end of the debt super cycle. This is first and foremost a report on what others are thinking, and is especially well organized in doing that.
Yes, I expressed disappointment that the book did not address what "heterodoxical economic thinking" has to say about the crisis, but that does not mean that the presentation of mainstream thinking is not well done and worth reading.
As far as hawking face cream (or other products that several people have advised me they have resented in the past), I am one who can ignore advertising that doesn't appeal to me or my needs if the primary material presented has value.
John Mauldin is one of the premier reporters on the macro economic scene. I have gotten more leads to new (to me) ideas from his several weekly newsletters over the years than from any other single source. Many of the virtual professional contacts that I interact with today were established when I followed up on something that John had discussed in one of his newsletters. I have established more professional relationships through Seeking Alpha and probably through LinkedIn as well but neither of those are individuals. For me John Mauldin stands alone as a valuable individual for helping expand my horizons.
The other unique thing about John Mauldin is his amazing diligence in interacting with those who question something he has posted. He has always responded to me when I had a question, helped with introductions to others and reached out to me to talk about something when there was a question left open.
One story with which I am familiar involves John and Jeff Miller. A year or two ago (I think I am right on the time-frame), John had a discussion about the shortcomings of the BLS employment data and analysis. Jeff Miller is one of the top experts outside of the U.S. Dept. of Labor on their data processing and analysis procedures. Jeff sent an e-mail to John suggesting that John was off base on some of his opinions. The next week Jeff and John spent several hours working through the details and the following week John wrote about the results of that interaction and how he had changed his mind about some of the statements he had made previously.
The reaction of all too many "pundits" is to wave a finger in the air when questioned, including even those who have have won Nobel Prizes. That is not a reaction characteristic of John Mauldin. He has an intellectual curiosity that is unsurpassed. I disagree that he looks for those things that "fit his pre-existing opinion" as you put it.
John Mauldin has opinions, he states them and he welcomes the opportunity to work on challenges to those opinions. I have observed that his opinions are changed by new facts. This is probably a good reason he wouldn't make a good political candidate - he has flexibility.
No, at least not directly. I don't want to say that it might not be derived from the profusion of graphics that accompany the text, but I do not think that would be the case. I would have to dog ear the pages some more to give a definitive answer.
This is a 300 page book and there is a lot more that could have been included. But related to what I mention in the review, for every thousand people who might read a 300 page book on this topic maybe 10 would read a book of 1,000 pages. The authors have probably made the correct trade-offs.
Is Modern Portfolio Theory Dead? Come On [View article]
This is a very thorough article and yet it does not address the fundamental problems with MPT the way most practitioners use it.
1. The assumption that returns are normally distributed (gaussian "bell curve") is not valid at all times and breaks down at exactly the worst times for the investor. The Black Swan events that the author mentioned are also called "fat tail" events because they create much more frequent data occurences in the improbable tails of the gaussian curve than the MPT model predicts. These fat tails occur because correlations tend to move toward 1 (high agreement) when there is economic distress. The MPT model simply cannot perform at all in such an environment because it is still based on the much lower correlations of a previous time period.
2. The author dismisses catastrophic losses as having limited affects in the long term. Try telling that to an investor who has experienced a 30% or 40% drawdown in a portfolio that was diversified among many stock sectors and countries plus had his portfolio "protected" by a 25% allocation to U.S. treasuries. MPT had assured him that he couldn't live long enough to see a 40% loss. Yes, eventually (in the long run) it all will be made back (at least it always has in the past), but how many Black Swan drawdowns and recoveries can one go through and retain sanity. And besides, perhaps the most irrefutable observation of John Maynard Keynes comes to mind: "In the long run we're all dead."
3. The real problem in portfolio management is the time variablity of correlations. This is something that a number of investment professionals that I know are using in their portfolio management practices and I also apply such analysis in advising my clients. Clive Corcoran has a book due out from Wiley on this very subject within a few months (before the end of the year).
Yes, the author is correct that many of the applications of MPT can be and are still being used. But he is completely off base when he represents that the application (if it is to be successful) is as he represents it. He wrote: "... it enables the automated, low-cost investment management offered by a new wave of Internet startups ..."
I strongly recommend that you look such gift horses in the mouth and never assume that such systems can give you significant drawdown protection unless they are far from simple in their design. Question to ask before entrusting your money to such a service: Show me how you dynamically monitor the changes in correlations in real time and what actions you will take with that information.
Disclaimer: I am not taking any new clients nor do I have any plans to offer a dynamic portfolio mangement software system such as I described. But I do talk with people who have more ambition than I do and I expect that others will be offering these types of services and/or software systems in the not too distant future.
I have to do a deep data analysis of that question. On the surface the data seems to say that cap ex goes up when government deficits go up and cap ex comes down when federal deficits go down.
I want to do one of my careful analyses of what correlates with what, what are the lead are trailing times for things that correlate and does correlation really have a relationship to causation.
A lot of people will tell you what the result of such questions will be but they often speak from the viewpoint of their theory rather with data analysis.
So I am going to ask you to postpone that discussion until I have done a little research project.
The biggest shortcoming of the extraordinary policies is the object of their "affection". The benefit went substantially to the banking class, to keep insolvent oligarchs afloat, and too little went to the real economy that can both produce goods and services as well as buy them.
The "financial class" greatly increased income throughout this entire disaster while the "Main Street class" lost ground.
I fault the implementation much more than the economic principle.
If the same amount of money had been directed to individuals and goods and services producing businesses, the stronger banks would have retained more performing assets and survived while the weaker banks would have been reorganized, as is the way capitalism is supposed to operate: the efficient prosper and the inefficient fail.
Instead the decision was made to prop up the insolvent and preserve the inefficiency.
Federal deficits are a vehicle for the creation of money and, after so much money had disappeared into a black hole of bad debt, some replacement money was needed. What was wrong was that a significant amount of the new money was poured into the same black holes. The black holes should have been abandoned and allowed to consume themselves and burn out while the matter in the "normal universe" should have been given an opportunity to recover.
Yes, some mortgagees should have failed and been foreclosed - there were egregious positions taken by borrowers as well. Yes, some businesses should have gone under - not every business can succeed.
But the travesty is that after a few failures and managed failure avoidances, the mass of the banking oligarchy was allowed to survive unpenalized, unrepentant and to go on to unprecedented growth, consolidation and further enrichment of the executives who managed the financial debacle. Everybody else must pay, but not the Wall Street deities.
DigDeep and AR - I apologize for such a long rant so far off the HO topic.
You are definitely leading a gang, there are 7 likes for your comment. Now if that were to grow some you could be leading a mob.
And all we need are few more trading algos to be implemented. With some more Knight Capital - like stocks in play the number of new lows will be no problem.
Good point. It's the old "sell everything when the cab driver gives you a stock pick" idea. Crashes happen when everyone is a bull and major bottoms occur when everybody is a bear.
We have been publishing reports from people within China and from people who do business in China that all agree: China's current course is unsustainable. The rebalancing option opinions vary from difficult and painful to impossible except with catastrophe.
My personal conclusions after reading all these viewpoints is that the difficult and painful (but ultimately successful) are more likely than the catastrophic scenarios. However, China does have a demographic cliff in front of it and, in that sense, it has a very Japanese look about it. However, I will go along with China not being Japan and I expect they will find a different way to address their demographic burden.
Endgame: A Book Review [View article]
John Mauldin does express opinions in the book (and I think that Jonathan Tepper has opinions in there as well, although they only took the trouble to specify when an opinion originated from John).
However, the book is primarily devoted to reporting what the mainstream economic community is thinking about the end of the debt super cycle. This is first and foremost a report on what others are thinking, and is especially well organized in doing that.
Yes, I expressed disappointment that the book did not address what "heterodoxical economic thinking" has to say about the crisis, but that does not mean that the presentation of mainstream thinking is not well done and worth reading.
As far as hawking face cream (or other products that several people have advised me they have resented in the past), I am one who can ignore advertising that doesn't appeal to me or my needs if the primary material presented has value.
Endgame: A Book Review [View article]
Excellent observations!
Endgame: A Book Review [View article]
John Mauldin is one of the premier reporters on the macro economic scene. I have gotten more leads to new (to me) ideas from his several weekly newsletters over the years than from any other single source. Many of the virtual professional contacts that I interact with today were established when I followed up on something that John had discussed in one of his newsletters. I have established more professional relationships through Seeking Alpha and probably through LinkedIn as well but neither of those are individuals. For me John Mauldin stands alone as a valuable individual for helping expand my horizons.
The other unique thing about John Mauldin is his amazing diligence in interacting with those who question something he has posted. He has always responded to me when I had a question, helped with introductions to others and reached out to me to talk about something when there was a question left open.
One story with which I am familiar involves John and Jeff Miller. A year or two ago (I think I am right on the time-frame), John had a discussion about the shortcomings of the BLS employment data and analysis. Jeff Miller is one of the top experts outside of the U.S. Dept. of Labor on their data processing and analysis procedures. Jeff sent an e-mail to John suggesting that John was off base on some of his opinions. The next week Jeff and John spent several hours working through the details and the following week John wrote about the results of that interaction and how he had changed his mind about some of the statements he had made previously.
The reaction of all too many "pundits" is to wave a finger in the air when questioned, including even those who have have won Nobel Prizes. That is not a reaction characteristic of John Mauldin. He has an intellectual curiosity that is unsurpassed. I disagree that he looks for those things that "fit his pre-existing opinion" as you put it.
John Mauldin has opinions, he states them and he welcomes the opportunity to work on challenges to those opinions. I have observed that his opinions are changed by new facts. This is probably a good reason he wouldn't make a good political candidate - he has flexibility.
Endgame: A Book Review [View article]
I suggest you simply refer to rules of accounting. Every liability for one party is an asset for another.
Of course both the debt and the interest on the debt are budget items and appear on statements of account.
Endgame: A Book Review [View article]
No, at least not directly. I don't want to say that it might not be derived from the profusion of graphics that accompany the text, but I do not think that would be the case. I would have to dog ear the pages some more to give a definitive answer.
This is a 300 page book and there is a lot more that could have been included. But related to what I mention in the review, for every thousand people who might read a 300 page book on this topic maybe 10 would read a book of 1,000 pages. The authors have probably made the correct trade-offs.
Is Modern Portfolio Theory Dead? Come On [View article]
1. The assumption that returns are normally distributed (gaussian "bell curve") is not valid at all times and breaks down at exactly the worst times for the investor. The Black Swan events that the author mentioned are also called "fat tail" events because they create much more frequent data occurences in the improbable tails of the gaussian curve than the MPT model predicts. These fat tails occur because correlations tend to move toward 1 (high agreement) when there is economic distress. The MPT model simply cannot perform at all in such an environment because it is still based on the much lower correlations of a previous time period.
2. The author dismisses catastrophic losses as having limited affects in the long term. Try telling that to an investor who has experienced a 30% or 40% drawdown in a portfolio that was diversified among many stock sectors and countries plus had his portfolio "protected" by a 25% allocation to U.S. treasuries. MPT had assured him that he couldn't live long enough to see a 40% loss. Yes, eventually (in the long run) it all will be made back (at least it always has in the past), but how many Black Swan drawdowns and recoveries can one go through and retain sanity. And besides, perhaps the most irrefutable observation of John Maynard Keynes comes to mind: "In the long run we're all dead."
3. The real problem in portfolio management is the time variablity of correlations. This is something that a number of investment professionals that I know are using in their portfolio management practices and I also apply such analysis in advising my clients. Clive Corcoran has a book due out from Wiley on this very subject within a few months (before the end of the year).
Yes, the author is correct that many of the applications of MPT can be and are still being used. But he is completely off base when he represents that the application (if it is to be successful) is as he represents it. He wrote:
"... it enables the automated, low-cost investment management offered by a new wave of Internet startups ..."
I strongly recommend that you look such gift horses in the mouth and never assume that such systems can give you significant drawdown protection unless they are far from simple in their design. Question to ask before entrusting your money to such a service: Show me how you dynamically monitor the changes in correlations in real time and what actions you will take with that information.
Disclaimer: I am not taking any new clients nor do I have any plans to offer a dynamic portfolio mangement software system such as I described. But I do talk with people who have more ambition than I do and I expect that others will be offering these types of services and/or software systems in the not too distant future.
Hindenburg Omen Blog - April 24, 2012 [View instapost]
I have to do a deep data analysis of that question. On the surface the data seems to say that cap ex goes up when government deficits go up and cap ex comes down when federal deficits go down.
I want to do one of my careful analyses of what correlates with what, what are the lead are trailing times for things that correlate and does correlation really have a relationship to causation.
A lot of people will tell you what the result of such questions will be but they often speak from the viewpoint of their theory rather with data analysis.
So I am going to ask you to postpone that discussion until I have done a little research project.
Hindenburg Omen Blog - April 24, 2012 [View instapost]
The biggest shortcoming of the extraordinary policies is the object of their "affection". The benefit went substantially to the banking class, to keep insolvent oligarchs afloat, and too little went to the real economy that can both produce goods and services as well as buy them.
The "financial class" greatly increased income throughout this entire disaster while the "Main Street class" lost ground.
I fault the implementation much more than the economic principle.
If the same amount of money had been directed to individuals and goods and services producing businesses, the stronger banks would have retained more performing assets and survived while the weaker banks would have been reorganized, as is the way capitalism is supposed to operate: the efficient prosper and the inefficient fail.
Instead the decision was made to prop up the insolvent and preserve the inefficiency.
Federal deficits are a vehicle for the creation of money and, after so much money had disappeared into a black hole of bad debt, some replacement money was needed. What was wrong was that a significant amount of the new money was poured into the same black holes. The black holes should have been abandoned and allowed to consume themselves and burn out while the matter in the "normal universe" should have been given an opportunity to recover.
Yes, some mortgagees should have failed and been foreclosed - there were egregious positions taken by borrowers as well. Yes, some businesses should have gone under - not every business can succeed.
But the travesty is that after a few failures and managed failure avoidances, the mass of the banking oligarchy was allowed to survive unpenalized, unrepentant and to go on to unprecedented growth, consolidation and further enrichment of the executives who managed the financial debacle. Everybody else must pay, but not the Wall Street deities.
DigDeep and AR - I apologize for such a long rant so far off the HO topic.
Hindenburg Omen Blog - April 24, 2012 [View instapost]
Now 11 likes! A mob?
Hindenburg Omen Blog - April 24, 2012 [View instapost]
You are definitely leading a gang, there are 7 likes for your comment. Now if that were to grow some you could be leading a mob.
And all we need are few more trading algos to be implemented. With some more Knight Capital - like stocks in play the number of new lows will be no problem.
Have a great weekend.
Economic Rollercoaster Gaining Downward Momentum [View article]
Good point. It's the old "sell everything when the cab driver gives you a stock pick" idea. Crashes happen when everyone is a bull and major bottoms occur when everybody is a bear.
China's Giant Catch-22 [View article]
Analysis articles: http://bit.ly/OvhezU
Opinion articles: http://bit.ly/OvhgI6:
We also cover economic and political news from China: http://bit.ly/Qws7PV:
China's Giant Catch-22 [View article]
We have been publishing reports from people within China and from people who do business in China that all agree: China's current course is unsustainable. The rebalancing option opinions vary from difficult and painful to impossible except with catastrophe.
My personal conclusions after reading all these viewpoints is that the difficult and painful (but ultimately successful) are more likely than the catastrophic scenarios. However, China does have a demographic cliff in front of it and, in that sense, it has a very Japanese look about it. However, I will go along with China not being Japan and I expect they will find a different way to address their demographic burden.
DEBT AND DEPRESSIONS. AUSTRALIA HEADING INTO GREATER DEPRESSION AGAIN [View instapost]
Yes, to paraphrase Samuel Taylor Coleridge:
Debt, debt everywhere,
And never a drop to drink.
Cliffs, Nightmares, And Hidden Taxes [View article]
Then how will they pay their taxes?