Book Review: Endgame - The End of the Debt Supercycle and How It Changes Everything

Includes: DIA, QQQ, SPY
by: UltraLong

"Endgame – The End Of The Debt Supercycle And How It Changes Everything" by John Mauldin and Jonathan Tepper was published earlier this year by John Wiley & Sons, Inc. John Mauldin is a well known financial expert and a multiple New York Times best-selling author. His weekly e-newsletter, Thoughts from the Frontline, is one of the most widely distributed investment newsletters in the world. Jonathan Tepper is the founder and Chief Editor of Variant Perception, a macroeconomic research group. He is also the founder of Demotix, an award-winning web site, and has started a long/short equity hedge fund with Hinde Capital.

I read the book over a relatively long period of time but I was still able to get the big picture. Many chapters in the 300-page book work well as stand-alone writing. The first half of the book deals with basics of economics and looks at recent research about sovereign debt problems. Besides some economics 101 they explain the concepts of the debt supercycle (originally developed by Bank Credit Analyst), deflation, inflation and hyperinflation. Chapter 5 titled "This Time Is Different" deals with – you probably guessed it – the book bearing the same name from Carmen M. Reinhart and Kenneth Rogoff [short version available online here]. In addition, it contains an interview with the authors of that book. Chapter 6 titled "The Future of Public Debt" looks at a working paper from Bank of International Settlements bearing the same title [available online here].

The authors argue that we are in a balance sheet recession which is the end of the 60-year long debt supercycle. They write: "The recovery time in much of the developed world is going to be measured not in months but in years, perhaps decades for some. It will be a much more volatile economy with more frequent recessions. For some countries, this will be very deflationary; for others, not so much. And for some, the risk of high inflation is very real.

In the second half the authors look at various countries and their specific problems: The United States, The European Periphery ("PIIGS"), Eastern Europe, Japan ("the bug in search of a windshield"), The United Kingdom and Australia. Mauldin and Tepper also look at emerging markets predicting a likely cheap credit induced boom-bust cycle before these markets finally decouple from the developed markets. Finally, they give some rather vague investment advice. It's too loose and too generic to be followed upon without further advice.

Despite the doom and gloom the authors seem to be optimists in the end of the day: "We think that this era of endgame will itself end, and like the reset button on a computer allows you to start over, we believe that what will follow will be a major era of new prosperity, medical marvels, and wonderful new life-changing technology. Opportunities will abound."

This is a book definitely worth reading even if you are familiar with the articles upon which many its chapters are based on.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.