My Comment: Finally!!! (Mish)

22 posts / 0 new
Last post
Rosemary Sims's picture
Rosemary Sims
Status: Bronze Member (Offline)
Joined: Oct 2 2008
Posts: 81
My Comment: Finally!!! (Mish)

And I am grateful too for this decisive action today.  Will it really make any difference in our future?

http://globaleconomicanalysis.blogspot.com/

Rosemary

Headless's picture
Headless
Status: Gold Member (Offline)
Joined: Oct 28 2008
Posts: 363
Re: My Comment: Finally!!! (Mish)

Rosemary,

It's probably suicidal to even go here, but I find it amazing that Mish can write an article that long and detailed and not once mention U.S. debt, U.S. demographics, or the degraded U.S. education system--to mention one country killer... 

My prediciton: Mish, another guy who was right while he was right; Schiff will write an article like this about Mish a year from now.

Lee

P.S. The Sitka Philosophy (pitch)? We recommend investing according to what the market is doing? Welcome to Cramerica... Just brilliant!

 P.P.S. (Edit): I do think Schiff is wrong in his reasoning on why not to buy real estate--you should, if you could get the loan; his proposal of hyperinflation and falling real estate prices just doesn't make sense (perhaps since he is a renter, he's just trying to preserve the fall in prices as long as possible so he can get in...).

Mike Pilat's picture
Mike Pilat
Status: Platinum Member (Offline)
Joined: Sep 8 2008
Posts: 929
Re: My Comment: Finally!!! (Mish)

Let's also bear in mind that the Fed is no longer even pretending to care about inflation and rising prices, they are doing everything they can to get prices to rise again!

We are now constantly being spammed by the mainstream media about the "dangers of deflation" as we also hear Tim Geithner accusing China of leaving the Yuan too weak. To me, that means the powers that be are still trying for a (much) weaker dollar. Rising prices are no longer simply a side effect of the inflation and stimulus...rising prices are the precise goal for which the Fed and Treasury are striving.

Mike

Woodman's picture
Woodman
Status: Diamond Member (Offline)
Joined: Sep 26 2008
Posts: 1028
Re: My Comment: Finally!!! (Mish)

Still digesting Mish's long post, but Schiff gives up a lot of credibility to me when I hear him because he seems to rely on charisma rather than facts, and he always comes to the conclusion you should buy his books and investments. 

Headless's picture
Headless
Status: Gold Member (Offline)
Joined: Oct 28 2008
Posts: 363
Re: My Comment: Finally!!! (Mish)

Woodman,

My main problem with MiSh (and Schiff, to some extent) is that he doesn't include "manipulation" anywhere in his discussions; manipulation has been THEE driving force, given the gross concentration of capital that has nothing to do but seek out the newest game.

There is one guy that seems to have a firm grasp on the "economics" (is there really is such a thing) and the Wall-Street-Siphon (the stealers of your parents and grandparents life's work); that guy, who has the fatal (though appealing and admirable) quality of not taking himself seriously--to the extent that he actually plays the clown almost constantly--is Max Keiser.

I know many people here will think I'm an idiot for saying that(on top of all the other things they may think I'm an idiot for saying), but there you have it.

Lee

P.S. Doesn't mean he can predict everything either...

mainecooncat's picture
mainecooncat
Status: Gold Member (Offline)
Joined: Sep 7 2008
Posts: 488
Re: My Comment: Finally!!! (Mish)

It seems like Shedlock is saying that there has to be a netting of money supply, that is the total created minus credit destruction/debt write-downs and that most people simply look at gross injections. But to my recollection he's never presented hard numbers on the latter, the destructive aspect. Now I know he's a math and numbers guy, so I wonder if the data doesn't exist (isn't completely documented) or if he's just not breaking it down because it would contradict his theory on deflation (shrinking money supply) and he'd be left with prices falling with a flat or slightly increased supply-- therefore causing logical dissonance in the orthodox economist's mind and perhaps indicate the unraveling of a previously predictable system. He usually addresses it somewhat nebulously by saying something like this, "Now, I really think these guys are making a mistake not including shrinking credit in their analysis." But I never see him say, "Here's the numbers, here's the net result. See, there's actually been a shrinkage of x billion or trillion. That's why it's deflation, so there."

I also wonder about the fact that many claim that there hasn't actually been a massive shrinkage of credit and the banks have the money to loan and people are simply being more cautious with large purchases like houses and cars or heavy machinery for companies, etc.

I also wonder about the fact that much of the destroyed wealth was paper gains and had never really been part of the supply because it was never claimed or actualized by the investors who were holding it. If you give my company $1000 and I tell you two years later that it's worth $10,000 now (which is really just a figment of cooked books) but you never claim your $9000 gain -- and actualize it -- and then my company goes bankrupt is all of that money really destroyed? Or is just the original $1000 destroyed?

I also wonder about the fact that many claim -- such as Martenson -- that the newly created money hasn't "hit the streets" yet and that's why deflation seems to be winning the day.

He mentions that Schiff is talking about what ought to happen instead of what is happening, and I agree with that. But given the fact that they're both Austrian Schoolers there's obviously a disconnect here. Aren't Austrian Schoolers for the most part primarily focusing on the dangers and hazards of printing or electronically generating money, the dangers of stimulus packages, the dangers this environment poses for the US dollar, etc. Yet Shedlock seems to be saying don't worry about it. I don't see him anywhere address this disconnect, something like, "What's happening violates the theoretical principles of the school I'm a follower of and here's why I think that is." So is he tacitly admitting that the government is doing the right thing here in the sense that if he believes that these newly injected dollars are simply off-setting destruction then if the government didn't do this we'd have something maybe like hyper-deflationand everything would just shut down because there'd be simultaneously no capital and zero liquidity?

Obviously this topic is very confusing and controversial, as people who've spent there lives studying this stuff have conflicting views on what's really happening. For my part, I love thinking and philosphizing about it, but in the end I agree with Nassim Nicholas Taleb's assessment that no one really knows what's going on.

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5570
Re: My Comment: Finally!!! (Mish)

As has happened before, I find myself squirming uncomfortably at Mish's tone and approach. 

I sense a fair amount of ego at play here and when Mish states that Schiff is merely talking his book and accuses him of sticking to his analysis, I think I hear the pot calling the kettle black.

Also, Schiff's analysis has been very right for a long time and that's why he's getting some attention.  When nobody else would, he went into the lion's den (CNBS, Fox, etc) and took as good as he got.

His trading and portfolio management may not be equal to his analysis but it's important not to confuse the two.  "The market can remain irrational longer than you can remain solvent" is a well-worn phrase for a reason; it's true.  Trading and portfolio management is not easy and nobody is immune from losses.

For Mish to imply that Schiff is somehow wrong because "the market" has not (yet) confirmed his view with dollar rewards makes an implicit assumption that the market is somehow right.  The market is not efficient.  It is quite often irrational and swings to extremes in both directions.  Schiff can be wrong for all the right reasons.  Welcome to the messy world of humans and money.

At any rate, I don't sense any "humble" in Mish's posts, which I see as an area for improvement.  If you are a trader and you cannot find a reason to be humble, don't worry it'll find you.

 

 

mainecooncat's picture
mainecooncat
Status: Gold Member (Offline)
Joined: Sep 7 2008
Posts: 488
Re: My Comment: Finally!!! (Mish)

Hey Chris,

Glad you brought up humility and the ego with Mish. It's clearly an issue.

Just for the record here in general also wanted to say -- and not really as a defense of Schiff but literally for the record -- that Mish begins his post on more or less a dishonest note. He mentions the Schiff-was-right theme and the Youtube videos talking about this. These videos -- at least the several I've seen -- don't have anything to do with what ends up being the main topics of Mish's post, which are hyperinflation and the impending dollar crash/major devaluation, though certainly Schiff typically mentions this as part of his broader analysis. The "rightness" of Schiff has to do primarily with the housing bubble and the stock market crash, spefically in financials. Schiff  was "right" when in December '07 he was challenging those calling for a Dow of 16,000,a continued rise in house prices and for being bullish on financials. But Mish doesn't mention these obviously contrarian and now prescient calls in general nor does he specifically mention that these calls  were the ones leading to the creation of the Scciff was right videos.

switters's picture
switters
Status: Platinum Member (Offline)
Joined: Jul 19 2008
Posts: 744
Re: My Comment: Finally!!! (Mish)

The phrase "the more I know, the more I don't know" has popped into my mind several times over the past few weeks when thinking about all this stuff.

Certainly we can make informed predictions based on historical analysis and observe trends as they are happening in the present, but can anyone say with absolute authority that they know what the future holds?  No.

And that's one of the things I appreciate so much about the Crash Course and Chris's blog posts.  He doesn't claim to have a monopoly on understanding this situation, and he doesn't make absolute predictions.

These days when people ask me what is going to happen, I simply reply "I don't know".  That's the truth.  If they're really interested in a conversation, we'll go on to discuss everything we talk about here.  I will also share what I think are prudent steps to prepare for events that may occur.  But I really don't know what is coming next week, let alone a year from now.  And I'm wary of anyone who says they do (including both Mish & Schiff, as much as I appreciate their work).

Woodman's picture
Woodman
Status: Diamond Member (Offline)
Joined: Sep 26 2008
Posts: 1028
Re: My Comment: Finally!!! (Mish)

Many great points you bring up Cooncat. I'd like to see the real change in debt vs. money supply increase numbers.  I agree also the tone of Mish's posts could be much improved; that kind of stuff just detracts from my interest.  I'm still not convinced anyone knows for sure what direction things are going

cat233's picture
cat233
Status: Platinum Member (Offline)
Joined: Aug 20 2008
Posts: 575
Re: My Comment: Finally!!! (Mish)
cmartenson wrote:

For Mish to imply that Schiff is somehow wrong because "the market" has not (yet) confirmed his view with dollar rewards makes an implicit assumption that the market is somehow right.  The market is not efficient.  It is quite often irrational and swings to extremes in both directions.  Schiff can be wrong for all the right reasons.  Welcome to the messy world of humans and money.

At any rate, I don't sense any "humble" in Mish's posts, which I see as an area for improvement.  If you are a trader and you cannot find a reason to be humble, don't worry it'll find you.

 

 

Well said!  As a trader of the market, I know these statements are so true!

Cat

Ray Hewitt's picture
Ray Hewitt
Status: Gold Member (Offline)
Joined: Apr 5 2008
Posts: 458
Re: My Comment: Finally!!! (Mish)

Both men are doing a great service at making Austrian Theory known to the general public. Schiff is just as cocky on the air as Mish is on his blog. Mich didn't engage in ad hominem insults. He argued that Schiff is wrong and he backed himself up with data. That's the right way to debate scientifically. I rather enjoy their passion. The aw-schucks style strikes me as phoney. When readers need to have their emotions appealed to then they are not ready for appeals to reason arguments.

I think Mish has the stronger argument. The amount of money, credit and OTC deratives on the books are over ten times the entire world GDP. Pyramid Schemes tend to gather momentum and breathe as they collapse. The world's governments can't create money fast enough to stop it. For hyperinflation to occur, there needs to be currencies to hyperinflate against. When they are all doing it in unison, there are none except precious metals.

It is not just the dollar that will collapse; the whole world fiat money system is destined to collapse. The next phase will be the collapse of bond market. That's the mother of them all, the time when governments run out of credit. The big nuke in the room is the $700 trillion OTC derative market. As Mich asserts, I reserve the right to change my model.

Buckle up.

Nichoman's picture
Nichoman
Status: Gold Member (Offline)
Joined: Nov 1 2008
Posts: 422
Re: My Comment: Finally!!! (Mish)
Ray Hewitt wrote:

Both men are doing a great service at making Austrian Theory known to the general public. Schiff is just as cocky on the air as Mish is on his blog. Mich didn't engage in ad hominem insults. He argued that Schiff is wrong and he backed himself up with data. That's the right way to debate scientifically. I rather enjoy their passion. The aw-schucks style strikes me as phoney. When readers need to have their emotions appealed to then they are not ready for appeals to reason arguments.

I think Mish has the stronger argument. The amount of money, credit and OTC deratives on the books are over ten times the entire world GDP. Pyramid Schemes tend to gather momentum and breathe as they collapse. The world's governments can't create money fast enough to stop it. For hyperinflation to occur, there needs to be currencies to hyperinflate against. When they are all doing it in unison, there are none except precious metals.

It is not just the dollar that will collapse; the whole world fiat money system is destined to collapse. The next phase will be the collapse of bond market. That's the mother of them all, the time when governments run out of credit. The big nuke in the room is the $700 trillion OTC derative market. As Mich asserts, I reserve the right to change my model.

Buckle up.

Compelling is fact it is hard to find much positive news/data anywhere.  Even latest LEI and housing sales reports, on closer inspection, reinforces more trouble ahead.

 

See...

http://www.ritholtz.com/blog/2009/01/fed-activity-boosts-leading-economic-indicators/

http://www.ritholtz.com/blog/2009/01/existing-home-sales-fall-35/

and

http://www.calculatedriskblog.com/2009/01/annual-existing-home-sales.html

 

Nichoman

Rosemary Sims's picture
Rosemary Sims
Status: Bronze Member (Offline)
Joined: Oct 2 2008
Posts: 81
Re: My Comment: Finally!!! (Mish)

 "For my part, I love thinking and philosphizing about it, but in the end
I agree with Nassim Nicholas Taleb's assessment that no one really
knows what's going on."

I like Taleb too but I don't really think he is somebody who can relate what is happening on the street, or has even had to work for a living on it.  To my way of thinking, anybody with talent such as his should have to apprentice in a Main St grocery or something to understand the enormous impact of economic and financial policy on it.  The theoretical truth must always have something to do with the possible impact on real people or it is no more than the greedy machinations which caused all this to happen in the first place, even if the policies are only short sited rather than greedy. Though I think he is correct in his assessment that nobody really knows what is going on.

I like Gail the Actuary and have even gone back often to TOD archives to find her old pieces.  Such consistent reasonableness and humility combined with a demonstrated desire to learn from those who read her pieces as well as to teach them, all the while being right on with her predictions is really quite rare.  And she is fearless to boot.  Now, if that sounds like somebody we all know here, it's because we're on his site.

"that guy, who has the fatal (though appealing and admirable) quality of
not taking himself seriously--to the extent that he actually plays the
clown almost constantly--is Max Keiser."

Who is Max Keiser?  Do you have a link?  

"I sense a fair amount of ego at play here"

That's what it seemed to me, too.  I always question the recommendations of anyone who seems to be making them in the perceived reflected glow of another.  One upmanship really ruins the productive use of even brilliant brain waves, I think. Thank you for the peaceful, mostly ego-free atmosphere you provide here, which promotes such diversity of thought.

"Both men are doing a great service at making Austrian Theory known to the general public."

Yes, absolutely.  I just wish they had the capacity to provide that great service without projecting such a contentious, "I know and can prove everything" image.  And neither seems to be able (or even to pretend to be able) to listen to others.  Listen.  Ask questions.  Really simple, I think.  But both seem to come out punching.  And so closely associated with Austrian Theory I wonder how much they can be actually promoting it as a reasonable underpinning for actions. But then I was only reading blogs and watching vids.

Rosemary

machinehead's picture
machinehead
Status: Diamond Member (Offline)
Joined: Mar 18 2008
Posts: 1077
Mish Mash Mush

In most professions, it is very rare for one practitioner to
publicly excoriate another. I've seen investment newsletter writers
who, when publicizing their Top Ten ranking, would blot out the other
names to avoid casting aspersions on them. Those who've been around
awhile know that they'll get their turn in the lower rankings soon
enough, thanks to the caprices of Ms. Market.

Mish's long-winded
blast at Schiff sounds like a personal vendetta. I suspect he'll end up
regretting this column. While Warren Buffett often highlights foolish
investment philosophies, you don't see him naming the practitioners. In
the long run, it doesn't pay. The big guys don't have to acknowkedge
the pups yapping at their heels.

Mike Pilat's picture
Mike Pilat
Status: Platinum Member (Offline)
Joined: Sep 8 2008
Posts: 929
Re: My Comment: Finally!!! (Mish)

Mainecooncat: I'd also add a couple of things to #7

1) In many of the videos and I think even in his book, Schiff does not attempt to time the market. He is often confronted on tv and tempted to put a date on hyperinflation and he generally doesn't bite. He focuses on the fundamentals without attempting to call the very short terms events. So in that sense, it's very difficult to decisively say he's been wrong thus far, since to my knowledge he never said that we'd be hyperinflating right now.

You pointed out in #5 that perhaps no one knows what's going on. Along those lines, I've got another idea. Just a thought, I don't necessarily buy it:

2) What if the huge backlash on the internet and the very vocal Austrians have begun to break through? Perhaps without Peter Schiffs, Ron Pauls, and the like we'd be guaranteed hyperinflation. But maybe their strong words have gotten into enough people's minds and prepared enough market participants for what should have come that the actions now taken are serving to prevent hyperinflation to some extent. Perhaps rules aren't so rigid in this area but continue to evolve and we are now seeing the latest "rule change" that will define future generations of economists.

I think the above scenario is fairly unlikely but there always is a little voice in the back of my head saying "what if you're wrong" when I begin to ponder hyperinflation. Just a thought. Thanks for your posts.

Mike 

raptor's picture
raptor
Status: Bronze Member (Offline)
Joined: Sep 12 2008
Posts: 27
Re: My Comment: Finally!!! (Mish)

...................

I also wonder about the fact that much of the destroyed wealth was
paper gains and had never really been part of the supply because it was
never claimed or actualized by the investors who were holding it. If
you give my company $1000 and I tell you two years later that it's
worth $10,000 now (which is really just a figment of cooked books) but
you never claim your $9000 gain -- and actualize it -- and then my
company goes bankrupt is all of that money really destroyed? Or is just
the original $1000 destroyed?

...................

 

Very well said... I also was scared about the size of the CDO ready to default. 

But learned (on another forum) that what most of the ppl are reffering to is the NOMINAL VALUE the real NET VALUE is approximated by some to 1/10th of that size.

http://derivativedribble.wordpress.com/2008/10/24/netting-demystified/

Which downsizes the deflationary forces alot..

On the other hand most of the printed money 

http://www.sfgate.com/cgi-bin/object/article?f=/c/a/2008/11/26/MNVN14C8Q...

probably went for paying debt (i.e. deflating)

Can't find a graph for it.. but afaik the banks reserves have grownfrom 50B to ~700B (i.e. not 3.2T).

Again on another forum I asked I think very important question, How big the two forces really are ?

Unless we can measure them we cant really know which one is winning.. the inflationary side is more visible cause we know apporoximately what the Fed/gov print.

switters's picture
switters
Status: Platinum Member (Offline)
Joined: Jul 19 2008
Posts: 744
Re: My Comment: Finally!!! (Mish)

One more thing.  Schiff often reminds people in his podcast that none of his clients have lost anything unless they sell.  They may be down 50%, but they're still receiving 10-12% dividends (which is one of his main objectives) and if they're following Schiff's advice, they're buying more of the stocks at those low prices - not selling for a loss. 

That doesn't mean his cleints won't end up losing money, or that they wouldn't have done better somewhere else, but Schiff often brings this up when people mention how much the Euro Pac portfolios are down this year. 

I follow Mish's blog and think he's a smart guy, but that post really turned me off.  Seems like two five-year olds on a playground shouting "I'm right" and "You're wrong" back and forth.

Downrange's picture
Downrange
Status: Martenson Brigade Member (Offline)
Joined: Aug 13 2008
Posts: 62
Re: My Comment: Finally!!! (Mish)

Agree, the article (Mish) was self-serving, but of course that was his purpose: he's in business here on the internet to sell his services and develop his subscription client base, as is Schiff.  I don't see it as "ego," per se, so much as working his own business plan (at Schiff's intended expense).

Like many who have a nest egg, small in my case, I've spent a lot of time trying to figure out the markets over the past few years.  As Karl Denninger wrote in his Ticker today, managing your own money can be a good choice for many reasons, if you have the time to research and come to conclusions about what to do that you are comfortable with. (Linked - it's dropped to the second position now, I believe: http://market-ticker.denninger.net/ ).  At least if I lose money through my own errors, I have no one to blame but myself.

As to the question of what's next, I tend to draw back to the big picture, as put forth in the Crash Course.  Short term, there's just no telling which direction things will go, but longer term we are facing severe resource depletion, overpopulation (overshoot) as a result of the century-long "oil boom," and possible global climate changes that will require significant resources to accomodate for a large percentage of the planet, particularly if the shift is towards cooler temperatures. 

We are also facing an upcoming global political crisis - and I mean that in the sense of politics representing the visible form of the maintenance and wielding of Power.  Chris, it seems to me, has (wisely, perhaps) avoided making any sidetrips through politics and power in his Crash Course, as such a diversion on the journey to enlightenment about the real economic world we all inhabit together would inevitably result in many passengers spilling out of their seats and falling by the wayside in advocacy or defense of their own personal "causes."

Still, the fact of the impending power crisis remains paramount, in my view, and will be settled in some manner, probably within most our lifetimes.  As Bucky Fuller wrote it, the history of the world is largely the record of the struggle between aligned nation-states on the basis of scarcity of resources, with the spoils going to the victors.  (He also wrote that this no longer need be the model, but that's the subject of another discussion.) This has generated a global posture where war usually is still the answer to significant economic questions affecting resource allocation.  Without going into detail here, I'd just say the plans have been in place for a long time for varied interests to address each of several paths for the future, with widely-varying implications for any individual's welfare, depending on where you are positioned.  Understanding the resource picture presented so clearly in the Crash Course, I find it difficult to visualize a path through the next twenty years that does not include some kind of fairly apocalyptic global conflict, with attendant massive social dislocations.  Even if such overt conflict could somehow be avoided, it seems inevitable that the change affecting many individuals would be anything less than catastrophic.

How that affects ones investing posture is an interesting question, and frankly I don't have good answers yet.  It may well be that we will be addressing this issue from a completely new perspective within a decade, so, rather than blindly follow Mish, Schiff, or anyone else, I prefer to try to remain flexible and mobile.  One thing is for certain:  we are living in "interesting times."

Woodman's picture
Woodman
Status: Diamond Member (Offline)
Joined: Sep 26 2008
Posts: 1028
Re: My Comment: Finally!!! (Mish)

Peter Schiff's response here:

http://www.financialsense.com/fsu/editorials/schiff/2009/0129.html

 

Headless's picture
Headless
Status: Gold Member (Offline)
Joined: Oct 28 2008
Posts: 363
Re: My Comment: Finally!!! (Mish)

Re: Schiff's response:

Touché!

Say "Goodnight Sitka."

And, of course, the great irony--and most painful part for MiSh--will be that he either follow's Schiff's plan and does well over the coming years, or he doesn't; either way, he loses...

mainecooncat's picture
mainecooncat
Status: Gold Member (Offline)
Joined: Sep 7 2008
Posts: 488
Re: My Comment: Finally!!! (Mish)

"My popularity on television and the internet has led a very small money manager to use his popular financial blog to promote his fledgling business by attacking the recent poor performance of my long-term investment strategy."

Hilarious opening by Schiff, especially his use of "very small" and "fledgling."

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments