Addicted to Money – An indictment on education?

A  very good series screened on ABC (Australia) recently called Addicted to Money. If you want to be prepared for the future, I highly recommend that you get a copy and watch it. It is a commentary on the Global Financial Crisis that looks into history – both financial and social – and shows how predictable it actually was.

Segue into my education soapbox and you will see – particularly in the last episode of the series – a great indictment of the education system (and for that matter every other part of modern western civilisation).

The episode points out that the “finest minds,” the most “educated” (should it say schooled?) people on the planet were not able to predict the financial crisis.

In the big crunch, the pinnacle institutions, the biggest brand names of modern schooling all lost their shirts in the GFC. For example, according to the series the credit crunch cost:

  • Harvard 11 billion dollars
  • Stanford 30% of its value
  • Oxford more than 100 million pounds.

Quoted on this fact, Professor Robert Reich, Former US secretary of labour said of the “brightest minds” who were in charge at the time, “They were not wise, they were not talented. In fact, they were quite stupid!”

According to the series, the so called “smartest guys in the world” hadn’t a clue that the credit crunch was imminent.

In fact Professor Ian Goldin quoted in the documentary pointed out, “the overwhelming majority, I’d say 99% of the profession, didn’t see the economic crisis coming… one has to wonder about the profession.”

If these guys couldn’t get it right, then what hope is there for the rest of the schooled masses? Of course, even successful street smart investors like Warren Buffet got caught out too. However, there were people predicting the GFC, like the schooled and educated (experienced) Marc Faber.

Back before 2007 Marc Faber, looking at conditions, financial and history cycles predicted the end of the credit bubble.

In 2006 Marc Faber said on ABC Inside Business about the boom market at the time:

It doesn’t change the fact that it is an imbalanced boom and it’s driven largely by credit creation in the US, leading to overconsumption, leading to a growing trade deficit, current account deficit, the accumulation of reserves in Asia and a global boom. But it is nevertheless an imbalanced boom and one day there will be a problem, certainly with the US dollar. The US dollar is a doomed currency.

There were others too, but they are in the minority of public investment commentators.

I guess my gripes with the education system are only a tiny part of the problem. The existence of an mass education system like ours is just one of the symptoms of an empire in decline.

Perhaps it is just one of the great excesses of an empire at its greatest heights to believe that its great wealth was due to scientific management of people, rather than the hard work, effort and cooperation of.

Schooled western countries such as America and Australia are being brought to bear by the so-called uneducated peasants of China and India. In reality, what they are is un-schooled, not un-educated. And as their rapidly growing economic power shows being un-schooled is certainly not a bad thing to aspire to.

Written by brettg in: Economics,Education | Tags: ,

The world economy is doomed… Buy a farm, get a shotgun

According to Marc Faber author of the Boom Doom and Gloom Report, the global economy fell of a cliff in September. To top that off governments are printing money to “ease the situation” and bailing out banks that made stupid choices. Marc Faber’s outlook on ABC’s Lateline Business last night was not very good.

Faber points out that government interference and bailouts only delay the coming economic doom wave, and whilst they hold it up, the wave is just getting bigger.

A TNT driver last week told me that business is scarily quiet. All casuals are gone, and drivers are being asked to do extra work to keep their jobs. When freight stops, it’s a sure sign that the economy is up a creek without a paddle.

Ultimately, the prospect of many large western governments going broke is very real and the economic situation that we are experiencing is unprecedented. Mark Faber

My advice to you is to go and buy a farm… and a shotgun, because things will get very bad in the world.

If governments fail or hyperinflation comes in to roost, civil unrest will surely follow (See Zimbabwe). It won’t matter how much money, gold or property you have then or how secure you feel now.

It’s hard to see a way out and I wonder what the heck are we going to do about this? The current economic system doesn’t work. I fell confident enough that we are all about to know this for sure. I think it’s time to look to an alternative source for guidance. See the bible at Jeremiah 10:23.

Written by brettg in: Economics |

The worlds favourite billionaire – Warren Buffet

IMG_1516 Warren Buffet’s letter to Berkshire Hathaway shareholders in 2008 is really interesting to read. I learnt an enormous amount about the Global Financial Crisis (GFC, not to be mistaken with KFC) by reading it.

What I found fascinating though was Mr Buffet’s ability to admit mistakes. Why is this so intriguing? Warren Buffet is famous for being a conservative, but consistently performing investor. I maybe out of my depth here, but I understand that his company Berkshire Hathaway is basically the benchmark for all investors and investments.

It seems that many of the high flyers in public companies seem to want to cook the books when they stuff up, as a way of saving face (see the note about Fannie May and Freddie Mac on page 16). Of course by doing that, they inevitably make the situation worse and it always ends badly. By contrast, Mr. Buffet is up front about his stuff ups. Even when they involve billions of dollars, and even when given a bit of time they might turn out ok. See a couple of examples from the letter:

I told you in an earlier part of this report that last year I made a major mistake of commission (and maybe more; this one sticks out). Without urging from Charlie or anyone else, I bought a large amount of ConocoPhillips stock when oil and gas prices were near their peak. I in no way anticipated the dramatic fall in energy prices that occurred in the last half of the year. I still believe the odds are good that oil sells far higher in
the future than the current $40-$50 price. But so far I have been dead wrong. Even if prices should rise, moreover, the terrible timing of my purchase has cost Berkshire several billion dollars.

I made some other already-recognizable errors as well. They were smaller, but unfortunately not that small. During 2008, I spent $244 million for shares of two Irish banks that appeared cheap to me. At yearend we
wrote these holdings down to market: $27 million, for an 89% loss. Since then, the two stocks have declined even further. The tennis crowd would call my mistakes “unforced errors.”

Nobody wants to lose, and you can see that Warren Buffet hates to make mistakes. Having made a mistake, he is open and up front about it.

What would I do if I lost several billion dollars?

One final word that stood out to me from the letter:

Approval, though, is not the goal of investing. In fact, approval is often counter-productive because it sedates the brain and makes it less receptive to new facts or a re-examination of conclusions formed earlier. Beware the investment activity that produces applause; the great moves are usually greeted by yawns.

This letter is a fascinating read, and quite funny too. If you are interested in what’s going on around it, I highly recommend that you read it. Warren Buffet is certainly my favourite billionaire.

Written by brettg in: Economics |

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