Europe’s Greek Tragedy by John Mauldin, Mauldin Economics

In this week’s Outside the Box we have a unique diagnosis of Europe’s ills from … a medical doctor. The author is Dr. Luc De Keyser, who currently serves as the chief medical information officer at Xperthis, the largest provider of hospital information systems solutions in Belgium. He has done pioneering work in multicenter clinical trials, medical ontologies, paleonutrition, and examining human conflict from an evolutionary perspective.

Dr. De Keyser (writing for Stratfor) is not sanguine about Europe’s future. There are times, he reminds us, when a doctor has to make the tough call and conclude that the patient’s case is simply without hope. It’s a painful diagnosis and not one that the doctor enjoys sharing with the patient. But at some point the patient must be told.

The fundamental obstacle to solving Europe’s problems, he asserts, is that Europe is simply too complex to fix in any straightforward or dependable way:

For such problems, there are no simple solutions. There aren’t even complicated solutions. There are only best-guess measures with no guarantees of success. The currency union’s underlying flaws, like so many other modern problems, are far too intricate and perplexing for our minds and institutions to cope with. Failing to admit to our own overconfidence in dealing with the bloc’s problems will only perpetuate the crisis playing out across Europe.

Our poor human brains, the good doctor says, simply aren’t built to cope with a sociopolitical entity as big and complex as Europe. One thing we not-so-evolved apes like to do is interpret information in a way that confirms our preconceived notions. This is called confirmation bias, and in simpler times it kept us out of harm’s way by encouraging preferences for things we knew to be safe. This is a limitation that afflicts economists right along with the rest of us. And so we see, for example, Wolfgang Schäuble, finance minister of Germany, and Yanis Varofakis, former finance minister of Greece, obstinately pushing diametrically opposed economic programs. Which is OK, says Dr. De Keyser, until people on both sides start to claim that adherence to the other guy’s economic school of thought is going to ruin the livelihoods of millions of people.

We’re riddled with other sorts of biases, too – stuff that the field of behavioral economics is still trying to understand and help us all to cope with. Dr. De Keyser recommends humility: “[W]e must first accept that it is our fate to be overwhelmed by the problems of modern-day society.” Well, that’s a start, I guess; but maybe we should just bring the challenge closer to home and recognize that just as Europe’s (and the US’s and China’s) leaders struggle mightily and often futilely to manage their societies, we too should be keenly aware of our mental limitations in managing our investments and businesses. We all have a lot to learn.

All too often in our investment portfolios we want to make the investment world conform to our biases and opinions. More often than not we find out that reality is far more complex and that there is a plentitude of variables, many of which are unknown to us, that influence what we fervently wish to be a simple, straightforward solution.

This week’s Outside the Box is refreshingly short on words but long on wisdom.

This appears to be a week to get my geek on. Last night I had dinner with Art Cashin, Jack Rivkin, David Kotok, China expert Leland Miller, and half a dozen others. We discussed everything from Puerto Rico bonds (the implications of which I must admit I did not fully understand) to China to what the Fed will or will not do in September. The majority who were at the table (a total of 11) think the Fed will not raise rates in September. I am not one of them, but then I have been talking September for a very long time. Hardly any point in changing now unless something significantly different happens in the data.

Today I spent six hours doing a deep dive into analytical software that approaches equity investing from a entirely new perspective, truly rebuilding business analysis from the ground up and totally destroying any pretense that market cap weighting has a defensible rationale. I’m looking forward to being able to write about that software later in the year. This is something I’m going to have to spend a great deal of time on. Literally scores of the smartest mathematicians and programmers I’ve ever been around have been working on these models for 6–8 years. The results are just beginning to manifest – and my head is still swimming from what they showed me.

And now my youngest son, Trey, and I are getting ready to go to the Upper West Side here in New York City to have a “brain training” session with Dr. Lana Morrow. I expect that I will soon be able to tell you a lot more about the imaging work she does to help people learn to focus and concentrate. I know it sounds “out there,” but there is an enormous amount of science behind her work.

Then later we’ll all meet Altegris CEO Jack Rivkin for dinner. It was Jack who introduced me to Dr. Morrow. And tomorrow Trey and I travel to Grand Lake Stream, Maine, were 60 economic geeks gather to fish, drink, and talk investments and politics and economics and whatever else comes to mind. Somewhere in the course of that journey I’ve got to figure out how to get this week’s letter written. I’m going to have a great week being with old friends and meeting new ones.

You’re trying to figure out how to be more productive analyst,

John Mauldin, Editor
Outside the Box

[email protected]

Europe’s Greek Tragedy

By Luc de Keyser, for Stratfor
August 5, 2015

The eurozone is unraveling. Each swing of the pendulum between financial infusions and economic strafing for Greece further weakens the unity of the bloc. Some, including Ian Morris, take heart in the belief that the crisis, though painful, is just one of the many obstacles on a path that generally points toward success for the European experiment. Others point to Europe’s economic woes as a proof of concept that merely affirms the Continent’s need for even greater integration.

As a clinician, I see things differently. There are times when those in my field have to make the tough call and conclude that the case of our patient – the object of diagnostic study here being the European economy – is simply without hope. It’s a painful diagnosis, and one that a doctor is often hesitant to share with his or her patient. But at some point, the patient must be told.

The following is a physician’s honest, if difficult, diagnosis of the Greek tragedy unfolding in Europe and of the Continent’s hopeless attempts to keep itself from falling apart.


A little more than a month ago, the presidents of the five EU institutions published a roadmap for strengthening the Economic and Monetary Union. At the same time, European Central Bank chief Mario Draghi called for a quantum leap in European integration efforts to safeguard the union’s irreversible nature. But these leaders’ proposals came too little, too late; the mechanisms

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