James Montier on Hysteria of Hyperinflation:
In the past, I’ve admitted to macroeconomics being one of my dark, guilty pleasures. To some “value” investors
this seems like heresy, as Marty Whitman once wrote, “Graham and Dodd view macro factors . . . as crucial to the analysis of a corporate security. Value investors, however, believe that macro factors are irrelevant.” I am clearly a Graham and Doddite on this measure (and most others as well). I view understanding the macro backdrop (N.B. not predicting it, as Ben Graham said, “Analysis of the future should be penetrating rather than prophetic.”) as one of the core elements of risk management.
In this paper I’d like to turn to a subject that has long fascinated me: hyperinflation. My interest in hyperinflation stems not from my background as an economist, but rather from a small collection of bank notes that my father gave to me. (A peculiar benefit of his smoking habit – bank notes were used as an incentive to purchase cigarettes.) Included in this collection is a one million mark note from the Weimar Republic; it is this note that is responsible for my interest in hyperinflations. To this day I collect bank notes from hyperinflations. The notes shown in the body of this paper come from my collection and serve as decorative reminders of important historical hyperinflations.
My interest in these unusual events was reignited by my exposure whilst a student to the monetarist view of
hyperinflation, which I found deeply unsatisfactory. This interest was then further kindled when I covered the Latin American markets in the wake of their hyperinflationary experiences.
GMO White Paper James Montier Hyperinflations, Hysteria, And False Memories by
