couldn’t really get particularly nostalgic about that period. that was one of — i’m actually standing on one of our fixed income trading floors, one of the occasions all my fixed income counterparties were calling me saying are you guys why is the dow at a new high? i get the fed just started easing. the credit markets were coming to an end. the fact we’re exceeding thathigh is not surprising and i agree, valuation is fair and themarket didn’t protect us then but we’re not on the verge of arecessn.io the risks to growth are still on the down side. there’s been plenty of evidence this payroll tax is biting. there’s parts of the market working really well that have driven us to new highs.staples and health care being the two best performers thisyear. that is the stock market in the sweet spot of fed policy, high dividend payers where the money flows are going and that will continue to work even through a growth related pullback as we get into the second quarter. parts of the market related tocap spending look okay, the parts related to the domesticeconomy look really elrated. i say you stick with the highdividend payers and they will work in the pullback and up trend.that make sense to you? some of the elements of what he has to say. the way i approach it, every recession sews the seed of the next business recovery and the next business recovery sews the seeds to the next recession. i think the theme is it’s not over yet nor is the market a bargain. you’ve written public letters to the white house. one. it was a good one. a lot of things happened in spite of what goes on in washington. do you still think we need policymakers to come together on some type of grand bargain? absolutely. is it holding us back? you’ve had a brilliant fellow on this show i have enormously hard regard for, ken, and stan rucker miller talks about generational theft and a guy you ought to listen to, a bright individual. we can’t continue on policies like we’re having. the most negative part of the sequester is not impact on the economy, another evidence of inability of government to get together and fiscal boys to work things out. that’s why the entire burden of dealing with this recession fell on bernanke and basically bernanke’s created an environment the saver is being destroyed. tell me a guy or family saved lucky enough to have $2 million that can retire on that. it’s wrong. interest rates don’t belong where it’s at. bernanke is carrying the entire low. it’s disfunctional government. sad. we’re heading to big problems. high tax states versus low tax states. maybe he didn’t say it in the right way, i don’t think he said anything wrong, phil mickelson, you’re a big golfer. he said for every 18 holes i play i don’t want to give 11 to the government and keep 7% to myself. 62% tax rate, all in. we have to come down and come to some understanding what are appropriate tax policies. plenty of people in the pastargue gridlock is good. i know what you’re saying. if we have a functioning government we have two approaches to how we — what we want the government to do. one approach with a functioning government takes us right down the entitlement pathway. if we are all on the same page, if the house turns in two years and we’re all on the same page for that, is that better than disfunctional? no. the reason we’re getting away with the disfunctional government, there’s no pain associated with their policies. because of the fed. basically, i said this before, one of the most distinguished goldman sachs partners was henry fowler who left the department of treasury to become a partner with goldman sachs and partner with pete peterson of blackstone and they took ads in the journal and new york times alerting the public to the evils of the budget and deficit of congress. that was 1972. the united states has the lowestborrowing costs in history. pete peterson, another distinguished gentleman wrote running on empty four or five or six years ago.what’s the consequence? we’re living too comfortablebly with policies and when things change we will have a crisis on our hands. we either have intelligent leadership to head off thecrisis or respond the crisis. i’m not a big short seller and don’t think financial assets discount crisis. it’s potential for instability.we don’t know if that hits a year from now, 18 months from now, two years from now. we’re heading down the wrong path and we’re staying on that wrong path because there’s noconsequence to the policies. the public is telling thegovernment, here’s my money for nothing, take my money. t bills are 10 basis points, 8 basis points, 10 year money is 180. you would think intelligent fiscal management, we should beissuing 100 year bonds now as a country. jeff, the stock market is attractive compared to these other things. that’s a very important point. i said on this show three years ago, equities are the best house in the financial asset neighborhood. we don’t know whether it’s a good neighborhood or badneighborhood. think about alternatives in financial assets, not talking real estate or oil and gas, put your money in cash, that is zero, bernanke says it will stay in zero another year or two.put it in financial bonds, and you have very bright people on this show with the exception of myself, jeff is in bonds. buying u.s. government bonds today are like walking in front of a steamroller and picking up a dime. not a good policy. belongs at 4, 5 or 6. high yield in ’08, bloomberg high yield index was 25%. the s&p was 900, s&p multiple was 13.9. and high yield was 6% down from 13.5 and you’re left with common stocks.the average is 14 1/2 yielding 2%. you can find a lot of thingsbetter than average yielding much more than government bonds growing. there is — you are one of our very favorites to have on to listen to. sorry, barry. you’re very kind. there is a cost to this. we go back and look at the last time the fed did this in cap rates. our debt had gone to 100% of gdp in ’40s and ’50s and conference was single digit pes and inflationary spikes.the way we got out of that debt we got out of world war ii andstopped the military spending. there’s no easy solution to getout of the debt this go around because it’s all aboutentitlements. the i inevitable cost of this is inflation, just a question of timing. what is it — you talk range bound. what causes the upper end of this range right now for you? what causes it? you have a lot of positives in housing, rebound in business spending going on. still have the don’t fight thefederally. what’s the negative? at causes you to put the highend of the range? what causes you to put a top end close to where we are. there are many potential shocks, gasoline prices are high, a lot of reasons we are vulnerable. when does the fed stop our slow bottom line, europe, not the italian election, theeconomic crisis in europe trading a fiscal or economic one.france and germany. this will come back. same policies in europe. we know all those things. that’s the weird thing. we still had a spring slide last year related to europe and the year before as well. it wasn’t a new issue. we can’t do four in a row.would that be four in a row for the spring slide. it would. we can’t do four in a row, i don’t think. i think there are a lot of echos to the last couple of years, fially, monetarily what’s going on in the rest of the world. housing’s healed. finally, finally we will getsomething out of this. unemployment will come down.corporate profits are flush. come on, jeff. flush, they’re going at 1% year-over-year on the first quarter. don’t worry about thatquarter. okay. how about the fourth quarter? the third quarter of last year? the next one. we’re looking at an environment very slow revenue growth. you can’t drive a lot of profit off that. i’m not saying stocks are overvalued, they’re not, fairly valued. it’s been 115 days since we saw a 10% pullback. we’re close to one. he is negative. tactically negative. home builders, industrials, that’s where you want to buy. for a lot of investors- a lot of people have been waiting for dips to come and they haven’t come, that’s thething. they have back in february 25th, a big pull back, down 9%,a great opportunity to buy. we did. industrials the same thing.you can find opportunities to pick up some stocks that havegreat long term stories. talk about housing, home builders a great story for that. long term story but you get these opportunities to buy into them.
Charlie Munger: Invert And Use “Disconfirming Evidence”
Charlie Munger is considered to be one of the best investors and thinkers alive today. His thoughts and statements on investment research, investment psychology, and general rational behavior are often incredibly insightful. Anyone can learn something from this billionaire investor and philosopher. Q2 2020 hedge fund letters, conferences and more If you’re looking for value Read More