Continuing coverage, we're posting up notes from the Value Investing Congress. Below are notes from the presentation of John Mauldin of Millennium Wave Advisors. His talk was
entitled 'How Will the Elections Affect the Endgame? Finding Value in an Upside Down World.'
He's not a stock picker, but a macroeconomic thinker and writer (author of "Thoughts from the frontline" a newsletter.
Differences between uncertainty and risk: Uncertainty is the "unknown
unknowns" the term used by Rumsfield. The things we don't even know we
don't know. Investors are obsessed with risk. We can model it, it
makes us feel like scientists. We have more ways to quantify risk, yet
me walked into 2008 missing the obvious. We think we can model risk.
Surprises aren't only the bad things, but the good things (like the
invention of the iPhone? or the steam engine)
In 1850 the number one job in the USA was a farm worker, in 1900, it was
personal servant. The cheapest thing was to hire a laborer to do the
hand labor. Uncertainty comes in all forms. The problem with
uncertainty is you can't model it.
Today
acclaimed money manager Stephen Leeb spoke with King World News about
the ongoing war in the gold market near the $1,800 level. Leeb also
spoke about how it will end. Here is what Leeb had to say: “There really
has been a battle just below the $1,800 level on gold. It’s fierce,
and it’s ongoing. Some people will say there is some government or bank
selling to keep gold in check. Others will say it’s just normal
profit-taking as you get toward a round number.”
newworldeconomics.com / April 15, 2012: Foreign Exchange Rates 1914-1941
The basic story of this time period, 1920-1940 is something like this: A lot of currencies left the gold standard during WWI, including the U.S. to a small degree. Some then had hyperinflation in the early 1920s. During the mid-1920s, these currencies are repegged to gold. The Great Depression begins. I thought Germany was the first of the big countries to devalue in August of 1931, but it turns out that was wrong. Germany’s government defaulted on its debt that month, and imposed heavy currency controls, but the currency was not (officially) devalued. Thus, Britain was the first of the big countries to devalue, in September 1931. Because the British pound was the world’s premier international currency, much like the dollar is today, many countries followed Britain’s lead and devalued simultaneously or soon after. Japan followed in December 1931, basically to return the yen exchange rate to its pre-devaluation level.
These are annual averages, which unfortunately do not capture some of these events well. The September 1931 devaluations, for example, get averaged into 1931, so the 1931 averages show only a slight decline for the full year. The U.S. devalues in 1933 of course, and repegs to gold in 1934 at $35/oz.
I suppose some of the points made here are that most countries devalued their currencies around the late 1931 timeframe, if not earlier in some instances. This put “beggar thy neighbor” trade pressures on all the non-devaluing countries. When the world’s premier international currency, in this case the British pound, is devalued, usually there are a lot of copycats. The result is that nearly all countries also devalued, if only to restore exchange rates to somewhere near their pre-devaluation levels.
I’ll have the remainder of the countries next week.
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In
the following video commentary Russian General Konstantin P. Petrov
(Ret.) asks some interesting questions and includes his own thoughts
(perhaps the non-official Russian position) about a variety of topics
that include the end of US dollar hegemony, the orchestration of the
9-11 attacks to engage America in a mid-east war, the puppeteers behind
the politicians and the coming premeditated collapse of the United
States of America as we know it.
