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Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

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Lawrence McDonald: "How To Listen When Markets Speak."

Subtitle: Risks, Myths, and Investment Opportunities in a Radically Reshaped Economy.

Almost finished. The case he's making is cogent and crisply, sharply written. A quick read, though very meaty. His thesis is that smart investors, looking forward, must move from growth to value--- specifically into basic materials. Oil, gas. Gold, silver, copper, palladium, platinum.

We are in decline, economically. I have said as much for several years, myself. Some of the reason for it is that the world has emerged and grown and thrived, following WW II. We're not the 800-pound gorilla in the room which can throw its weight around the way the USA was able to do, decades ago. A big part of the decline, says McDonald, is geopolitics and overspending Inevitably, the gummint will NOT be able to literally pay down the debt, ever again. It's too massive. In order to handle it, the gummint will have to continuously roll it all over as it matures, and play interest rate games to help cover it.

McDonald has no use for economic sanctions, like the sanctions imposed on Russia and specific Russians, following the Russian invasion of Ukraine. (Crimea was previously stolen, annexed.) Russia has friends in other directions. Most are not even communist. Russia is still feeding raw materials to China so the Chinese can manufacture stuff. Gotta keep the power on. And they're not operating with any "Green Revolution" imposed upon themselves.

I was not surprised, in his treatment of that stuff in particular, that he simply ignored the ethical implications of not responding to the Putin-monster, and just letting him have his way. There is no investing conversation or essay or book which will go near anything to do with ethics. Obama, so I read, confronted Putin at a meeting of big-wigs, and told him flat-out: "We can do stuff to you." Granted, because of the multi-polar economic and political environment today, sanctions are proving to be as useful as trying to use your finger to push a string across the table.

Breathtaking quotations that gobsmacked me:

"44% of all US dollars ever created, were created in 2020 and 2021." Ya, that was the Covid era. But holy jaypers. DEVALUATION, much?????

"The US dollar has lost 93% of its value since the year 1900."
******************************************
McDonald includes summaries of some interviews he's had with some remarkably smart Shining Lights in the Investment Industry. I just finished up reading his account of a conversation with Charlie Munger. Final, distilled thoughts from that meeting actually lifted my spirits. I've made my share of mistakes in investing, but in broad terms, I could take some satisfaction, realizing I'd been doing these things by instinct, for the most part:

Charlie told him: "Trade and invest less. Sit back and wait for those top two or three opportunities that come along each year. Measure your level of conviction and allocate your capital accordingly. Above all, never trade or invest out of boredom or a desire to find something to do. Keep up your high level of passion for markets. Growing wiser is a combination of humility and diligent curiosity. Without the first, the second is useless."

Comments

  • beebee
    edited August 11
    @Crash,

    Thanks for this thread.

    I caught this interview that discusses some of his book's topics:

    https://m.youtube.com/watch?v=DVZpIrRXr4o
  • Thank you for the book summary.
  • msf
    edited August 11
    44% of all US dollars ever created, were created in 2020 and 2021. Ya, that was the Covid era.

    44% is about right, looking at M2. Such an increase is not unique. There have been other times, other situations aside from Covid, calling for monetary expansion. LBJ's "guns and butter" economy (1964 through 1968) boosted M2 by, oddly enough, 44% also.

    OTOH, the subsequent contraction in M2 (5% from April 2022 to Oct 2023) appears to be unique.

    Source: FRED M2 interactive graph

    "The US dollar has lost 93% of its value since the year 1900."

    Both of the quotes are designed to shock (or as you colorfully expressed it, to gobsmack). Not to inform or enlighten.

    A 93% decline in value in 125 years is an annualized inflation rate of 2.1%, just what the US is targeting. In comparison, a pound sterling in 1900 would have the purchasing power of just 0.6 pennies (UK) in 2024. A decline of 99.4%.
    https://www.officialdata.org/uk/inflation/1900?amount=1

    That's what an economy in decline looks like.
    image

    This is what the US economy looks like:
    image

  • @Crash I'm curious, with the many 1,000's of books written; and now, all of the Podcasts 'providing knowledge'? of the markets and the 'future' of investing; WHY choose this person for exposure here?
    Many of us here recall, after the U.S. equity markets were in the tank during the '70's and then the 'upward pop' that began in August of 1982. Books, especially paperback books were everywhere, expressing any number of markets scenarios and 'where' to invest for whatever reasons the author(s) presented.

    Being 'prescient' is a special gift and is usually not known or understood; until after the facts are presented.

    Thank you.
  • edited August 11
    @catch22. Another MFO participant mentioned the book. It's on his to-do list, to read the thing. Seems to me, he bought his copy. I was pleasantly surprised that my public library has a copy. :). Maybe I beat him to the punch? McDonald writes a regular column which he calls "The Bear Traps Report."

    image
  • bee said:

    @Crash,

    Thanks for this thread.

    I caught this interview that discusses some of his book's topics:

    https://m.youtube.com/watch?v=DVZpIrRXr4o

    I appreciate the link. I'm listening right now. Interesting. They are talking about stuff in the book, to start with, which is foreign to me, so I had nothing to say about it. Arbitrage and A.I.

    Now they've moved on to talk about what his "Bear Traps Report" is all about....And now, McDonald was asked about the central thesis of his book.

    Thanks! Getting it from the horse's own mouth! Gotta run now, but I'll come back to it.
    *Sadly, his audio quality is poor. I turned on the captions. +1.
  • @Crash. …that was me. The “Psychology of Bubbles” was interesting, and that was the basis for my earlier comment regarding this book.

    “One key lesson to take away is that for investors, bubbles are an incredible opportunity to make money—as long as you recognize when the sell-off is no longer a buying opportunity.”

    Which is pertinent perhaps to the market of current times. I no longer feel compelled to chase the absolute highest returns, and I believe there’s a lot of risk in the S&P500 currently.

    As I read on the blog”A Wealth of Common Sense”, “only an idiot gets rich twice”.

  • PRESSmUP said:

    @Crash. …that was me. The “Psychology of Bubbles” was interesting, and that was the basis for my earlier comment regarding this book.

    “One key lesson to take away is that for investors, bubbles are an incredible opportunity to make money—as long as you recognize when the sell-off is no longer a buying opportunity.”

    Which is pertinent perhaps to the market of current times. I no longer feel compelled to chase the absolute highest returns, and I believe there’s a lot of risk in the S&P500 currently.

    As I read on the blog”A Wealth of Common Sense”, “only an idiot gets rich twice”.

    Glad you chose to stop and comment. "Only an idiot gets rich twice." LOL. Sounds almost like a Yogi Berra-ism. And yes, I specifically recall that line from the book, too--- regarding bubbles. I'm not good enough to spot that sort of thing, and then get out in time, "before the fall." So I just don't do it. It's not in my own playbook.
  • @msf. Your contributions are always valuable. Thanks for what you've added!
  • I read this after I read his first book about the collapse of Lehman "Colossal Failure of Common Sense " which is very very good. While I suspect he was not as prescient in 2008 predicting the collapse of his firm as he now says he was, he does seem to have clearly understood how far out there Fuld and the bosses were.

    Current book is a good antidote to the AI craze and outlines the reversal of Globalization.

    The Bear Trap Report has dozens of ideas and sample trades but you need to pay a big $$$ to get the weekly report
  • edited August 12
    So, L. McDonald is convinced that we've turned a corner in the economic cycle. Systems and "market forces" work like a pendulum, from the point of view of "The Big Picture." There has been a rush to dive into Big Tech, but that means other sectors have been "starved" for investors' money. Therefore, Basic Materials, Industrial Metals, Precious Metals and Oil and gas or NGL or even COAL are the places to put your money. He claims that we ought to be "long" in those items, those sectors.

    OK, that's his case. It still seems prudent to diversify. And I'll volunteer to say that I'd rather NOT be in stocks which are Exploration & Production oil/gas companies; that's a boom-and-bust industry. Instead, I've chosen a midstream MLP (ET) and an oil drilling pipe-maker, with a solid worldwide reputation. (TS.) As for the metals, I'm watching RIO, but not buying--- yet. ET is a bit more than 5% of my total. And TS is less than ONE percent: A deliberate "afterthought."
  • The saying, "In Russia, it is very difficult to predict the past," is now increasingly applicable everywhere.
    If its difficult to predict the past, what chance do I have to be *convinced* about the future.
  • Devo said:

    The saying, "In Russia, it is very difficult to predict the past," is now increasingly applicable everywhere.
    If its difficult to predict the past, what chance do I have to be *convinced* about the future.

    Yes. All those re-writes of history, the Ministry of "Truth," a la 1984. Tass.

    And the current Russian regime is a bunch of mafia gangsters, supported by the military and the Kremlin apparatus. Increasingly applicable everywhere, indeed. Agreed. Still, I take his point that it's not a great idea to plow full steam ahead into a crowded trade. (Lots of us here do not trade; rather, we invest.) I personally love it when I discover a quality, neglected company that's not a big market mover.

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