READ THESE BOOKS
By Doug Casey
January 4, 2006 From International Speculator: http://www.caseyresearch.com/learnMore.php?pubId=1 No sooner did I remark in my October 2005 review of John Ross's Unintended Consequences and Boston T. Party's Molôn Labé! that I rarely read financial books than I find myself reading and reviewing two more. Since these two also were written by very old friends, I felt compelled to read them on general principle-but also because I know the authors to be astute observers of markets and, more important, the human condition. First is Becoming Rich, by Mark Tier (St. Martin's Press, $24.95). Years ago Mark founded the World Money Analyst in Hong Kong. My take is that, as he grew more philosophical, he became less interested in what happens in the markets and more interested in why some people are so much better than others at capitalizing on those events. Like only a few other practitioners of the trade, he searched for the secret of winning the battle for investment survival. In the current book, he reports his judgment (a correct one, in my view) that it doesn't make a lot of sense to try to reinvent the investment wheel. Since many smart people have been trying to beat the market for a long time, the smartest approach is to stand on the shoulders of the giants who've succeeded (rather than scurry with all the Lilliputians looking for the next newest and greatest tout). Mark's decision to analyze the methods of Buffett, Icahn and Soros is good, in that their modi operandi are clear and explainable. (I would have added only John Templeton.) This book is not, thankfully, a hagiography of the men; it's not concerned with their personal lives. And why should it be? As I've pointed out in a previous issue of this letter, both Buffet and Soros are idiot savants: geniuses at one thing, morons at nearly all else. But who cares if your plumber (or fund manager) believes in fascism or crop circles, so long as he's good at what you're paying him to do? Tier analyzes and formulates the methods these men developed to make themselves multibillionaires through investing. It's an excellent book. I liked it, learned from it, will profit through it-and urge you to read it. After studying their methods, you might wonder whether Buffett or Soros would ever buy the kind of resource stocks we're in now. Buffett almost certainly would not. Even though his father was a well-known gold bug and Berkshire Hathaway owns one of the world's largest hoards of silver (129.7 million ounces, bought in 1997 and 1998, at around $4.40), mining stocks, by their nature, wouldn't meet his standards. Their earnings range from consistently negative to non-existent to completely unpredictable. And their balance sheets are jostled by radically fluctuating metals prices and the largely unpredictable results of what amounts to a perpetual Easter egg hunt over barely accessible ground in often bizarre and unwelcoming countries. Soros, on the other hand, has dabbled in resource stocks. There are many paths up the mountain. As highly as I recommend Tier's book, Bill Bonner's (with his co-author, Addison Wiggin) is even more to my taste in reading. Empire of Debt (Wiley, $18.45 on Amazon.com) is a completely different kind of book-not, strictly speaking, an investment or economics book at all. Bonner's and Wiggin's thesis is that, over the last century, the U.S. has transformed itself from a republic of honest yeoman into an empire. It didn't happen through malice and aforethought but through what amounts to (with a nod to Marx) historical dialectical necessity. It's the nature of nation states, if they have the basic makings, to lord it over their neighbors. In the past (I go into this in considerable detail in IS XXII, No. 7, of July 2001, on Islam), empires operated as profitable enterprises with a simple business plan. 1. Attack a weaker or less determined neighbor and steal all his gold, cattle and women. 2. Repeat as necessary, at least until you become old and fat enough for someone to return the favor. As Bonner and Wiggin point out in elegant prose, via many exquisite examples, empires necessarily have limited (although in some instances very long) life spans. This brings the authors to the American Empire, which is something of an anomaly. It doesn't conquer countries for fun and profit (although it's fun for some people, such as Teddy Roosevelt, and profitable for others such as, say, bigwigs at United Fruit in the past and Halliburton in the present). Like the none-too-bright bookkeeper who embezzled the accounts payable, the American Empire has it backwards. Instead of enriching itself through honest rapine, it lords at a loss. Worse, this empire isn't footing the bill out of current earnings, nor even out of accumulated capital. It's operating on debt-financed by the kindness of strangers who can be counted on no more than one day at a time. Worse, the money the American Empire is borrowing comes in good measure from the Chinese, who at some point may be identified as the enemy du jour. This book doesn't offer financial advice per se. That's not a failing, in my opinion, because the value of such advice is necessarily fleeting. What this book really offers is an analysis of American and world history. And since the analysis is sound, you're likely to draw the same conclusion I have: It's better to own gold than the paper of a country that seems to be going on tilt. I like thoughtful books, books unmarred by an author's pretense of being the world's leading expert deigning to speak ex cathedra. I enjoy the sense of dealing with an intelligent, intellectually honest person who's hunting for the truth. He's the one who'll explore the neglected byways and alleys of thought. He doesn't need the comforts of conventional wisdom, so he's ready to find the truth where it lies, whether in the unthinkable idea or in an antiquarian bookstore's forgotten volume. These authors are my kind of scribblers. You'll find that Empire of Debt draws on their wealth of obscure knowledge and builds on their intellectual courage. It debunks the humbug that everybody thinks they know but just isn't so. It's really a delight to see stupidity exposed on every page. I suspect George Carlin may have collaborated secretly in writing this book. It's alone worth the price of admission to read the book's several pages on the now celebrated columnist Thomas L. Friedman. Years ago, before he became famous for his almost uniformly idiotic prescriptions, I wrote several reviews of his columns. I simply couldn't believe that even the New York Times would publish such inanities. What we have in Becoming Rich and Empire of Debt are two quite different types of book. Which is more valuable? That's a question best to address obliquely, by indirection, parable, Zen koan or the like. In hope of doing so, I'll tell you a true story. I recall asking my father, many years ago, his opinion on some matter of world affairs. He was a man of broad knowledge and experience but few words-at least when he was talking to me. His answer was: "It's all a matter of economics." Cryptic, in that it didn't answer anything, but profound, in that it answered everything. A couple of years later I asked him another question, on another big topic. His answer was: "It's all a matter of psychology." Both answers were absolutely right, of course, and equally applicable to every field of human action. It would be so much neater if I could just leave you with that but, at about the same time I received the "psychology" answer, I was talking with a Sgt. Major Max Trujillo about a related question. Max was quite philosophically inclined, especially for someone with his background. His answer was: "It's all a matter of semantics."
Editor's Note: Doug Casey is a best-selling author and Chairman of Casey Research, LLC., publishers of the International Speculator, one of the nation's oldest and most respected publications dedicated to identifying investments with the potential to double or better within a 12 month time frame.
Bill Bonner and Addison Wiggin's new book, Empire of Debt, is available now. Visit Amazon.com for your copy: Empire of Debt: The Rise of an Epic Financial Crisis |
