James Montier does MMT

It seems that a lot of analysts have caught onto the MMT framework popularized by the late economist Wynne Godley and made topical in this downturn by Rob Parenteau of the Richebacher Letter. We have seen Martin Wolf use Godley and Parenteau’s financial sector balance approach to dissect both the Japanese and European macro-economy. More

Spinoza, Descartes and suspension of disbelief in the ivory tower of economics

Here’s something I want to run by you on behavioural economics and the way economic issues are being debated in the blogosphere. We are witnessing an implosion of long-held belief structures that go the core of how we believed our economic system functioned. You heard Alan Greenspan admit this after the financial system collapsed in

Montier: Was It All Just A Bad Dream? Or, Ten Lessons Not Learnt

James Montier, a member of fund manager GMO’s Asset Allocation Team, examined whether we learned anything from the market declines of 2008 and early 2009. His answer is, as you would expect, not a lot. Below, is an outline of the ten lessons not learned followed by a link to the full paper. It’s a

Bank leverage: forever blowing bubbles part two

You have heard me use the phrase “liquidity is seeking return” to describe the increase in the price of riskier assets due to monetary stimulus. The Bloomberg News video clip below points to an increase in lending for buyers of riskier loans like high yield and mortgage bonds. The blurb below from the associated article

China’s present growth story is built on malinvestment

Late last year, I predicted that China, as a major exporter to the West, would feel a huge impact from the meltdown in the global economy, taking it’s growth rate down to 2% (See Top ten predictions for the 2009 global economy). Forgetting about the fact that data are highly suspect in China, I see

Links: 2009-06-28

Bank of NY Mellon sees writedowns, 2009 profit: report – Reuters This is what I expect many banks to be saying later this quarter. Is Obama Edging Towards Bush-Like Indefinite Detention? – Michael Scherer, Swampland This is very disappointing. We now have some serious political compromises on finance, civil liberties, health care, and the war

Does Ben Bernanke blow bubbles too?

During Alan Greenspan’s tenure at the helm of the Federal Reserve, he was often accused of using monetary policy to target asset markets so as to keep the party going.  In short, Alan Greenspan was seen by many, including myself, as the bubble blower-in-chief. All of this came to an end with the very hard

Fix the real economy first: lessons from James Montier

James Montier has a very good piece out via John Mauldin ([email protected]) on the need for real economy stimulus over financial sector stimulus. The quote I find most memorable goes to the heart of our debate about the financial system: Investors seem to be rather excited about banks posting profits at the moment. Frankly, if

James Montier sees “deep value” in markets – he is bullish

James Montier, a market guru usually known as a permabear has turned bullish of late. In keeping with my bullish sentiments, I have posted his thoughts below according to Bloomberg News.

That said, I should always qualify my ‘bullishness.’ I still believe we are in a bear market and that equities will go lower on an inflation-adjusted basis. Investing only in index funds is a bull market strategy to be avoided like the plague. However, there are many stocks trading for 3 and 4 times earnings like Valero Energy or Chevron that deserve a look – Montier obviously agrees. This is shaping up to be a value investor’s dream

News round-up: 26 Nov 2008 – Politics, Economy and Markets

Politics As the time for Barack Obama to take office moves ever closer, his policy team is coming into view. Obama has appointed a slew of economic advisors including Tim Geithner, Larry Summers and Paul Volcker. In addition, he looks to have filled out the key positions in his White House staff and to have

The Road to Revulsion

This newsletter from John Mauldin arrived in my inbox this morning. If you haven’t read his newsletters they are very good, including those from Guest commentators like this one from James Montier. I will add the text in full. It is quite long. In a future post, I’ll give you my thoughts on bubbles and