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DISCUSSION THREAD: Episode 25 - Charles Biderman

  • amkc
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2 years 5 months ago - 2 years 5 months ago #1 by amkc
Charles doesn't pull any punches in this one. It was also pretty interesting to hear about his ETF strategy. It sounds like a harmony of fundamentals and technicals. To what degree do you guys integrate both practices (or at all)?
Last edit: 2 years 5 months ago by ErikTownsend.
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2 years 5 months ago - 2 years 5 months ago #2 by Pepe le Moko
Replied by Pepe le Moko on topic DISCUSSION THREAD: Episode 25 - Charles Biderman
I'm thinking about your spin on the End Game. What if there isn't any "End Game". That is to say what if in the words of Ray Dalio we are in the midst of a "Beautiful Deleveraging". See this video for his take on things:

This is supported by the current debt/GDP chart:

He said that Debt/GDP peaked in late 2008 and so it seems. This is one of the pivotal events of our era. Anybody remember this?

"If you take anything away from this presentation, I hope that it is this one chart."

Why didn't he divide them? Is it because the deleveraging idea doesn't fit with the hyperinflation scare mongering?

I shouldn't rag on Grant Williams too much. I have been "bracing for impact" for six years as the stock markets sail higher and higher. In any case the Fed can't juice the engine any more. Valuations are off the charts:

The issue is that the Fed has hit it's target. This is the GDP situation:

The Fed measures what is called the "Real Potential GDP". They then try to twiddle dials and flip switches until the red line hits the blue line. That has now happened. This is a chart showing how close they came:

Close enough for government work ;-)

What that means is the the economy is going full blast. Employment is as "full" as it is going to get. Does it seem like things are still not right? The problem is that the blue line is not keeping up with the green line. I was going to post a chart showing the size of the gap, but you can eyeball it.
This gap is a puzzle to economists and is the main reason that I ( still) think that hyperinflation is in the cards ( in the distant future). Larry Summers thinks this gap is caused by " Secular Stagnation ". Krugman wants to juice the economy hard to close the gap. You can bet this will happen only after conventional methods have been exhausted.
Bond prices in the US have quite a ways to drop before any thought of negative interest rates is seriously discussed.

Have you seen the article on Secular stagnation by FOFOA? He does a good job with it.

Biderman seems like one of the more astute thinkers out there. He had some plan where he collected payroll tax info before the unemployment report. This sounded good, but I cannot find anything on the web about it and he took his youtube channel private.
Last edit: 2 years 5 months ago by Pepe le Moko. Reason: blog software doesn't like FRED pngs

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2 years 5 months ago #3 by ErikTownsend
Replied by ErikTownsend on topic DISCUSSION THREAD: Episode 25 - Charles Biderman

Thanks so much for your excellent, chart-rich posts! And for sticking with us as we sorted out the technical glitches that previously prevented posting multiple graphics.

I agree that the blue line's disconnect with the green line is central, but the red line isn't really (IMHO) nearly as close to the blue line as the government figures depict it. The output gap was widening so they changed the rules a couple years back and Presto! Now it's narrowing...

The one place we seem to disagree is hyperinflation. Systemically important (and certainly, the de-facto reserve currency) simply don't hyperinflate. There's no historical precedent, nor is there a rational argument. Secondary currencies most assuredly do, but USD hyperinflation simply isn't a credible risk IMHO. This is definitely an important toipic, though. Perhaps we should cover it after the guest interview in an upcoming show.


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2 years 5 months ago - 2 years 5 months ago #4 by Pepe le Moko
Replied by Pepe le Moko on topic DISCUSSION THREAD: Episode 25 - Charles Biderman
You keep asking these guests about "The end game". The implication is that Central Banks have some limit to the amount of debt they can take on. It is hard to have this discussion without talking about Hyperinflation, but I am sensing that you are foreseeing a future full treatment on the subject and you don't want to discuss it right now. I'm good with that. The implication is that you think that something like Dalio's "Beautiful Deleveraging" is what is happening. This is, by the way, pretty much what Steve Keen said when you interviewed him. The US is much better set to do this than most other places. The enormous and socially counterproductive student loan burden can be wiped out with the stroke of a pen. This would constitute a debt jubilee. Can you see Trump or Clinton doing that? Or any Capital hill politician?

The other issue you brought up is the unreliability of official statistics. The poster child for this is the Consumer Price Index. Everybody wants to find fault with the CPI. Charles H. Smith prefers the burrito index . Peter Schiff thinks a better inflation index would be the cost of magazines . The shadowstats guy says that the government has been systematically tampering with the CPI ( and other data ) for decades and it now diverges radically from official figures. All of these guys by the way think this will end in fire. I used to agree, but then I found the Billion Price Project . The BPP measures online prices in real time and it very closely tracks the official CPI. To make a long story short, I don't think that the government statistics are being "cooked" to give the impression of a radically different picture from reality. The changes in reporting we see in GDP, employment and CPI are designed to cope with changing conditions and to keep the stats relevant and up-to-date ( mostly ).

Thinking about it right now, the idea of potential GDP is stupid and uncalculatable ( incalculable?). A better metric might be just trying to calculate future GDP ( much like that green line above.). This guy does that here :

He says that Things Are Fine Here.

Some say the world will end in fire,
Some say in ice.
From what I’ve tasted of desire
I hold with those who favor fire.
But if it had to perish twice,
I think I know enough of hate
To say that for destruction ice
Is also great
And would suffice.
Last edit: 2 years 5 months ago by Pepe le Moko. Reason: incohate babbeling

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2 years 5 months ago #5 by ErikTownsend
Replied by ErikTownsend on topic DISCUSSION THREAD: Episode 25 - Charles Biderman

You bring up some really fantastic points here. Let me clarify a couple of things:

I am not intentionally avoiding discussion of large-scale inflation because of existing plans to cover it more extensively on a future show. You're giving me a wee bit too much credit there. I am in strong agreement that an analysis of high inflation and hyperinflation risk are very much needed, but I'm ashamed to confess that no, we don't have a brilliant plan already in the works to address them.

This all ties back to some mental wrestling I've been doing about the show's format. I could easily do a full-length show (with no guest) on end-game, inflation, hyperinflation, etc. But we're strongly commtited to bringing you a new guest each week. Me doing all the talking for the entire show would be enough to turn ME away, not to mention a large component of the audience who comes here primarily for our guests. We've done it a couple of times already (Bottom in Oil Prices Part II and Accredited Investor Academy Part I), and our download statistics clearly evidence that the listener base prefers a fresh guest each week.

We tried changing things up on this last show in "postgame" (what we call the content AFTER the featured guest interview). In the past we've used that time for Aaron to ask me questions about the featured interview itself. This last time we covered Greenspan's dollar shortage comments and my own views on why the most important question to focus on is what (other than inflation) could tie CB's hands. I welcome feedback, but my own take listening was that this episode was a little long, and even so, we barely touched those topics. It felt to me like doing guest interview + our own topics was "a little too much for one recording".

An obvious option would be to produce a 2nd hour-long podcast each week with just Aaron and me. Another popular financial podcast uses that format and it works well. Problem is, that would double our already over-budget production expenses. Sorry, as much as I'd enjoy doing the extra content, we don't have any revenue stream to cover another show every week.

I suppose we could take on the Inflation topic in pieces, and do a little bit in postgame across several shows. We'll think about that option. Meanwhile, we welcome further input from all our listeners...

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