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Pearls of Wisdom 7: Japan handled stasis the way they could. No sure if others can handle as well.
You need economic action. What is big risk using unemployed people to build big electricity grid? And we need to change our laws so that festering blobs of local policy making can be overridden. You may not like Chinese, but when they need to do something THEY DO IT. India has too much due process, they copied England, and it was not a good idea. Some places have sacred cows, can’t fix the traffic due to the cows downtown. We need some amendments to our religious ideas. That said, in big scale of things, there is a lot to be cheerful about.
Q5: CM How fast will improvements come?
CM: We have some sober facts. Japan had boom, and they put full resources of government into fixing it. But they got stasis, not growth. They spent an immense amount of money, and they got only stasis. That would be terrible here, and we have way more trouble. I would predict that it would very awkward to have no GDP growth per capita in USA. No economist in world predicted it for Japan 10 yrs ago. I think Japan is an interesting and threatening example. I don’t know if we will do better. Japan stimulus was worthless in some ways, every pothole got filled 3 times. They didn’t do highly useful things. If we create a big electric grid I think that is best way to go. I have never taken a course in economics, and here I am speaking about Japan. I’m not apologizing. I’m trying to do it my own way.
Pearls of Wisdom 8: On Stocks: Anyone who promises miracles should be shown the door.
Q6: CM: Current stock prices?
CM: Warren said this weekend that the best year he ever had was a recession when economy going down and stocks were going straight up. If you wait, you’ll miss it. I’m willing to buy common stocks at current prices with long term money. Coca-Cola and WFC I would buy today. I wouldn’t expect miracles – no doublings. Anyone who promises miracles should be shown the door. If it promises high rates of return and has high commissions don’t read it. You shouldn’t wait for agony to be over before buying common stocks. I for myself am pretty well invested. If there is a big bottom out there, I’m going to miss it. All these things are pretty obvious. I think we are lucky in that we have a stimulus. There is a way of doing this [ed: electrical grid investment]. I have been quoted figures of 7-8% of power losses in big systems over long distances. I don’t think we ought to care we are leaving it. Iowa – 20% of electricity is from wind. All kinds of things can be done.
Pearls of Wisdom 9: On Financial Industry: Some things Should Stay Boring
Q7: CM: Big issue – what kind of re-regulation should come to financial industry?
CM: I don’t know why something that can’t fail should be allowed to be anything other than a pretty boring business. That is what it used to be. Partners didn’t make a ton of money, and they were quite conservative. They were old fashioned, they had seen the 1930s. We don’t need a system where every bright young man needs $8bil to play with financed daily in the repo market. I think we should take away all the activities that aren’t boring. They should do moderate things, stock-broking, etc. That doesn’t take a huge amount of capital and does not present huge dangers. If someone wants to go crazy, I would close the system for him too. Massive leverage is bad. We don’t need options exchanges which have made margin rules uncontrollable. We don’t need credit default swaps. If someone wants to be gamey, he can operate as a hedge fund, and take in only sophisticated investors. But I would not reward the ballooning of the operations.
Pearls of Wisdom 10. Do you really need to announce to friends at country club that daughter marrying a hedge fund professional, and this is the highest rung?
A man does not deserve a lot of pay because he balloons a balance sheet at a tiny spread. An idiot can do it, and many do. But you can imagine how many would scream in London and NY. But if I were a despot, that is what I would do. I would run like Singapore. I wouldn’t run a world with 10-15% of engineers trying to make money by outsmarting other people. What purpose does this serve? The world worked fine in the 1950s. Obama intends to reduce the power of NYC, and I admire him for saying it. I don’t think he’ll have guts to reduce it as much as I would. We’ll see. Do you really need to announce to friends at country club that daughter marrying a hedge fund professional, and this is the highest rung? It is not pretty to take money away from people because you are a better card player than they are, and can lure them into the game and take a croupier fee. We need to protect the body politic, and it would be constrictive at start. [Wolfenhouer] is an economist I like a lot, he thinks like me.