Here is a holiday note from one of my favorites, Marc Faber:
A very Merry Christmas and a Happy New Year to all our website visitors.
First, I wish to thank all our website visitors for being part of a group of people who look at the world with
scepticism and are intellectually demanding. This forces me to maintain as high a standard for our
comments as I am capable of. Every day, I receive a great number of emails, some of which contain
enlightening comments or challenging questions. Naturally, I don’t have all the answers, since only the
ignorant have an answer for everything, and it’s usually only time that reveals the outcome of any problem or
issue. But even once an outcome is known, we still don’t know what would have occurred if we had taken a
different course of action. Take, as an example, the war in Iraq. As my readers will probably know, I was
opposed to the invasion and I still believe that it was a mistaken course of action. But I sincerely hope that
future events will prove me wrong and that, as a result of the invasion by American forces - for whom I feel very
sorry for the casualties and pain they have endured - in time, the Iraqi people will have a far better life than
before. Only then can we consider the invasion to have been a success and worth the heavy casualties of the
coalition forces, which undoubtedly must bring a lot of grief to the families of those soldiers who have been
injured or killed. But my point is that, even if the invasion proves to be a failure, we still wouldn’t know what
would have happened if it hadn’t taken place. Possibly, if Saddam had remained in power, the outcome would
have proven to be far worse and led to a far larger number of casualties.
Every day, we are confronted with issues and problems for which there are no simple or clear answers. Of
course, I am privileged in the sense that I can draw on the knowledge of many extremely bright economists,
strategists, businessmen, political observers, fund managers, and even writers and poets, who all make a
contribution to my, and also my readers’ knowledge. In fact, one of the commentaries I enjoy the most is sent
to me every Sunday by Dr Mardy Grothe, the author of a highly recommended book entitled Never Let a Fool
Kiss You or a Kiss Fool You: Chiasmus and a World of Quotations That Say What They Mean and Mean What
They Say and of Oxymoronica: Paradoxical Wit & Wisdom From History’s Greatest Wordsmiths, to be
published in March 2004 (www.chiasmus.com and www.oxymoronica.com). Chiasmus is a reversal in the
order of words in parallel phrases, such as “one should eat to live, not live to eat”, whereas Grothe defines
oxymoronica as “a collection of apparently illogical or self-contradictory observations that contain deeper
meaning or hidden truths”. In Grothe’s new book, the reader will find an anthology of quotations that are
noteworthy because they are false on one level and true on another, such as when Ava Gardner said, “I am
deeply superficial.” According to Grothe, “in normal discourse, ‘deep’ is the opposite of superficial. But when
paired together, the marriage of opposites arrests our attention and tantalizes our thinking. Such is the nature
of all well-constructed oxymoronic observations.”
Dr Grothe’s work was introduced to me by Dean Le Baron, of Batterymarch fame, a few years ago, and the
good doctor has kindly given me permission to use here some of the examples he has collected over the
years. In the following I shall use some of his chiastic and oxymoronic phrases and mix them with some other
quotes that I have collected. On the subject of war, since we were just discussing the dilemma posed by the
Iraqi occupation, many illustrious people have made insightful pronouncements. William Tecumseh Sherman
warned, following the American Civil War, that “it is only those who have neither fired a shot nor heard the
shrieks and groans of the wounded who cry aloud for blood, more vengeance, more desolation”. Karl von
Clausewitz observed that “there is a point beyond which perseverance can only be termed desperate folly”.
And during the Vietnam War, Henry Kissinger made the following chiastic observation, which has some
relevance to the current situation in Iraq: “The conventional army loses if it does not win. The guerrilla wins if
he does not lose.” Even the comedian and best-selling author Will Rogers had a relevant comment regarding
the invasion of Iraq: “You can’t say civilisations don’t advance - for in every war they kill you in a new way.”
As far as terrorism is concerned, we should remember Pearl S. Buck’s words: “When hope is taken away
from people, moral degeneration follows swiftly after.” And to complete our quotations on war, here is H.G
Wells: “If we don’t end war, war will end us.”
On leadership, the 17th-century mathematical genius Blaise Pascal, who at the age of 20 invented a
revolutionary calculating device for his father which many regard as the first digital calculator, made two
remarkable oxymoronic observations: “There are only two kinds of men: the righteous who believe
themselves sinners; and the sinners who believe themselves righteous” and “Men never do evil so
completely and cheerfully as when they do it from religious conviction.”
Further on the subject of religion, Robert Ingersoll (a major force in the development of the Republican Party
and one of the greatest orators of his age) made the following chiastic observation: “I am not so much for the
freedom of religion as I am for the religion of freedom.” On the same subject, George Bernard Shaw, who won
the Nobel Prize for Literature in 1925, remarked: “I’m an atheist and I thank God for it.” On the subject of
leadership, his view was: “He knows nothing and he thinks he knows everything. Clearly, that points to a
political career.”!!! On politics, Paul Valery noted: “Politics is the art of preventing people from taking part in
affairs which properly concern them.”
In terms of investments, I hope that all my readers had a good year, as most asset classes, with the
exception, of course, of the US dollar, increased in value. But as George Bernard Shaw put it: “The most
important thing about money is to maintain its stability; You have to choose (as a voter) between trusting to the
natural stability of gold and the natural stability and intelligence of the members of the Government. And, with
due respect to these gentlemen, I advise you, as long as the Capitalistic system lasts, to vote for gold.” And
since I am continually asked for investment advice, let me remind our readers of Diderot’s words: “The best
doctor is the one you run for and can’t find.” Jean Jacques Rousseau had this to say: “The ability to foresee
that some things cannot be foreseen is a very necessary quality.” And just in case some of my readers didn’t
have a good year in terms of their investments, let me remind them of what Will Rogers said: “Good judgment
comes from experience and experience comes from bad judgment.” Moreover, since behavioural finance is
back in fashion, don’t forget that, according to Edmund Burke, “All men that are ruined are ruined on the side
of their natural propensities.” Regarding one’s ability to forecast the future, we should never forget that, as
Mardy Grothe wrote, “Illusion is one of the most pervasive realities of life” and “The greatest self-deception is
to believe oneself free of self-deception.”
Dr Grothe’s comments are particularly applicable to our Fed chairman, Alan Greenspan, who, in 1966, made
the following comment regarding the speculative boom of the late 1920s:
The excess credit which the Fed pumped into the economy spilled over into the stock market, triggering a
fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and
finally succeeded in breaking the boom. But it was too late: By 1929 the speculative imbalances had
become so overwhelming that the attempt precipitated a sharp retrenchment and a consequent
demoralizing of business confidence.
In Gold and Economic Freedom, Greenspan wrote “... that gold and economic freedom are inseparable, that
the gold standard is an instrument of laissez-faire and that each implies and requires the other”. Lacking
much intellectual integrity, Alan Greenspan was never a great forecaster either. My friend Bill Fleckenstein
recently quoted Greenspan as saying, on January 7, 1973, two days after the stock market had peaked out
and as it began a two-year decline that would see its value slump by 50%: “It is very rare that you can be as
unqualifiedly bullish as you can be right now.” Greenspan would have been well advised to remember that,
according to Bertrand Russell, “the degree of one’s emotion varies inversely with one’s knowledge of the facts
- the less you know, the hotter you get”, as well as Winston Churchill’s view, which he expressed in a
discussion: “I think we differ principally in that you assume the future is a mere extension of the past whereas
I find history full of unexpected turns and retrogressions.” Voltaire thought that “doubt is not a pleasant state of
mind, but certainty is absurd”. Along similar lines, our friend Peter Bernstein wrote: “In their calmer moments,
investors recognize their inability to know what the future holds. In moments of extreme panic or enthusiasm,
however, they become remarkably bold in their predictions; they act as though uncertainty has vanished and
the outcome is beyond doubt. Reality is abruptly transformed into that hypothetical future where the outcome
is known. These are rare occasions, but they are also unforgettable: major tops and bottoms in markets are
defined by this switch from doubt to certainty.”
In 2003, momentum investing and trend following was back in fashion, as is evident from the recent strong
performance of semiconductor stocks, and of companies with either extremely high valuations or no earnings
at all. But as Lord Cairncross, a Fellow of the Royal Statistical Society, observed, “A trend is a trend, but the
question is when will it bend? Will it alter its course due to some unforeseen force and come to a premature
end?”
At a recent conference, a friend of mine, whom I regard as one of the smartest fund managers I have ever met,
told me that he had had a “bad year”, having been too bearish. After maintaining short positions for too long,
he eventually closed them out at significant losses. I believe that his investment misadventure in 2003 mirrors
the relative underperformance of many hedge funds, which had large short positions in high-tech and
telecommunications stocks over the last 12 months. I hope that my friend will find some consolation in the
words of Mark Twain, who wrote: “It is strange the way the ignorant and inexperienced so often and so
undeservedly succeed when the informed and the experienced fail.”
A financially prosperous year aside, I hope that all our readers also enjoyed good health and found
happiness, and that 2004 will bring them much the same. Personally, I had a satisfactory year, although I was
saddened by the deaths of three friends whom I greatly admired and from whom I had learned a great deal.
The formidable economic historian Charles Kindleberger, and two legends of the investment world, Leon
Levy and Larry Tisch, all passed away in 2003. All three men had been immensely successful, albeit in
different fields, but they had remained remarkably humble and were extremely generous in donating their time
and money for good causes and charities. I shall always remember Leon Levy for his great intellectual
capabilities and savvy business acumen. Moreover, I well remember how, some 15 years ago, when I was
still in charge of Drexel Burnham’s Hong Kong office, our receptionist called me and said that two
unannounced visitors from the United States had just arrived and wanted to see me. In those days, we
frequently had clients from Drexel’s US offices come by our office, check on some quotes, and send
messages via our system to their account executives in the US. My first reaction was therefore to think that
these visitors, whose names didn’t register, would do just that and so be a waste of my time. Still, I reluctantly
agreed to meet with them. The two gentlemen came into my office, where we proceeded to chat about Hong
Kong and Asia. Then, when the discussion turned to the US economy and the US stock market, it struck me
that my visitors were to my great surprise very well informed. Moreover, as occurs once in a while in life on
meeting someone, there was some chemistry and good feeling between us. So, when I was escorting my
visitors to the door and they asked me to join them a little later for lunch at the Mandarin Grill, I accepted their
invitation. However, as I was making my way back to my desk, I realized that I didn't even know their names. I
asked my receptionist, who hadn’t understood their names properly but said it was something like “Tisch”.
And indeed, at lunch, I learned that the two low-key and humble gentlemen who had just popped into my office
were Larry and Preston Tisch. I was familiar with their company, Loews, because it, along with other
conglomerates such as Gulf and Western, Rapid America, LTV, ITT, and Litton, had been enormously popular
in 1970 when I started working on Wall Street.
Over the years, Larry and his sons and I became very friendly. I shall always remember how when I once
complimented Larry on his astounding business success, he humbly and self-deprecatingly observed that he
had just been lucky in buying Lorillard Tobacco in the 1960s, whose large cash flow had enabled him to make
many mistakes and still survive. And when I started my own business in Hong Kong, one of the very first
telephone calls I received was from Larry’s son Jimmy, who immediately offered me his support. Larry was
extremely frugal in his personal life, but, like Leon Levy, extremely generous when it came to charities and
universities. These two highly successful businessmen can best be described in the wise words of Edmund
Burke, who wrote: “If we command our wealth, we shall be rich and free; if our wealth commands us, we are
poor indeed” and of Albert Camus: “You are forgiven for your happiness and success only if you generously
consent to share them.”
In terms of happiness, I hope that my readers will take to heart the words of William Saroyan, who said: “The
greatest happiness you can have is knowing that you do not necessarily require happiness”; of Albert
Schweitzer, who wrote: “Success is not the key to happiness. Happiness is the key to success”; and of
George Orwell, who wrote: “The essence of being human is that one does not seek perfection.” Moreover, as
Pliny the Younger wrote, “In health we should continue to be the men we vowed to become when sickness
prompted our words.”
We all have ambitions and are full of hopes, but we should not forget the line in the classic tale Heidi, by
Johanna Spyri, “Oh, I wish that God had not given me what I prayed for. It was not so good as I thought.” As
Mardy Grothe remarked, “Be careful what you wish for, it might come true.”
At a recent conference in Germany, an evidently successful but slightly arrogant young businessman made
some comments to the effect that to think about the future and to make any forecasts was bunk and basically
useless. I was at first somewhat taken aback, because I suppose that I agreed with him to some extent, but I
equally thought that this young man should consider the words of Confucius: “If a man gives no thought about
what is distant, he will find sorrow near at hand”; although, even if we are well prepared for all eventualities, as
Mark Twain wrote, “A thing long expected takes the form of the unexpected when at last it comes.”
Moreover, as Mardy Grothe recently commented, when Matthew Prior wrote a poem describing every poet as a
fool, Alexander Pope retaliated with the following chiastic verse, where one might substitute “financial analyst”
for “poet”:
Sir, I admit your gen’ral rule
That every poet is a fool;
But you yourself may serve to show it,
That every fool is not a poet.
Finally, I wish to thank all our readers for their support, loyalty, and encouragement. I should also like to take
the opportunity to thank the many economists, strategists, analysts, fund managers, and readers of this
monthly letter whose collective knowledge, advice, and suggestions have greatly benefited me and enabled
me to compile this report. Thomas Mann wrote that, “a writer is somebody for whom writing is more difficult
than it is for other people” and I admit to often feeling that way when putting my thoughts on paper. I also feel
that 2004 may be a far more challenging year in terms of investment returns than 2003 was, as investors’
expectations are now running far higher than they were 12 months ago. Still, even if 2004 doesn’t enrich us as
much as 2003 has done, I hope that all my readers appreciate that one can also become rich by moderating
one’s needs and be, as Art Buck remarked, “financially secure when you can afford anything you want and
don’t want anything”.
Yours sincerely
Marc Faber |
