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To: Wyätt Gwyön who wrote (110319)	1/6/2002 12:19:09 PM
From: Jon Koplik	Respond to of 152472

Mucho -- I just want to get it "on the record" that whenever some smug @$$#!& gets on CNBC and says (usually with a smirk on their face) how they cannot believe that some people are so dumb that they actually believe that "this time is different" ... Well, there are some profound examples of times when "this time it WAS different," and those who assumed that "this time it could not possibly be different" were either bankrupted, or left behind in a huge way. Two quick examples : I have read that the real "ruination" of Montgomery Ward (the once gigantic retailer) was the company's bet that in the period right after World War II, the country would undoubtedly go into a recession or depression (as it had after every war since 1776, apparently).* The chairman of Montgomery Ward was reportedly quite smart, and intimately familiar with economic statistics and past economic history. He would spread out charts and graphs of past post-war periods in strategy meetings, etc. The reason Montgomery Ward went to hell, and Sears Roebuck surged in the post-war period was simply because Sears dared to bet that "this time it WAS different." An example where I personally dared to assume "this time it was different" involved bets on interest rates in 1994/ 1995. I am going to copy an old e-mail I composed and sent to (I think) Barrons (back in 1996 or 1997) (which, of course, they never printed). ***************************** Subject: do not be afraid to make bets on interest rates as if members of the Fed are brain dead Mime-Version: 1.0 Content-Type: text/plain; charset="us-ascii" (I earn my living trading Eurodollar futures for my own account. (I have no other source of income, other than some minor interest and dividends). I am not wealthy, and did not inherit lots of money. If I am wrong for an extended period of time in my trading, my life becomes very unpleasant.) Just a brief reminder on how unbelievably wrong this (endlessly congratulated) Federal Reserve Board can be. In mid to late 1994, the following was stated several times on sources such as CNBC and Wall Street Week -- for the past roughly 75 years of Federal Reserve history, long bond yields had NEVER peaked and reversed trend until AFTER the peak in short-term rates for that cycle. In other words, the "all knowing" Fed would do their thing with Fed Funds a whole bunch of times, know when to stop, and then the whole rest of the world would sense their wisdom and eventually clamor for ownership of long bonds, thereby turning the whole interest rate cycle. In late 1994, it sure looked like long bond yields had already peaked and reversed, but anyone daring to bet on this was told : you are fighting 75 years of Fed history. (The implication being : you are nuts!) The Fed did indeed raise short-term rates again (in early 1995), but both the long end and (amazingly) the short end of the bond market were already well into a rally that had started at least a few months before this peak in the Fed's own official rate raising cycle. My analysis -- daring to bet (in late 1994) that "THIS TIME IT IS DIFFERENT" did indeed work, and yet practically no one is bothering to remember this important fact just a few years after it happened. Jon Koplik **************************************** Jon. P.S. I have not always been correct on my interest rate bets.

To: Wyätt Gwyön who wrote (110319)	1/7/2002 10:44:58 AM
From: carranza2	Read Replies (3) \| Respond to of 152472

...some astute observers have pointed out that a consideration of facts is "looking in the rear-view mirror"; certainly, the rear-view mirror is not the most important set of facts out there: i would much prefer to back up my arguments with facts taken from the future, but i have yet to find a good newsletter source for that subset of reality. Mucho, The reference to the "rear view mirror", as you well know, is to Buffett's Fortune article in which he notes a long term anomaly between stock market performance and underlying economic conditions. He concludes that caution must be exercised in using historical data to make predictions about the stock market based on that kind of data. I'm sure you read the article and are familiar with the anomaly Buffett pointed out and which is the subject of his "rear view mirror" comment. Diss the The Great Sage at your own peril. By the way this is what The Great One has to say about dividends at Berkshire Hathaway. "We will either pay large dividends or none at all if we can't obtain more money through re-investment (of those funds). There is no logic to regularly paying out 10% or 20% of earnings as dividends every year." focusinvestor.com I haven't read the article in a few weeks but I do recall that the one bit of data to which he did give weight in determining whether the market is properly valued was the ratio of GDP growth to the growth of the total stock market valuation. You might note that this is not a "rear view mirror" metric. Seems a good gauge to me. He seems to use it to clear up the distortions created by the anomaly he has noted.