The Best of Kass
Among his posts this past week, Kass shares his recent portfolio moves and looks at the earnings cliff.
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Munger & Me
Originally published on Friday, Feb. 8 at 11:54 a.m. EST.
- Berkshire's Charlie Munger has also been critical of Dr. Jeremy Siegel's investment thesis.
A bunch of subscribers have suggested that I am a hater because I am critical of Dr. Siegel's investment thesis.
That is fine, as anyone is entitled to his/her view. And though I might strongly disagree with the assertion that I am making an ad hominem attack on the professor, I strongly believe in everyone's right to express their opinions.
That said, I am critically analyzing his investment thesis; I am not attacking him personally.
It should be noted that I am not alone in my criticism; I have very good company.
In a Q&A session at the 2006 Berkshire Hathaway (BRK.A/BRK.B) annual meeting, Charlie Munger, Berkshire's vice chairman, was asked about Dr. Siegel's theories.
Munger said, "I think Jeremy Siegel is demented."
Buffett, clearly embarrassed, added "Well, he's a very nice guy."
Munger continued, "He may well be a very nice guy, but he's comparing apples to elephants in trying to make accurate projections about the future."
So, is Munger a hater, too?
The Earnings Cliff Lies Ahead
Originally published on Friday, Feb. 8 at 8:21 a.m. EST.
With inflation running low, sales and profits will be challenged.
It remains my view that the 2013 real GDP in the U.S. will be (at best) +1.5% -- the CBO has just issued a forecast of +1.4%. That said, there are accumulating downside risks to economic growth in the form of the fiscal drag of policy and the über expansionary monetary policy of delivering zero interest rates (which is not likely to exist beyond year-end).
It also remains my view that the consumer remains particularly vulnerable to policy.
With inflation running low, sales and profits will be challenged. Business pricing power is limited, but costs are likely to trend higher (raw materials, interest rates, etc.). Meanwhile, productivity is starting to decline -- it was down -2% in fourth quarter 2012 -- and wage rates are rising. This spells a threat to unprecedented high profit margins, which are not likely to be stable (as many prognosticators expect) but are more likely to mean revert (over the many years ahead).