October 28, 2013

A different perspective on global economics

Posted in International Economy · 46 comments ·
Share 

Bill Bonner shrugs as he recounts how he tried to buy a Palladian mansion in Waterford. The seller was Nama and an Irish bank that had lent to a boom-time developer who had since gone bust. Bonner publishes the world’s most successful financial newsletter. His company, based in Waterford, has a turnover of $400 million and is growing exponentially; and yet, in 2011, when he bid for a property which was in danger of severe dilapidation, the Irish bank that in effect owned the property didn’t return his call.

At that stage he wanted to save the building, which otherwise would suffer further deterioration over the winter, and he hoped to begin reconstruction in the spring; however, it seems that ”someone local didn’t want the deal to happen”.

Four months later, as he says himself, “the roof fell in”. Today the building lies idle, “thieves have ripped the remaining copper off the roof” and something that could have been the headquarters of a global publishing business is now “beyond saving”.

You can hear the incredulous tone in his voice as he tries to figure out a country where the owners of property ,the banks and Nama, will not sell the building in order to save it, allowing the thing to fall into ruin. Now no one will buy it, and all the money is lost.

“Sometimes,” he says, “I don’t know how the country holds together”.

And yet he is optimistic about Ireland. Bonner’s publishing house, Agora Publishers, has a base in Waterford. It has been operating worldwide since the late 1990s.

“Ireland is a great country to do business in; the workforce are smart and pleasant. We’ve been delighted with our Irish office for years, but when the banks don’t respond to a buyer who wants to save a building and put a business in there, it makes me sad. The country will recover, no doubt, cycles always turn, but not before prices fall to the level where it makes sense to buy.”

Bonner, who will be a keynote speaker at the Kilkenomics economics festival (running from November 7 to 10), is a true maverick who has built up not just a publishing empire but an investment one too, buying when assets are cheap and selling when everyone wants them. He is one of the original contrarians, happy to be cautious when everyone else is reckless and be euphoric when others are despondent.

This approach to investing, called “value investing”, has garnered Bonner a huge number of worldwide followers who read his material voraciously all the time. Some 500,000 investors read his flagship newsletter ‘The Daily Reckoning’ every morning precisely because of his maverick insights. “You’d be surprised how many people don’t buy things because they are cheap, which ultimately should be the basic starting point,” he says.

Bonner has a maverick’s way of looking at the world of finance and economics. He is still based in what he describes as ”unfashionable” Baltimore, home of The Wire and ascribes some of the clarity of his thinking on economics to the very fact that he is in an unfashionable city, far away from the glitz, noise and greed of Wall Street. He describes himself and Baltimore as “the anti-Wall Street”.

Warming to the theme of how the financial industry rips people off, Bonner quotes the ultimate value investor, Warren Buffet, when he suggests that 30 per cent of all the money that goes into investment simply pays the salaries of the financial machinery that is behind the shining facades of the world’s biggest banks.

“The lawyers, accountants, brokers, underwriters and the whole apparatus of an industry is expensive, particularly as it is designed to sell a share of something to someone who doesn’t really know what he is actually buying. I mean all those stockbrokers’ luxury houses in Long Island have to be paid for!”

And who pays them? To Bonner, it’s the little guy. He focuses on the US Federal Reserve, which he describes as a “banking cartel”. Under the slogan of quantitative easing, Bonner points out that what it is really doing is transferring huge amounts of money from the next generation who will have to pay for all this money printing either in inflation or in huge debt repayments to the stock market. And who owns the stock market? Well, it’s not the guy working in a factory, as Bonner laughs at the bizarreness of the whole thing; it’s the rich people!

“If you want to know why the rich get richer, there’s no secret to it,” he muses. “The Fed makes them richer and those people happen to be in the financial sector, largely and the financial sector just happens to be the sector that the Fed most favours.”

Interestingly, unlike other contrarian voices in the financial markets, Bonner isn’t an “endist”, those who believe that the end of the financial world is nigh. On the contrary, he suggests that he has no idea how things will turn out, no one does. However, he draws on economic history, a regular theme in his writing, which extends beyond the regular diet of financial analysis to include forays into psychology and philosophy. Economic history tells us that things don’t last forever, long periods of very low interest rates are followed by periods of higher interest rates and higher interest rates will render the present worldwide policy of printing money null and void. Forecasting precisely when this will happen is impossible, but Bonner’s best guess is that this will happen in the next five years. In the meantime, stock markets will most probably keep going upwards, pumped up by the steroids of the Fed.

Bonner is the author of three New York Times bestsellers and is working on a fourth, which is aimed at debunking the entire economics profession, something he describes as ”nonsense, the numbers are just made up and not a science at all and the more you dress it up like science and the more you rely on it as a science, the more you are misleading yourself”.

He signs off, laughing, by citing Alan Greenspan, who was deemed by many for many years to be the great economist driven by numbers, theories and intricate forecasts. Yet as Bonner humorously observes, this week Greenspan pops up on TV in the US, long after the damage was done, and says: “Remember all those numbers and forecasts we based everything on? Well, you know, we didn’t really believe them ourselves.”

With that, he is gone.

The very funny, contrarian, iconoclastic Bill Bonner will be in Ireland in two weeks’ time appearing at Kilkenomics in Kilkenny on Saturday November 9th. For anyone with an interest in the world around us, his shows are not to be missed.

Book at www.kilkenomics.com
Subscribe to receive my news and articles direct to your inbox


  1. Paul Divers

    subscribe

  2. Adam Byrne

    Nice quote from Bonner:

    All political activity is aimed at: (1) gaining power, (2) holding onto power and (3) using power to transfer wealth, status and more power to the insiders.

    http://www.dailyreckoning.com.au/bitcoin-a-threat-to-the-feds/2013/10/04/

    • You hit the nail on the head Adam. But they are aided along there way by the media both print and broadcast, Irish media are pushing there own agenda that Is to preserve the status quo at all costs .

    • 5Fingers

      I echo Micheal’s comment and qualify it by saying that current political structures and institutions were modelled during a time when the ability of idiots in high places was limited by the technology of the day. You cannot cause mass destruction with swords and a few guys going around shouting out the news. Today, all you need is a smartphone and any idiot can screw up half the planet either with bull nonsense information or with nukes.

      God help us, but our laws and our politics coupled with technology is catastrophically polarising the insider/outsider effect and I am at a loss as to how we can make sense of it. Never before has there been such an imperative for all to wake up out of their inward looking stupor and reach out to all. Either that or oblivion.

  3. Joe R

    The story about the Palladian house simply dosen´t stack up as presented.

    NAMA for starters has no listings for such a property in Waterford. Planning permission would be a serious issue for what was outlined by Bill ( a genuine historic house and estate?) and is not mentioned as a factor or consideration. Expert professional advice would have to be taken on board at some point too but this all sounds like pub talk in its presentation, not a seriously considered proposal. Plus having to allow for the the roof falling in on a dilapidated house may not have serious extra cost implications in the context of a large restoration project – the whole place would have to be restored – and this is particularly true if the the guys is worth 400 million. Costs and time lines are difficult to control in a restoration project. If the guy is dedicated to the project, a large refurbishment and change of use then a fallen in roof is no serious impediment.

    Plus no money was confirmed as “lost´´ just a possible notional valuation and he could have argued down the price more to allow for the cost of the fallen-in roof.

    This strikes me as total BS, it panders to far too many myths. Property stupidity is alive and well. It doesn´t begin or end with loans or valuations.

    • EMMETTOR

      If, like me, you’ve been dealing with an Irish bank, in relation to your mortgage “or other loan secured on your property”, you’ll lend more creedence to this tale. If Ulster Bank are anything to go by, Irish banks are the most badly run organisations ever to exist. Every time I get off the phone with them, I think “what a way to run a business”. The left hand doesn’t even know there’s a right hand, a total shambles.

      • Joe R

        Nothing surprises me about Irish Banks´ bad habits too, Emmettor, but the record of their behaviour alone does not make the story presented here credible.

        There are lists of NAMA properties for sale in Waterford available. There are not that many.Which one is it?

    • ciaranmg

      As someone who was reasonably close to these events I can tell you that it’s almost exactly correct.

  4. whatamess

    I’m a little confused on this…

    “Economic history tells us that things don’t last forever, long periods of very low interest rates are followed by periods of higher interest rates and higher interest rates will render the present worldwide policy of printing money null and void.”

    Whatamess thought the ECB would do everything in its power to keep interest rates LOW for as LONG as possible coz if interest rates rise,even 1 or 2%,especially for countries that are already on the brink,the cost of servicing the debt will reach a stage of critical mass and where it’s untenable and KABOOM.
    i always thought that was the mexican stand off and without a growth led approach (exports) ,that’d remain the status quo

    replies on a postcard please:)

  5. Paul Divers

    Publishing two articles in one day is confusing. Which one are we supposed to read first? It is hard keeping up with the debate one post never mind two.

    One post gets more comments than another, dilutes the focus and relegates the one less visited to the confines of history with hardly a glance. Might as well not bother.

    Productivity is admirable, especially on bank hol’s but it is easier to consume information when it appears with your predictable regularity, namely Mondays and Thursdays.

    Better to spend 10 hours working on a cracker than 2 x 5 hour efforts that cancel each other out.

  6. Paul Divers

    ‘subscribe to receive my news and articles direct to your inbox’

    If you turned the word ‘subscribe’ into a link you may see your subs increase. Just a thought.

    A strong call to action at the end of an article usually works well.

  7. 5Fingers

    I have a real problem with Bonner and the rest of what is essentially anti-statist anti-communal thinking – not because I believe they are wrong about the agendas which lurk in large institutional bodies but that they believe they are somehow better than that were they in the same position. The attitude is basically a cry of wanting to be left alone untouched yet still be given a passport to allow them affect others as they themselves see fit (of course, they being self made and hard working individuals, they see this as being only right – not realising they will always be running into some counter opinion which is not to their liking – democracy sucks!).

    The sad part about all this is the utter misdiagnosis and inability to see owns one psychological ruses. While my gut instinct is to align to these ideas of the dailyreckoning I need to stand back and realise this is just a randomly successful rag among many others which did not quite make it to the fore. In the meantime we are ignoring to our peril the danger of outmoded thinking at ALL levels as a result of what has happened in that last 20 -30 years. Remember, we have atom bombs, not swords. We have winner take all in an instant which makes lock-in by the newly gentrified irresistible and instant mass impoverishment all to easy. Bonner does nothing at all to address this and is not realising he and his ilk are just part of the same problem merely making money out of the ruses or 19th century thinking that affect us all.

  8. EMMETTOR

    We impose a single currency on the divergent economies of Europe, export all the jobs to a Communist sweat-shop, so when the Chinese profits look for somewhere to invest, there’s only the Finance Industry, where everything is overvalued and the Functional Class have been busily lining their own vaults to the detriment of their customers and shareholders for years. The Stock Market is a bubble formed into an institution, it’s only when a crash occurs that we see the actual value of stocks and shares, what happens when it runs out of bigger fools? As for the smoke and mirrors of derivatives and other weapons of mass destruction, there aren’t even any mirrors. This is what Shit’s Creek is like, without a paddle, or a canoe.

  9. Deco

    That is strange, being told that the official bad bank in the land (as against the unoffical ones) does not want to do business. I know of incidents where the Official Bad Bank of Irl. sold property to relatives of the bankrupt speculators who previously owned it !!!

    Maybe Bonner is not corrupt enough.

    Lucinda Creighton brought up the issue of funny deals of this sort, where the debto was a relative if the purchaser. And I sat on the sidelines thinking, Creighton is finished now, nobody says that about the establishment in this country. And sure enough, she is. And it has been swept under the carpet. Zero coverage from the state broadcaster which bullies the people into giving it a tithe, so that it can lie to the populace in return.

    There is a lot going on in the shadows that we don’t hear about.

    The Irish institutional state is corrupt, and has been since the time of Haughey. The whole thing is a complex network of funny deals, deceit and nonsense.

    Bill Bonner is better off having nothing to do with it. Though like Max Keiser he has done us a great favour in telling us what is really going on.

    It seems that when the institutional state in this country is not capable of corruption, deception, extortion, waste, cronyism, nepotism, or outright fraud – there is very little left where it has any competence.

  10. The current problems are the same ones as 100 or five hundred years ago.
    “The Money Lenders” were driven out of England 600 years ago and invited back when William of Orange was nominated as king of England.

    The Bank of England was formed in 1692 by private subscription and funded the war in the Netherlands and then underhandedly managed to get the payments footed by the taxpayer.

    Later the Bank of England was used as the template to set up the Federal Reserve (Paul Warburg–Daddy big bucks?– from the house of Rothschild) in the US. The Central banking system was set up and bit by bit other countries had to follow suit to be able to use the US dollars to effect international trade.

    Those countries not part of or threatening to leave the family of central banks have been invaded or threatened (including Iraq, Libya, Iran, North Korea, Etc.)to enforce conformity.

    The central banking system has set up the fiat money system which is designed to do just what it is. It pauperizes the population by syphoning the production of the people off into the banks and the central banks which finds its way to the controlling elites of the handful of families at the core of the organization.

    The money system is a Ponzi Scheme. It requires the constant addition of more money to exist. It requires ever greater amounts or it crashes and dies. The crash is inevitable and only postponed by QE to infinity.
    Currencies will be inflated to infinity which means their value will be zero.

    Only hard assets will remain.

    That is the message of Bill Bonner and Max Keiser, Hugo Salinas Price, Bill Murphy, Chris Powell, Mike Maloney GATA.org and others. The state will do nothing. It is owned and controlled by the banker elites through their proxies.

    Only you can protect yourself by taking the required actions before the destruction of the monetary system occurs. That is the real message unfortunately ignored by the 99.99%. The world will not be a pleasant place when the mother of all crashes occurs so get a little land for yourself, get out of debt as much as possible, get 6 months worth of food on hand, get any money out of the banking, paper ponzi scheme except that need for day to day use, and then get down to living without worry for tomorrow.

    The country that has an illuminated population will be able to rid itself of this curse but until then the politicians will do and can do nothing to change for the better.

    When this occurs there will be and honest monetary system in place, likely based on precious metals, and no legal tender laws and no fractional reserve lending.

    Imagine an economy based on thrift , industriousness, savings and investment, replacing the current debt based, credit induced consumerism.

    Now back to the farm and digging ditches preparing for winter rains.

    • 5Fingers

      Get any pile of facts and you can fit a story to it. In fact you can build loads of stories. Humans are natural story tellers. It is entertaining. It is no different than finding patterns in clouds.

      Facts? Have you got all the facts? Or just some of them? Which are important? Which are not? No one really knows. Maybe those facts are the ones that survived the compounded confirmation biases of several serial generations. We hate uncertainty. Certainty is the comfy blanket for the self assured and prognosticators.

      I have no idea what will happen. I see a lot of effects that are good and bad and very poorly understood. Constantly harping on banks and a nostalgic longing for some utopian world of thrift and industry where everyone is smiling at one another as though high on drugs with their stepford wives whirring away at home is misleading, psychologically naive and time wasting.

      • Well thank you for those kind thoughts. Your carping criticism is destructive and debilitating. There is nothing positive said and not idea of the problem let alone a solution.

        Until you can show definitive proof that the banks are not the problem and why then your comments are simply loose talk and pompous opinion.

        You apparently have little understanding of the current money system , its conformation or operation or you would not be so scathingly indifferent.

        In the meantime check out some facts and dispute them if you can.

    • Ryu Hayabusa

      On the plus side It’s time people got back to nature anyway Tony.
      What could be more satisfying than growing your own Parsnips & Carrots!

      Pah who needs Chinese Garlic? Why should one’s garlic have to travel half the circumference of the planet, totally senseless.

      Until a ‘critical mass’ of people rise up these lowlifes will continue to pilot their neo liberal chariot to hell and back.

    • bonbon

      There’s that Nietzschean “throwness”, the basis of the nazi economics so admired by Hayek. “Start small” – massively reduced population – genocide with a wink. Honestly a monetary system for the few survivors is a murderous plan indeed.

      It is but a short step from that to “fertility of the soil”, blut und boden.

      Instead send that BS to the Wall Street and the City so they can improve the fertility of their soil. Break up the banks so we can reconstruct the economy around modern technology, fusion. The New Paradigm for Mankind

  11. whatamess

    3 mins of Niall Tobin

    http://www.youtube.com/watch?v=EgVGqeIsopA

    i watch this now,30 years later, and i just cringe coz it’s the tolerance of this ‘cute hooorism’ and gombeeenism that significantly contributed to landing us all in such terrible trouble

    • Ryu Hayabusa

      Niall is a ledge…

      He may aswell have wrote the sketch yesterday. It’s just as applicable in today’s Ireland.

    • Ryu Hayabusa

      A Gombeen man rang a bell today…

      &all the fawning lickspittle RTE/FG toadies were whooping and rejoicing!!

      Hear ye, Hear ye… Salutations to all.
      Give praise & thanks, for Today The King of the Gombeens doth rang a Bell!! I think it was my turn?? I’m next so I am.

      I’ll ring it for Nein Thousand Pouuuuunnnnd, not a penny less.

  12. [...] David McWilliams Interviews Very Funny And Astute Bill Bonner – David [...]

You must log in to post a comment.
× Hide comments