Peter Dag & Friends: February 2014

2/26/14

Timely advice?

George Dagnino, PhD Editor,
The Peter Dag Portfolio.
Since 1977
2009 Market Timer of the Year by Timer Digest
Portfolio manager

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2/12/14

If he is right about high-yield bonds then the stock market is in trouble because high-yield bonds are closely related to equities.

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2/9/14

Food for thought

2/7/14

Observations

The Soviet Union collapsed because the nomenklatura – their bureaucratic apparatus – eventually caused it to become completely inoperative.

I wrote in the past how the growth of a country depends on the number of power groups. A country grows rapidly when there are many power groups. They want the pie to grow quickly to share its wealth. Countries controlled by a small number of power groups grow slowly. There are few groups involved in sharing the wealth generated by the economy.

In economies with an autocratic, socialist, dictatorial regime the bureaucracy is in control and the only way to survive is to be part of it.

Italy is collapsing. It is the canary in the coal mine. I know the Italians. I was born there. I was educated there and I decided to leave. Italy chose an economic planning system first mentioned by Rousseau and modified by Mussolini. Some crucial industries need to be protected for the good of the country. This is the fascist credo. The industries to be protected are the big ones. What is left is organized in guilds to protect their members from the big fish and hinder new entrants in the business.

The bureaucrats love it. They control the money and how it is spent. The management of these industries rotates to gain status and money. Example. The Italian government is “trying” to find a buyer for Alitalia, a bankrupt airline. They cannot find one. Why? Because those gaining from it would rather sink than salvage it.

This is the Italian legacy of fascist economic policies. Italy is sinking because there is only one major power group in charge: the bureaucracy. And they tax and spend, totally unconcerned about how fast the economic pie is growing. Their priority is their pocketbook.

The bureaucracy becomes a major power group as it gives to its citizens what they want. Everything sounds fine. What countries like Italy forget is to ask themselves who will produce the wealth to finance the glorious and populist social programs?

(This Observations appeared in the 3-03-08 issue of The Peter Dag Portfolio ).

STRATEGIC INVESTING FOR UNCERTAIN TIMES.
Learn how to manage your portfolio risk and sleep comfortably. Improve the certainty of returns by taking advantage of business cycle trends. Learn to use simple hedging strategies to minimize the volatility of your portfolio and protect it from downside losses.
You will receive your user id to access 4 FREE issues – and all the previous ones - of The Peter Dag Portfolio. Email your request to info@peterdag.com. New subscribers, please.

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Observations

Why do we think the way we do in the western world? A few years ago I read a delightful book – Sophie’s World – which introduced me to philosophy. When I was a young student I disliked philosophy. But this book changed my mind about philosophy and led me to explore why we westerners think the way we do.

It took more than two thousand years for the western world to develop and focus on concepts that are driving our political, religious, financial, and many other aspects of our life. There are many books about philosophy and philosophers. They are a menu of what thinkers said and who they are. Ed and I are looking instead for something else.

We started this project a few years ago. We meet on Saturday for about a couple of hours. We talk about business for a few minutes. Ed is a banker. When we are ready to get “serious” one of us reads a few pages about the philosopher we are studying. Then we discuss what impressed us, trying to understand the main points of the philosopher’s thoughts. I take notes. We follow a chronological order. By doing so we have the incentive to study also the economic times and how and why the philosophers said what they said. This is very important for the concept I am following.

I think, after more than two years, that I am beginning to have a picture of the historical thinking transitions. I must confess it is an exciting one. It is not perfect, but I am beginning to see some light.

We think the way we do because times change. We must change to find ways to cope with these changes. We must find new solutions to familiar problems, but each time they have a different level of complexity as science tempts us with new innovations. Right now the main branches of philosophy are logic/artificial intelligence, psychology, and economics/political science.

Well, I wanted to tell you how we got here, but I will have to try another time.

(This Observations appeared in the 2-18-08 issue of The Peter Dag Portfolio ).

STRATEGIC INVESTING FOR UNCERTAIN TIMES.
Learn how to manage your portfolio risk and sleep comfortably. Improve the certainty of returns by taking advantage of business cycle trends. Learn to use simple hedging strategies to minimize the volatility of your portfolio and protect it from downside losses.
You will receive your user id to access 4 FREE issues – and all the previous ones - of The Peter Dag Portfolio. Email your request to info@peterdag.com. New subscribers, please.

FOLLOW ME ON TWITTER @GEORGEDAGNINO FOR MY LATEST VIEWS.