A family member saw me reading this book, and he asked me, "You're reading that book a few decades too late, aren't you?" On the contrary: I love to read investment books outside of the market cycle that they were written in. It shows the folly of prediction, the near-uselessness of reading books that tell you what's going to happen.
Note that I said near-uselessness: Books like this protect me from being manipulated by "predictors" in the media who write or say things now. And it keeps me humble about (and unattached to) my own predictions, my own thinking about the future. This is why I read books like this from time to time.
Almost always, the predictions in any prediction-y book (especially a prediction-y book about the stock market) will be hilariously wrong, and this book is no exception. This author, for example, believed a big bear market is coming--a really big one, to the point where he calls it the Greater Depression. He believed it would come in the years following publication of this book in 1993.
Wrong! The stock market doubled over the next two years and tripled in the four years after this book was published. Thanks, prediction guy!
Again, books like this protect me (more like make me bulletproof) from "predictors" who write or say things now.
So, whenever I hear the prediction, from someone on financial TV, some YouTube video on Bitcoin, some article somewhere, or some comment on somebody's Twitter, I visualize this book or some book just like it. I visualize a strident guy writing a 400 page book, warning people away from stocks right before one of the best periods to invest in them, ever. I imagine what would it be like if, for the prediction I'm hearing live, now, the results were precisely as opposite as it was to what this guy said, then. This exercise allows me to non-attach to all market predictions. It's incredibly useful.
Ironically, this guy's prediction for a market crash/Depression probably seemed pretty plausible in its day, because we had already had a bull market for the last 12 years... Nobody expected the great bull market to last from the early eighties all the way into 2007, with a brief interruptus from 2001 and 2002. And I don't think this author could dream that the stock market level today is ten times what it was when he published this book calling for another Great Depression.
There's never enough humility in the marketplace for predictions. Never.
Although note that if you write a book containing hundreds and hundreds of predictions, you're always going to find ways in which you were "right." You also want to make sure that many of your predictions happen naturally and repeatedly over time, with a certain periodicity. So, if though you call for a major market correction, you can cite one that happened many years later and cite it as evidence you were "right." A good example in this book would be when Casey writes, "prepare for a wave of bank failures." This is a beautiful, evergreen prediction you can always make that will always come true at some point, because banking/credit cycles tend to come in cycles of 20 years (give or take) approximately equal to the length of a commercial banker's career. Market crashes likewise offer similar evergreen opportunities to "predict."
Again, a useful book but not at all in the way the author intended. This book offers insightful and humble readers extremely helpful contra-lessons and contra-models for their own predilection for prediction.
Predictions: don't make 'em, don't believe 'em, don't attach to 'em.
Notes:
1) More predictions that are "right" but off by decades. one of the megatrends Casey expected in the early 90s is an exodus from cities into small towns: again this is 1993, and this prediction was exactly, precisely, wrong. But it wasn't ultimately wrong, it was just wrong so early that it was effectively wrong. People have been predicting the decentralization of the economy for decades, is now, post COVID, the time that we actually will see it?
2) We are on the brink of a "greater depression." "At a minimum we're headed for a financial collapse" Permabearishness. In 1993!
3) When I see charts of US debt levels and growth of the money supply ending in 1993, the charts look almost the same as the charts you see today showing us levels and the growth of the money supply. A Bitcoiner could have offered us these same charts today. The question is: if there's supposedly some comeuppance coming, when will it be? It seems like we're in this constant waiting for Godot situation (waiting for inflation, currency weakness, etc.) and he never shows up...
4) More utterly wrong predictions: At publication, the stock market is "very high" (yet it went much, much, much higher), inflation is coming (it didn't, then), and the government has a gigantic debt load to service (compared to today that debt load was peanuts!)
5) Further incorrect about the claim that there will be a coming debt crisis in the 1990s because of all the extra debt taken on across the 1980s deficit spending, ironically we came the closest to mostly paying down our debt during the late years of that decade, it played out the exact opposite of what the author expected. Sometimes, reality gives us a new set of data points that show us how wrong we can be!
6) It's important to cite instances where the author either tortures data or uses unethical chart/graphic techniques: you can't show a chart of nominal personal bankruptcies and fit that to a narrative of individual debt getting out of control: you have to use bankruptcies as a percent of the population. Unfortunately that is largely unchanged across the 20th century, and this doesn't support the author's argument. Pages 41-45 also caught my eye with a string of four misleading charts out of six, all suffering from denominator fallacy.
7) If I read "the chickens are coming home to roost" one more time in any book of perma-bear porn I ever pick up, I'm going to stop reading right then. Unfortunately I did not follow that rule with this book.
8) Before you get to what to do about it, you have to grind through 60 plus pages of everything that's going wrong and all of the collapse calls you could ever imagine--right before a decade when nothing ever collapsed, actually nearly two decades.
9) Hedging for more profit and less risk. Here he's talking about running a long/short book, unfortunately that's just twice as many ways for things to go wrong!
10) Using Ben Graham's criteria for investing in stocks.. in the 1990s?
11) The presumption that the DJIA or the market needs to trade down to book value (yes the author thinks this!) in order to be a good value is deeply specious in an era of asset-light internet businesses and intangible assets, with very high profit margins.
12) Some sovereign individual-related stuff here, that was way ahead of its time, but now is actually timely. Unfortunately all the rules on banking secrecy and Swiss annuities have changed and so the action steps are useless except thematically.
13) The chapters on ethics of Wall Street are useful and would be interesting to anyone who has a standard consensus view (propagated by the media). Interesting take on the ethics of the movie Wall Street with Gordon Gecko, also the ethics of Michael Milken, his prosecution was a complete breach of justice.
14) Also worth noting the idea that most people would think we would want a securities regulator like the SEC to issue clear guidelines. In reality the exact opposite is true, and the agency benefits by having unclear guidelines, which can be enforced arbitrarily. This expands the power of the agency specifically by being not clear.!!!!
15) Predictably recommending gold, and--typical for a permabear--predictably delusional about its upside.
16) Insights on mining: Mines that are closer to break even at the current commodity price, or that have higher break evens. These will have much more upside if you have an upside view on the underlying commodity.
17) Land/real estate ideas: looking at resort properties: Aspen is a good example of a type of town to consider both as a place to buy a home and live year-round, taking into account demographics, environmental constraints on building and a place to get away on modern problems.
18) 25 years early calling for a commercial real estate collapse. 15 years early calling for a collapse in residential real estate prices. !!!
19) The bulk of the remaining third of the book is political analysis of the changing, or better said decline of the United States and the West. It's interesting, albeit depressing, and at times quite insightful, but it really is difficult to see why it has a place in this book. There are on occasion investment implications that the author discusses, but only on occasion.
Images attached: South African mining stocks
