Charlie Munger..It's Over

[strupgolf]

Well, Nebraska Home Mart buys 90% of their stuff from overseas. and this is not the way it used to be. Manufacturing has gone oversees and will never come back.

[1967 R50/2]

Some casual observations about this discussion:

1. Lot's of blaming other nations because their people work more cheaply/longer/harder....with no company or governement benefits.

Ridiculous. Only have ourselves to blame for being too soft and greedy. Nobody ever promised you'd be healthy, wealthy or wise. All those things require work. So get to work!

2. Too much looking to the past. "After WWII was done with..."

Who cares? That was another century. And give credit where credit is due. Germany and Japan did a lot of that rebuilding themselves, and the current up and coming BRICs weren't a beneficiary of the Marshall plan at all.

I can tell you this, Asia is looking far into the future. Better get with the game.

3. Too much focus on "manufacturing"... or even more ridiculously "Automation puts PEOPLE out of work"

What are we in Victorian England? Afraid of the Iron Horse are we? Somebody designs, builds and services all those machines. Automation creates new, more skilled jobs by replacing UNSKILLED labor.

The reality is that at the beginning of this decade the US produced more doctorates than any other country and 50% of PHds were born overseas. Came to the US to get educated and stayed.

Now it's become all but impossible to get an H1B because we want to keep out immigrants from"Those" countries". Again, we cut off our nose to spite our face.


And I am done.

[berettafan]

Yet again I state the 50's era middle class was a sham from the start. It was built on salary/DB models that have failed BIG.

How many of you inherited some measure of wealth from parents who accumulated during that era (say 50s to 70s)?

[strupgolf]

Ok , I see some of your points, and very vell said, We're in the ****'s. Plus, no class of people have gained so much from their peer's as the group from the 50's 60' 70's as far as inherited wealth as this generation.It's a bubble, and enjoy it as you can, because it won't last to the next generation.

[Joeaksa]

Originally Posted by DAEpperson

Man, are you inside my head?

BTW - I have friends in and around So Cal - successful guys, who have purchased property as you describe. 1 w/ 5 acres, well, solar. Another w/ 10 acres east of SD.

What do you guys think we are up to here in AZ?

Last place I would invest a penny is Kalifornia, but in a state outside of that are we might have a chance but only if we can take care of ourselves.

[TheMentat]

Originally Posted by 1967 R50/2

Some casual observations about this discussion:

1. Lot's of blaming other nations because their people work more cheaply/longer/harder....with no company or governement benefits.

Ridiculous. Only have ourselves to blame for being too soft and greedy. Nobody ever promised you'd be healthy, wealthy or wise. All those things require work. So get to work!

2. Too much looking to the past. "After WWII was done with..."

Who cares? That was another century. And give credit where credit is due. Germany and Japan did a lot of that rebuilding themselves, and the current up and coming BRICs weren't a beneficiary of the Marshall plan at all.

I can tell you this, Asia is looking far into the future. Better get with the game.

3. Too much focus on "manufacturing"... or even more ridiculously "Automation puts PEOPLE out of work"

What are we in Victorian England? Afraid of the Iron Horse are we? Somebody designs, builds and services all those machines. Automation creates new, more skilled jobs by replacing UNSKILLED labor.

The reality is that at the beginning of this decade the US produced more doctorates than any other country and 50% of PHds were born overseas. Came to the US to get educated and stayed.

Now it's become all but impossible to get an H1B because we want to keep out immigrants from"Those" countries". Again, we cut off our nose to spite our face.


And I am done.

My thoughts exactly!

[tabs]

Originally Posted by 1967 R50/2

Some casual observations about this discussion:


2. Too much looking to the past. "After WWII was done with..."

Who cares? That was another century. And give credit where credit is due. Germany and Japan did a lot of that rebuilding themselves, and the current up and coming BRICs weren't a beneficiary of the Marshall plan at all.

3. Too much focus on "manufacturing"... or even more ridiculously "Automation puts PEOPLE out of work"

What are we in Victorian England? Afraid of the Iron Horse are we? Somebody designs, builds and services all those machines. Automation creates new, more skilled jobs by replacing UNSKILLED labor.

.

Let me set U straight..On your point #2 and #3

History shows you how you got to where you are standing today, it gives you the rational. Second history points the direction that you are going in. It does this simply by showing you the direction the momenteum or forces at work are moving in. The Past, Present and Future are all one continium for me.


Automation cuts the number of unskilled labour jobs necessary to accomplish a task on a production line. Thus it cuts the number of jobs that were previousily needed. It takes a smaller number of people who have skills to run the Automated mfg facility. With a better than 30% drop out rate from American High schools that is exactly what we are turning out...people who need a picture of a Big Mac on the cash register to know what to charge.

So with the exception of those two points I don't disagree with much of your sanctimonious BS...Have a nice day....

[jyl]

These posts are more about PPOT'ers giving their views, than about trying to understand what Munger is saying and why.

[berettafan]

what he's saying is so simple and common sense that it really doesn't need deep analysis.

and it's good to see what others are thinking about the US economy. sometimes you lean something, sometimes you just get depressed. but it can't be a bad thing to discuss it.

[jyl]

Is his parable that simple and common sense? I'm not sure.

For example, in "Basicland", the trigger for the fall is that energy prices shoot up and oil imports consume 30% of GDP.

"Meanwhile, hydrocarbon imports would amount to 30 percent of GDP, instead of 15 percent. Suddenly Basicland had to come up with 30 percent of its GDP every year, in foreign currency, to pay its creditors."

US oil imports are no-where near 30 pct of GDP. In most recent year that I found data for, they were <3% of GDP.

So, this is one key aspect in which Munger created a "Basicland" that bears no resemblance to the US.

Why did he choose to do that? Munger knows these facts perfectly well, he didn't change 3% into 30% by a typo. He did that for a reason - what is it? Is Basicland's crushing hydrocarbon import bill meant to represent some other aspect of the US economy?

[tabs]

Originally Posted by jyl

Is his parable that simple and common sense? I'm not sure.

For example, in "Basicland", the trigger for the fall is that energy prices shoot up and oil imports consume 30% of GDP.

"Meanwhile, hydrocarbon imports would amount to 30 percent of GDP, instead of 15 percent. Suddenly Basicland had to come up with 30 percent of its GDP every year, in foreign currency, to pay its creditors."

US oil imports are no-where near 30 pct of GDP. In most recent year that I found data for, they were <3% of GDP.

So, this is one key aspect in which Munger created a "Basicland" that bears no resemblance to the US.

Why did he choose to do that? Munger knows these facts perfectly well, he didn't change 3% into 30% by a typo. He did that for a reason - what is it? Is Basicland's crushing hydrocarbon import bill meant to represent some other aspect of the US economy?

OHHH GEEEZ let me guesss....Please let me make a guess....I am willing to make a guess, I am wanting to make a guess and I am waiting to make a guess.

On one hand it could be that the energy percentage of GDP could rise dramaitcally in years to escpecially with a decline in the value of the USD, rise in the price of the commodity because of scaracity AND because of FED C&T regs...Hmmm the ONLY reason I bring this up as a possibility is that Buffet/Munger just bought the Brulington Northern RR....take a trip on the B&N RR and pay 4X the amount on the dice....


However if one were to really gaze into the crystal balllllll.....HMMMMM I seee it now it is becoming ever clearer.........Why the cost of energy is a metaphor for the INTEREST COST on the US debt.....WOW does he, could he possibly mean that if we continue down this road that INTEREST COSTS WILL go up...to as high as 30% of GDP....NO WAY..that would be un American....SAY TAHNK YOU BARRACK, Thank YOU Nancy and Thank You Harry...for all that you have done to us...ahhh I mean for us...

[jyl]

Munger also cosntructs a Basicland in which

"The winnings of the casinos eventually amounted to 25 percent of Basicland's GDP, while 22 percent of all employee earnings in Basicland were paid to persons employed by the casinos (many of whom were engineers needed elsewhere). "

But in the US, for the most recent year I can find (2006), the GDP share of the financial services industry was only 8.3% of US GDP, and a lot of that is stuff that probably wouldn't be considered "casinos". If you take out stuff like insurance, and just focus on the part of the financial services industry that provides credit, you get more like 5% of US GDP.

Again, Munger knows these facts. Why did 5%, or 8%, become 25%? What is he trying to say? Does he know that 8% is in fact not the right number, that there is another 17% hidden in the so-called casino? Does he think that 8% in 2006 is going to become 25% in 20XX, so his parable is a warning about the future not the present?

[jyl]

Well, let's suppose Munger means oil imports to be a metaphor for national debt.

And let's suppose total national debt rises to 100% of GDP. What might the interest rate on that debt be? Want to be extremely pessimistic and say 10%? Then interest costs would be 10% of GDP.

How does 10% become 30% in the parable?

Is 10% too pessimistic? Well, check out yields on Greek government debt, on non-investment grade corporate debt, on risky consumer debt. Yeah, I think 10% is clearly at the extremely pessimistic end of things.

Is 10% not jsut too pessimistic, but unrealistically so? Well, how much is interest on the national debt now? It's been running around $250BN/yr, or appx 2.5% of the debt principal. That is <2% of GDP, roughly. Does 2.5% realistically go to 10%? I suspect not.

So, if oil imports are supposed to be a metaphor for national debt, and casinos represent the securities and derivatives-trading aspect of financial services, I think a realistic version of the Basicland parable would be something like:

"oil imports rose to 5% of GDP (not 30%) and the casinos accounted for 5% of GDP (not 25%)."

But that's not how Munger wrote it. So, again, the question is - why?

[tabs]

OHHH Great Mohamad of PIMCO is thinking in terms of 700B to 800B USD a year in interest. And one thinks that a realistic interest rate on banana republic debt and remember that term was first utterd by WHO in recent memory...? is more like the late Carter early Reagan years of 16%.

And OHHH Great asker of questions...Remember the 5th of November...ahhh no that not it....rmeber that the Boomers start to retire in mass this next year with more and more of them on the Social Security and Medicare roles....that means God forbid the day we should see that the SS SURPLUS into the GA now becomes a NEAGATIVE draw agains the Tresury as all those 40 years worth of IOU's that the American people kept voting for by electing the countries leadership over the past 40 years NOW ARE COMING DUE...so the deficit will become increasingily harder to contain...Thank You...which basically means you are FKED.

BTW JYL do you want to expalin to the lay people on this Board just how FKED they are?

[tabs]

I wana hear the Liberals on this Board MOANNNNNN when they are slipped the big Barrack and Nancy Salami....they won't even know what hit em...and nancy will still be blaming Bush or one of his successsors..for ruining the country...all the while they is jettin around on your dime I mean $100 bill as it will be so devalued by then...

Maybe a good analogy would to to think in terms of what happens to a car when there is no oil in the crankcase or the oil sump..

[m21sniper]

Originally Posted by 1967 R50/2

3. Too much focus on "manufacturing"... or even more ridiculously "Automation puts PEOPLE out of work"

What are we in Victorian England? Afraid of the Iron Horse are we? Somebody designs, builds and services all those machines. Automation creates new, more skilled jobs by replacing UNSKILLED labor.

Nonsense.

Automation is designed by it's very nature TO PUT PEOPLE OUT OF WORK.

For every "skilled" repairman that gets a job, 5-6 people who used to do the job manually get put out of work.

Eventually, machines are going to put us all out of business. It is inevitable as the rising sun.

[TheMentat]

Originally Posted by m21sniper

Nonsense.

Automation is designed by it's very nature TO PUT PEOPLE OUT OF WORK.

For every "skilled" repairman that gets a job, 5-6 people who used to do the job manually get put out of work.

Eventually, machines are going to put us all out of business. It is inevitable as the rising sun.

Wrong.

Automation is designed to free up people's time, so that they can be productive elsewhere. Whether they have the chops to do so is a different matter altogether.

Retaining obsolete means of production for the sake of "job preservation" is about the stupidest idea imaginable. The success stories of the next centuries will be those nations that are able to keep their workforces productive by adapting, not by clinging to the past.

[m21sniper]

Wrong right back at you.

Automation is designed to cut costs by reducing the labor force and increasing productivity.

Period.

Is it stupid to want to preserve human cashiers jobs in lieu of machines? If you really think so, i would redirect that word stupid right back at you amigo.

The last thing we need is hundreds of thousands of cashiers(and pilots and soldiers and blah, blah, blah) on unemployment because machines now do their jobs.

Are you really too short sighted to see the long term effects of what machines and technology will eventually do to humanity?

[widebody911]

Originally Posted by TheMentat

Wrong.

Automation is designed to free up people's time, so that they can be productive elsewhere.

Wrong. Factories automate primarily to reduce payroll overhead and secondly to improve productivity and quality, ie remove human error/sabotage from the equation.

[McLovin]