Mark Tier on Effective Investing, Where the World Is Headed and Why Financial Literacy Helps
The Daily Bell is pleased to present this interview with Mark Tier.
Introduction: Mark Tier is an Australian based in Hong Kong partly because “paying taxes is against my religion.” Founder and (until 1991) publisher of the investment newsletter World Money Analyst, he’s the author of Understanding Inflation, How To Get A Second Passport, The Nature of Market Cycles and The Winning Investment Habits of Warren Buffett & George Soros. His latest works are entirely outside the investment field: When God Speaks for Himself: The Words of God You’ll Never Hear in Church or Sunday School (written with George Forrai), and the just-published Trust Your Enemies, a political thriller, a story of power and corruption, love and betrayal − and moral redemption ...
Daily Bell: Give us some background on yourself. Where did you grow up and go to school?
Mark Tier: I'm from Australia but in 1977 I moved to Hong Kong. I'm still based there, but I spend most of my time these days in the Philippines. In a sense I've been a nomad all my life. My father was in the army so we rarely spent more than three years in any one place. We ended up in Canberra − that's Australia's equivalent of Washington − where I went to high school and university.
I studied economics and political science at the Australian National University. In my final year of economics I discovered Ludwig von Mises (thanks to Ayn Rand). In what should have been my last exam I made a fundamental mistake: I argued from Mises' perspective against the examiners. So I had to repeat that final year to get the degree.
Then, when I got out into the real world, I found that I had to unlearn pretty much everything I'd been taught.
My professors were all Keynesians; reality is Misesian.
Daily Bell: Bring us up to the present and how you began to focus on investing.
Mark Tier: I've always wanted to be a writer. When I was 14, I'd get up early and pound an ancient typewriter for a couple of hours before going to school.
After graduating, I started writing a book that was published as Understanding Inflation (and became an Australian bestseller in 1974). I put an ad in the back for an investment newsletter − and I've been "unemployable" ever since. When I moved to Hong Kong I renamed it World Money Analyst. In 1991 I sold it and "retired." That lasted about three months. I was a partner in another newsletter business for a few years. Since 2000 or thereabouts, I've written three books and am now working on a couple of others.
Daily Bell: What's your track record been like?
Mark Tier: Actually, until I figured out what became The Winning Investment Habits of Warren Buffett & George Soros, lousy.
Ironically, in the World Money Analyst I advised other people what they should do with their money. My own forays into the market usually ended with burnt fingers.
Once I applied (starting in 1998) what I call the 23 "winning investment habits" to my own investing, everything changed.
For the next six years my personal stock investments went up an average of 24.4% per year − compared to the S&P's 2.3% − without a single losing year, compared to three for the S&P. A major, major transformation.
I can't tell you my precise track record since then as I stopped keeping track of it. Put it this way: except for a dip in 2008, my net worth has gone up or remained stable. And that's after paying the rent, putting food on the table, putting four kids through private schools and university, and indulging in vices like latest electronic gadgets and expensive cigars.
And when I get up in the morning, I have the luxury of choosing to do whatever I want to do with my day. Mostly, I write.
Daily Bell: In your book, you compare Warren Buffett and George Soros. Why do that when no one would think they'd have anything in common?
Mark Tier: I was taking a course in what's called NLP − short for "Neuro Linguistic Programming." Calling it "applied psychology" makes more sense.
One of the precepts of NLP is that if you can find two or three experts in the same field and identify the mental strategies they all share, you can replicate their abilities.
Buffett and Soros are the world's most successful investors. They both started with nothing and are now on the Forbes' list of billionaires. And yes, their investment methods are total opposites. Indeed, Buffett's a long-term investor; Soros a short-term speculator.
Even so, I found they have 23 mental habits in common. Furthermore: investors like Sir John Templeton, Bernard Baruch, Philip Fisher, Peter Lynch, and the dozens of other investors and traders I've studied and worked with, all practice exactly the 23 habits. Without exception.
Here's a simple example of how this works.
Many years ago, the famous hypnotherapist Milton Erickson (he died in 1980) was called in to advise the US Army's champion rifle team. One of the differences he found between the best and worst members was this: the riflemen who stood out aimed for the center of the bull's-eye. The others just aimed for the bull's-eye. When he got them to change their aim to the center, their scores went up.
You can see, intuitively, how that would make a difference.
Daily Bell: So what are the "Mental Habits and Strategies" that made Buffett and Soros the world's richest investors?
Mark Tier: Mostly, they seem, at first glance, to be counterintuitive.
For example, what's the average investor's primary aim when he makes an investment? Obviously: to make a profit.
Buffett's and Soros's major aim is quite different: never lose money. Their strategies are built around this first rule of investing: preserve your capital.
Another: they don't believe you have to be able to predict the future to profit in the markets. The last thing either of them has the slightest interest in is knowing what you, I, or anyone else think about where the market's going.
Prediction is one of "The Seven Deadly Investment Sins." These are beliefs that most investors (and investment "gurus" and Wall Street analysts) share that are just dead wrong.
Daily Bell: Give us another one.
Mark Tier: Sure. The belief that the only way to make big profits is to take big risks.
That's complete nonsense.
Have you ever filled out one of those "Risk Profile" forms − the sorts of things advisors and mutual funds ask for? What those forms are actually asking you is: How much money are you willing to lose?
The correct answer to that question is: not a penny. But if that's your answer, you'll be advised to invest in most "conservative" of investments. Which means: assets that aren't likely to lose much, and aren't likely to make much, either.
This is one of those many Wall Street axioms that are just totally off-base.
When you invest with the mindset of not losing money, you look for what Buffett calls "high probability events." That is, investments with a high probability of profit and a low probability of loss.
They don't happen very often. So most of the time the successful investor "does nothing." There's a wonderful Soros quote illustrating this. He once told his friend Byron Wien, then Morgan Stanley's US investment strategist:
"The trouble with you, Byron, is that you go to work every day [and think] you should do something. I don't.... I only go to work on the days that make sense to go to work.... And I really do something on that day. But you go to work and you do something every day and you don't realize when it's a special day."
"Doing nothing" in this context doesn't mean sitting on the beach. It means not buying or selling anything, but all the while hunting for an investment that meets your criteria.
That's what most successful investors do, most of the time (as well as monitoring their existing investments).
Buying and selling take no time at all. A couple of phone calls. Or these days: a few clicks on the Internet.
What takes the time is knowing what to buy, finding it and then, knowing when to buy it. As Buffett says, "You make your profit when you buy."
Daily Bell: What else do these two famous investors have in common?
Mark Tier: Altogether, I've identified 23 mental habits they both share.
For example, they both have a detailed investment philosophy: their explanation of why markets move up and down and how it's possible to profit over the long term.
Soros's is built around his theory of "reflexivity." It's really complicated, so I won't attempt to outline it here.
Buffett's is much easier to grasp. He invites you to imagine that you have a "Mr. Market" as a business partner. Mr. Market is a manic-depressive who'll be wildly over-excited one day and deeply depressed the next. In one of his Letters to Shareholders, he explained:
Without fail, Mr. Market appears daily and names a price at which he will either buy your interest or sell you his. Even though the business that the two of you own may have economic characteristics that are stable, Mr. Market's quotations will be anything but. For, sad to say, the poor fellow has incurable emotional problems. At times he falls euphoric and can see only the favorable factors affecting the business. When in that mood, he names a very high buy-sell price because he fears that you will snap up his interest and rob him of imminent gains. At other times he is depressed and can see nothing but trouble ahead for both the business and the world. On these occasions he will name a very low price, since he is terrified that you will unload your interest to him.
Obviously, the time to buy is when Mr. Market is severely depressed. But, Buffett warns,
Mr. Market is there to serve you, not to guide you. It is his pocketbook, not his wisdom, that you will find useful. If he shows up someday in a particularly foolish mood, you are free to either ignore him or to take advantage of him, but it will be disastrous if you fall under his influence. Indeed, if you aren't certain that you understand and can value your business far better than Mr. Market, you don't belong in the game.
An obvious corollary: the majority of investors "fall under Mr. Market's influence" and start believing that the "law of economic gravity" has been repealed. There's nowhere to go but up. Or when things collapse, all they can see − like Mr. Market − is doom and gloom.
Around this insight, Buffett built a complete investment system, which he follows religiously.
Soros has, too − around his investment philosophy. Now, you don't need to know very much about Soros to know his system, like his philosophy, will be completely different from Buffett's. Nevertheless, their systems are both built from the same bricks.
What's important here is whether your system (if you have one) has all the necessary parts. (And if you don't have a system, or it's incomplete, you'll be all at sea.)
The 12 Components of the Complete Investment System:
1. What to buy
2. When to buy it
3. What price to pay
4. How to buy it
5. How much to buy as a percentage of your portfolio
6. How you'll monitor the progress of your investments
7. When to sell
8. Portfolio structure & leverage
9. Your search strategy
10. How to protect yourself against systemic shocks such as market crashes
11. How to handle mistakes
12. What to do when the system doesn't work
The most important of the twelve elements of a complete investment system is #7: When to sell.
If you know what your exit strategy is, (both in the event things work out as anticipated, and in the event things go wrong), then you'll immediately know when the right time to sell comes along.
The average investor doesn't even know he needs an exit strategy. Think, for example, of an investment you hold that you bought a year or two ago. Suddenly, the market collapses, or the stock takes off, the directors run off to Paraguay with the money, the dividend is slashed − or doubled − or one of the dozens of other market events that can catch you by surprise suddenly happens.
What are you going to do?
Indeed, I wonder if you can recall, precisely, why you made that investment in the first place. I mention that because an exit strategy is built around the investment criteria that led you to buy it in the first place.
Let's say your system is a simple one: to buy stock in companies with a steady history of stable or rising dividends. If the dividend in one of those companies is cut, you're gone. Just like that. Because your reason for owning it no longer applies.
The fact that you don't have to think about it, that all you have to do is follow a pre-determined rule, is a lifesaver.
Most people, when they wake up in the morning and find something dramatic has happened to one of their investments, don't know whether sell, buy more, hold − or what. They have to analyze the investment all over again. What's changed? Why? What could happen next? Then their emotions are involved and they procrastinate.
In the markets, procrastination will kill you.
Another thing: great investors "stick to their knitting." They completely ignore anything outside what Buffett calls their "circle of competence." You can only have a high certainty of making a profit while avoiding significant losses when you know what you're doing.
Soros, of course, became famous from shorting the British pound. His Quantum Fund assets at the time were $7 billion. His short position was $10 billion − and he planned to increase that but the pound broke before he could.
That sounds terribly risky to you or me: on the face of it, his fund could have been wiped out if things went wrong. But he'd structured his positions so he estimated his total possible loss at 4%. That's still $400 million! An awful lot of money. But with $7 billion in assets, it would not have been a disaster. In other words: he knew what he was doing.
To us what Soros did seems full of risk because, if we were to do it, we wouldn't know what we were doing.
More broadly, you should have a system that fits your personality. I've identified three broad "investor personalities": the Investor, the Trader, and the Actuary. The first two, I trust, are obvious; the last needs a little explanation.
Benjamin Graham was an Actuary. He identified a particular class of investments − stocks selling substantially below their book value − and bought every one that matched his criteria. So at any one time he could have a hundred different stocks in his portfolio.
Ah, you might say − he's diversified. But buying 100 "cigar butts," 100 "growth" stocks, or 100 industrial companies is not diversification. Proper diversification is owning assets that will move differently in response to the same event, or not at all.
Buffett started out as a Graham "clone": buying dozens of stock based purely on their book value. Eventually, he changed his approach to one more appropriate to his personality.
I've created what I call the "Investor Personality Profile." It's a simple questionnaire that analyzes your investment style. You can quickly find out whether your primary mode is as Investor, a Trader or an Actuary. I've also created an "Investment IQ Test": you'll get a detailed report comparing how you rate on the 23 winning investment habits compared to Buffett, Soros and a third "superinvestor," Carl Icahn.
Daily Bell: You say Buffett and Soros don't diversify −
Mark Tier: That's right. They always buy "as much as they can" of an investment they've identified that meets their criteria.
Daily Bell: − so is diversification ever a good thing?
Mark Tier: Sometimes.
As Warren Buffett says, diversification is for people who don't know what they're doing.
Most investors don't know what they're doing. They're investing with their gonads, not their brains. They're swept away by the emotion of the moment. That's why so many people buy at the top and sell at the bottom.
For example, who in his or her right mind would buy this season's "hot stock": Facebook?
Think of anyone who's really good at something − the Beatles, Adele, Pavarotti − great singers, all of them. Or Tiger Woods, Roger Federer − any sports champion. Or a great writer.
How did they become great?
They started young and they specialized.
In life, diversification makes little sense. Imagine Rafael Nadal on the basketball court opposite Michael Jordan. The only thing worth betting on in that match would be whether Rafa would score any points at all.
Every successful businessman has all his eggs in one basket. So do you, if you think about. What are you best at? Only a few things, your profession being the obvious first choice.
And: how long did it take you to become good or even great? You'll have to invest about the same amount of time to become a great investor − or a great anything else.
If you're just average, what's the best thing to do? I'd recommend super-trader Ed Seykota's advice:
"The average trader [or investor] should find a superior trader to do his trading for him, and then go find something he really loves to do."
To which I'd add: if you can get paid for doing it. What could be better in life that getting paid for having fun?
Of course you can improve your investing skills. But for many people, it makes more sense to focus on what they love to do and/or get paid for.
Then, diversification makes sense. A simple strategy like Harry Browne's Permanent Portfolio approach − even a low-cost index fund − will meet the "first rule of investing" (over time): never lose money.
That said, if you've accumulated money, unless you blow it you'll always have a problem: how to preserve its purchasing power. If that's your primary investment aim − which it should always be − diversification is an excellent strategy. When done properly, you can stop worrying about what the markets are doing and get on with the rest of your life.
Daily Bell: You say great investors are not motivated by money. Why?
Mark Tier: Well, there are always a few Scrooges in any field. But think about it: if you had tens of billions of dollars like Buffett or Soros, would you bother getting out of bed in the morning if you didn't feel like it?
A lot of people wouldn't.
When you have enough money to live for the rest of your life without having to work, your motivation to do anything isn't the money. It's that simple.
Soros is a good example of this. His primary interest is not investing but philosophy. His major intellectual influence was the philosopher Karl Popper − author of The Open Society and Its Enemies. And he'd like to be remembered as a philosopher, not as an investor or speculator.
When he started his Open Society Foundations, he semi-retired from the investment field. First, Stanley Druckenmiller took over as manager, and Soros "acted as coach." Later, he announced he was changing the objectives of his Quantum Fund from aiming for high profits to just, at a minimum, tracking the market. A kind of retirement fund.
Though every time his capital was threatened by a crisis − as happened in 2008 − Soros jumped back in the saddle to preserve his capital.
Daily Bell: You obviously admire Soros. But surely, to a libertarian, his philosophy is an anathema. He's always advocating more government intervention.
Mark Tier: I admire Soros as an investor. I certainly don't admire his politics. Or Buffett's either. And the fact that they have that in common as well (and both married women named Susan) is not a perquisite to winning in the markets.
It's a pity Soros didn't take notice of the another seminal thinker of the 20th century who was, like Karl Popper, also at the London School of Economics when Soros was there: Friedrich Hayek.
It's a shame. His whole theory of "reflexivity" has, as its foundation, the business cycle of boom and bust. Soros takes that as a given.
If you think of the business cycle as a "fact of nature" rather than the result of human action, then it's easy to conclude that someone should do something to ameliorate the effects.
In some respects Soros is libertarian. For example, his support of organizations like NORML, which aim to repeal the prohibition of drugs. If he'd discovered Austrian economics in London at that same time he came under Popper's influence, well − maybe he'd be supporting Ron Paul today instead of the Democrats.
Daily Bell: What do you think of the "Efficient Market Hypothesis" and the "Random Walk"? Are they valid? If not, why not?
Mark Tier: In a nutshell, the "Random Walk" says that stock prices move randomly, which means you can't predict anything and your chances of making a profit on any one investment are random. While the "Efficient Market Hypothesis" says that the current price of any stock is the correct valuation of that stock. So there's no point in trying to beat the market − it can't be done.
Of course, it can be done. Graham, Buffett, Soros, Lynch, Templeton and others have proved that. To which the "efficient market" advocate replies with the analogy of a million monkeys with typewriters: at random, one of them will eventually produce the complete works of Shakespeare.
There's no point in arguing with them. Just follow the example of one of the ardent proponents of the Efficient Market Hypothesis: economist Paul Samuelson. Saying that Warren Buffett "may be as near to a genius at investing as I have observed," he made a sizable investment in shares of Berkshire Hathaway. We can only assume that his conscience was salved by the profits he made.
Now, I don't mean you should buy Berkshire Hathaway (unless the price is right), but take the point that even Samuelson believed Buffett could beat the market − despite saying it can't be done.
Remember, though, it's not easy. It takes time to develop the skills and test your methods. If you're now in the position where, if you worked another hour or two a week you could take home an extra few hundred (or even thousand) dollars, it would probably be more efficient to do that and limit your time on your investments to making sure you'll preserve the spending power of your capital.
Daily Bell: Are Wall Street research reports valid predictors of company and sector performance? If not, why not?
Mark Tier: To be honest, I really don't know. I don't take any notice of Wall Street reports. Except when I'm researching a company, and then I'll read whatever I can get my hands on. Though it's often better to go straight to the SEC filings, or the equivalent in other countries.
My only comment would be that you can get what Soros would call a "reflexive" reaction. When a company's quarterly or annual results come out below the "consensus" forecast, that stock will often drop a bit. But that doesn't seem to me to be of any significance in the long run.
And remember: if or when you do read broker's reports, no matter how good the analyst may be his basic job is to help the brokerage firm sell stock to its clients. So always read between the lines. Company annual reports too, for that matter.
Daily Bell: What do you think of the current dollar reserve monetary system? Is it failing?
Mark Tier: Has it ever succeeded?
Once upon a time gold and silver were money. Back then, when governments were strapped for cash they clipped the coins. At least the coins were still gold, however diluted.
Today, money is basically a blip in a computer, no one can tell the difference a "real" dollar and one that's been "clipped" − I suppose I should say "blipped."
Simply compare the history of money before and after 1913, when the Fed was created. There were runaway inflations before 1913 − assignats in France, the greenback during the American civil war, the earliest one was in China, soon after the invention of paper, if I remember correctly. In every case the government of the day tried to make people accept paper money as if it was gold or silver.
Of course, the people refused when they could.
You can count the number of hyperinflations before 1913 on the fingers of one hand. Since then, you'll need your toes as well.
And while there were booms and busts under the gold standard, they were nothing like as bad or as frequent as they've been over the last 100 years.
There's no reason to expect the next 100 years will be any better.
Daily Bell: Is central banking a good thing?
Mark Tier: Money in the economy is the equivalent of the blood running through your veins and arteries.
A central bank is a government monopoly which controls money. Would you like to have the government controlling your blood supply?
Daily Bell: Should central banks be shut down? Do you favor a gold standard? A private one? A state-run one?
Mark Tier: Governments should just get out of the money business entirely and let the market decide what money should be. Most likely, the market will choose gold.
As long as money is monopolized by governments, there'll be inflation. The only question is: how much inflation?
Why? Imagine for a moment that you're the politician in charge of the central bank. You want to get reelected − that goes without saying. (In fact, that's the only thing politicians are good at doing).
One way to get reelected is to buy votes. Of course, it's not called "buying votes," it's called fiscal and monetary policy. So you get the government to spend money now, mostly in electorates where your opponents have a chance of winning. The short-term result is a burst of prosperity. The long-term result − well, who cares about the long-term result? You'll be reelected (and if you're not, you can lay the blame on your opponents).
Of course, in some countries (like the US), the central bank is "independent." There, you can have a word in the Fed chairman's ear. If he doesn't listen, well, just run a budget deficit. It's then the Fed's job to finance it, whether they like it or not.
And what about self-restraint?
Milton Freidman proposed that the Fed should increase the money supply at a slow but fixed rate. For that to work, politicians, bureaucrats, regulators and central bankers must all exercise self-restraint.
That ain't going to happen. Ever.
Think about it.
If you gave your kids a credit card, do you think they'd exercise self-restraint? Or would you have to beat them over the head (metaphorically speaking!) every month when the credit card bill arrived.
If your parents had given you a credit card when you were kid, would you have exercised self-restraint?
When I was a kid I was always leaving the screen doors open. I don't know how many times my mother asked me, "Were you born in a tent?"
Of course, the correct answer would have been: "How would I know?"
But I didn't think of that till much later.
Almost nobody is going to exercise self-restraint with other people's money.
So there'll never be monetary stability in a country with a central bank.
It makes no difference if the central bank is privately owned. It can't be a central bank unless it has a government-granted monopoly.
In a completely free market for money, there'd be no central bank of any kind.
Daily Bell: How would you characterize yourself politically? Are you a fan of Ron Paul's?
Mark Tier: I'm with Doug Casey: all governments stink. Some just smell worse than others.
So I'm a fan of Ron Paul to the extent that I hope he wins both the nomination and the presidency. Although I think Gary Johnson (the Libertarian Party candidate) would probably be better.
But I'm not holding my breath.
Daily Bell: What do you think of America? Are the good times ever going to return?
Mark Tier: I'd say the United States is on the road to decline.
There's a coming intersection of three different forces:
1. Declining population growth and an aging population.
The growth of the world's economies since the Industrial Revolution has been based, in part, on increasing population. More people mean more consumers − and more producers.
But in the West, the reproduction rate is falling below the replacement rate. That means, not counting immigration, the populations of some countries − notably, Japan and Western Europe − are declining.
According to projections, sometime around 2050, give or take a decade or two, the world's population will stabilize or begin to decline.
This will be an enormous shock to businesses everywhere. No longer able to depend on growth from more consumers, or opening up new markets, businesses will be competing with each other for a declining number of customers. That's a completely different ball game.
Consider what could happen in the housing market.
More people mean more houses are needed. As people get richer − as is happening in so many developing countries − they buy bigger houses.
What happens when the population declines? There are more houses than there are people to live in them. I don't think you'd want to be in the business of property development then!
At the same time, the world's population is aging. That plus the falling reproduction rate means fewer workers for each retired person. Which equals either more taxes for those people working, or the effective bankruptcy of social security systems.
2. The continued growth of government.
As governments expand, so does the share of gross national product they take in taxes. An aging population will accelerate this process − for the people who are still working.
So the incentives to create wealth will decline.
3. The growth of the private sector in relation to government growth.
As long as the private sector grows as fast as or faster than governments, the growth of government can be financed without completely strangling the generators of wealth.
But should government growth (and taxes) exceed the growth of the private sector, there'll come a crossover point where government will become a burden too heavy for us to carry (if it isn't already).
This is not something we have to worry about right now; but I'm sure it's something our children or grandchildren will have to face.
And it's not inevitable. But a sea change is required to stave it off. That can only happen when people stop looking to governments to "solve" all their problems. Perhaps Ron Paul's growing impact is a sign of that.
Don't be deluded by politicians "favoring" smaller government, or running on an "anti-Washington" platform. Consider Ronald Reagan, the greatest example of this class of politician.
Reagan's greatest achievement, after helping Gorbachev tear down the Berlin Wall, was reducing taxes.
Remember "supply-side economics" − the argument that carried the day?
Looking into the argument is not very comforting. You'll recall the thrust of "supply-side economics" was that by reducing tax rates, a government would collect more money.
This is not a recipe for smaller government. Quite the opposite. But lots of people thought it was because their top marginal tax rate would go down.
Yes, the economy boomed − and the government continued to grow.
Daily Bell: What about Europe and the West? And do you think Europe will break up into component countries?
Mark Tier: Other Western countries are following pretty much the same pattern as the United States − with far less pressure to stem the growth of government. Ron Paul, sad to say, is a purely American phenomenon.
Overall, Europe's problem is similar to the United States: a federal government that's growing without obvious limits.
Of course, Europe isn't one country like the U.S. But Brussels is an "over"-government that follows the rule of all organizations: grow.
Growth is everyone's objective. Companies want more customers, associations want more members, churches want more converts. But − unless they're protected by the state − none of them can grow without limit. They must all "live within their means" − or face bankruptcy.
Bankruptcy is the ultimate check on growth. But while governments can print their own money, they're immune to bankruptcy. There's no check, no limit.
But in a democracy, citizens generally react against any fast change. So governments generally grow by "salami tactics" − slice by slice. For example, they don't ban something − say smoking − overnight. First, there's a law requiring non-smoking sections. Then they have to have separate ventilation. Then it's banned in certain places − offices, for example. And so on.
The "over"-government in Brussels is no exception.
Of course, growth is a secondary objective to survival. Brussels will fight tooth and nail to keep existing member countries in its embrace.
For the average European-in-the-street, there are many advantages. Borders have effectively disappeared, they can live and work anywhere in Europe and so on. Businesses like the larger market so few politicians will get much support by campaigning to "quit Europe," even in Britain, possibly the most "anti-European" member.
And quitting, of course, represents dramatic change, which few people like.
So why might a country want to quit? A crisis situation is the most likely scenario, such as Greece's current problems.
But if Greece walked out, it would be on its own. At the moment, its government (and politicians) are propped up by the rest of Europe. If they quit, they'd be totally reliant upon their own resources.
Even if that's a better proposition in the long run (getting off welfare always is), the immediate choice is disaster (if they quit) and maybe not (if they stay). If you were a politician, your choice is a no-brainer.
I'm not saying the EU won't break up one day. I'm just pointing out that most all of the incentives are against that happening.
Daily Bell: What about the euro? Will it survive?
Mark Tier: The major problem with the euro (aside from it being a monopoly, government-issued currency) is that there's no effective discipline. There are rules that member governments are supposed to meet, like a budget deficit not over 3%. But if they don't, there's no penalty. Are you going to make sure you always follow a rule if there's no penalty?
Obviously, not everyone will. Hence: Greece.
Will the euro survive? Who knows? At the moment, all the member governments seem determined to keep it alive.
My guess is it will continue to exist. After all, governments rarely kill programs just because they've failed.
Many years ago, Fredrick Hayek wrote a monograph entitled The Denationalization of Money. He suggested, as a first step, that all the EU members make every other EU country's currency legal tender in their own country.
Unfortunately, hardly anyone noticed.
But imagine if you lived in say, Greece, and could use German marks or even British pounds to pay your taxes and buy yourself a cup of coffee. There'd be no Greek crisis today.
In fact, quite the opposite. The drachma would probably have all but disappeared and Greece's government would have been forced to live within its means. Not the end of the world − except, of course, if you're a Greek politician or central banker.
No doubt a major reason Hayek's proposal never got any traction.
Daily Bell: What do you think of the Chinese Miracle? Is it for real or is it the result central banking monetary stimulus?
Mark Tier: It's real all right. Deng Xiao-ping said it didn't matter whether cats were black or white so long as they caught mice. By getting rid of many of the Communist-era controls, Deng granted freedom of sorts to the average Chinese.
Economically, the result has been astounding.
At the same time, the State hasn't "withered away." Far from it. It's trying to keep control by keeping its people happy with higher wealth or higher wages. And they're intervening heavily to try and make that happen, especially in the property market. They've built several whole new cities which are basically empty! It's amazing. My friend Tim Staermose − who writes for the Sovereign Man − was there recently. So if you want to see more why not go straight to the "horse's mouth."
On top of that, there's a slew of state-run "companies" that would collapse in a free market. In a nutshell, it looks to me as though an enormous bubble is probably brewing in China.
Daily Bell: What do you think of all these wars the US is embarked upon?
Mark Tier: It's crazy − realpolitik gone mad.
I'm sure you're aware of the "blowback" argument: that invading places like Afghanistan and Iraq increases America's enemies. I agree with that − you could call it Newton's law of politics: every action brings an equal and opposite reaction.
But I'd like to point out something different.
Although the US has the world's biggest military establishment, by fighting wars on so many fronts its forces are now stretched so far that if there was a real threat to the continental United States, they'd have trouble countering it.
Another factor: the US is in bed with all manner of disgusting dictatorial countries. Consider Saudi Arabia − supposedly an American ally.
Is it really?
Everything Saudi Arabia stands for is the exact opposite of what you can read in the US Constitution. The very culture of the country is anathema to everything the West stands for. But as long as we think we need them, they've got us − or at least, Washington − by the short and curlies.
After all, why should the US (or Britain, as it was in the past) try to grab control of the Persian Gulf for what they call "strategic reasons"?
If oil-producing nations want to sell their oil, they have to get it to the market. Which is just about everywhere except the Middle East. Let them deal with the problem of transporting it − and protecting it while it's en route.
Finally, what would have been the simplest way to "go to war" against Iraq − or Iran?
No, I don't mean nukes. I mean nuclear power generation.
Why are Middle Eastern countries important? There's only one thing they have that anyone else wants.
Through OPEC they use that lever to get what they want from the rest of us.
Where do they sell their oil? Mostly in the West.
If Western countries reduced their oil demand sufficiently, OPEC's power would dry up. No one would care any longer about the Middle East.
The only feasible way to do that is by a crash program of building as many nuclear power stations as possible, as well as increasing oil and gas production in non-OPEC countries.
Of course, that's not going to happen. Too many controls, regulations and "environmental" obstacles.
Daily Bell: Is the US an empire? Does it matter when it comes to investing?
Mark Tier: It's not an empire in the same sense as the British or Roman or Russian empires. With a few exceptions − American Samoa, Puerto Rico, Guam, and the Philippines until 1946 − the US doesn't actually accumulate colonies, like the British, or, as the Romans and Russians did, incorporate territory (beyond the continental US and Alaska) into the country.
But it has other hallmarks of empire: bases all over the world, few of which serve any strategic purpose. And the way the US bullies other countries. Consider just two recent examples: the arrest of a New Zealander (by the NZ police in New Zealand) and his extradition in relation to the alleged pirate site, megaupload.com, and declaring Switzerland's largest private bank, Wegelin & Co. a "fugitive" when its representatives failed to show up in a New York court. In the latter case, the US Justice Department is accusing the bank of being part of a conspiracy with American clients to hide money from the IRS.
Wegelin & Co. has done nothing illegal under Swiss law. The US action is just another example of a country extending its jurisdiction outside its own borders with no regard for local sovereignty, just as an empire would.
It's not the first country to do so. Consider how the British initially ruled India. There were millions of Indians, but only a few thousand British. They co-opted the rulers of the various sultanates, stationing "advisors" at each one. Buying them off. Playing one against the other.
It's a very effective way of ruling without occupying. I think the similarities with the way the US government "rules" outside its borders are obvious.
As to investing, there are advantages. The US government uses its economic clout to gain advantages for American business abroad.
There's nothing unique about this, by the way. The British did it, the French did it, the Romans did it, the Japanese did it. Every government seeks to extend its power − over both its citizens and everyone else.
Where, say, the Chinese and Indian governments are powerful − at the moment, just vis a vis their neighbors − they throw their weight around. (Nepal, Bhutan and Sri Lanka are, to some degree, Indian client states). If either (or both) of them supplant the United States as the world's most powerful state, they'll do exactly what the US is doing now.
Back to investing, consider this: Wherever you go in the world, what do you see? Starbucks, McDonald's, Kentucky Fried Chicken, 7-11s and so on. And many of the Indians, Chinese, Australians, Germans and so on sitting in these places are drinking Cokes, watching movies on their iPads or sending texts on their iPhones.
All American companies.
Sure, there's lots of local competition and quite a few other chains that aren't American owned. But the simplest way to get exposure to the all the world's economies is to buy stocks listed in New York.
The same was true of the London stock exchanges when Britain ruled the world. For our great-grandchildren, it might be Shanghai, Mumbai, Johannesburg, or − who knows?
Daily Bell: Any other books or articles you want to refer us to?
Mark Tier: There are a lots of great investment books to choose from. You can see the ones I've recommend on my website, MarkTier.com.
You'll also find articles of mine there − on investing and a variety of other subjects. Plus, you can read excerpts from The Winning Investment Habits of Warren Buffett & George Soros. I've also put online the whole text of How to Get A Second Passport. The details are out of date but the principles remain the same.
Libertarians among your readers will enjoy the two science fiction anthologies I co-edited (with Marty Greenberg), both built around the theme "Societies Without Government That Work." Give Me Liberty is a collection of SF classics, including my favorite, Eric Frank Russell's "...And Then There Were None." The stories in Visions of Liberty were all specially-written for the collection, by great SF authors like James Hogan, Jack Williamson, Lloyd Biggle, Jr. and others.
They won a Prometheus Award for libertarian science fiction in 2005, and were republished in one volume titled Freedom! At just $5 for the eBook, that's a real bargain.
A profound book that has nothing to do with investing, but everything to do with the state of the world today is The Rise of Early Modern Science: Islam, China and the West by Toby Huff. If you want to really understand why and how Islam is different from Christianity, this is the best source I've found (and I've read a lot of books on the subject). Actually, as the title suggests, "understanding Islam" is merely a side-issue for Huff. His main focus is why science and reason flourished in the West after the rediscovery of Greek thought − but not in Islam, which preserved that thought and passed it to our ancestors, the Greek-speaking Eastern (Byzantine) Christianity where Aristotle was the language of scholarship, or China, where science could have developed − but didn't.
A truly fascinating and enlightening book.
And I'd like to tell you, if I may, about the book I'm most excited about right now: my latest, a novel titled Trust Your Enemies.
I've styled it "A Political Thriller" − but as you can imagine from most of what I've been saying, it's more an anti-political thriller. And a powerful dramatization of the case against the "Wars" on drugs and terror − among other things.
The genesis of the story was the question: "How does an average guy become a Howard Roark (the hero of Ayn Rand's The Fountainhead)?" − in other words, a moral person.
The story revolves around Alison McGuire and Derek Olsson who, as teenage lovers, make moral choices that turn them, eventually, into enemies.
As they're close to realizing their dreams, they discover that the real-world results of what they set out to achieve are the opposite of what they desired ("Be careful what you wish for...").
Alison is one step from the pinnacle of power − as the "right hand" of the charismatic politician everyone expects to be Australia's next Prime Minister − when, to quote from the first review on Amazon.com:
"...the corrupt and totally repulsive (but also very powerful) senator Frank McKurn shows her a video he secretly had made of her having passionate sex with Derek Olsson, a man who's in prison awaiting trial for murder of a rival in the drug trade. He'll keep it under wraps if she works as his spy. At the same time, there's guerrilla war going on in the Sandeman Islands, where Australian troops are losing guys and a totally corrupt government is stringing the Australians along, and where Alison's boss makes a career threatening mistake. There's an awesomely sexy, smart, wanna-be-like-her journalist named Karla Preston who's covering what's going on in the Sandemans when she's nearly arrested for reporting what that government doesn't want the world to know and has to flee, hiding in a remote island village − and she also is tied to Derek Olsson, who ends up escaping in a blaze of gunfire while being transported to his trial and goes on the run using a series of disguises. The book is up there, for me, with The Girl With the Dragon Tattoo. Powerful, intense, very well written."
If you have as much fun reading it as I had writing it, you'll have a ball. If you have an eBook reader, by all means download the sample from Amazon. As Trust Your Enemies is rather long, you'll get the first nine chapters − enough to know whether it grabs you or not.
I'd like to make a special offer for your Daily Bell readers here, if I may. One of the "23 winning investment habits" of Warren Buffett and George Soros stands out so much that if it's the only one you adopt you can kiss the days of losing money in the markets goodbye forever. I call it "My Favorite Wealth-Building Secret," and I give chapter and verse in a Special Report. Purchase The Winning Investment Habits of Warren Buffett & George Soros and I'll send it to you as my "thank you." All the details are at my website, here.
Daily Bell: Any other projects in the works?
I'm in the middle of writing another financial book, which should be completed sometime this year. It's in the same vein as Winning Investment Habits: how your mental attitudes to money determine whether you'll be rich or poor. And I'm outlining another novel which I'm itching to get to. After that, I have dozens of other book concepts, so I'm "planning" to live a long life!
Daily Bell: Thanks for your time.
Mark Tier, a prolific author, has a distinct writing style, which is reflected in this interview. We want to note that Buffett's approach to investing lately includes sizable private investments in such companies as Goldman Sachs. It's as if lately he's not comfortable "investing" in anything but power elite affiliated firms.
Having pointed this out, we want to reemphasize we found many of Mr. Tier's points to be most interesting. What Buffett is or isn't doing currently has little to do with the larger ideas that Tier offers us. And he points out that they work, as well, using his own portfolio as an example.
Mr. Tier seems to have led a disciplined life in many regards. It's one that has been devoted to reading, writing and thinking about some of modern history's thorniest issues. He's made progress personally and professionally while providing support for his family as well. Good for him.
He seems to be an example of someone who has tried hard to understand How the World Works and has reaped benefits as a result. Free-market thinking is effective on numerous levels. That seems to be a Lodestar for Mr. Tier and we wish him and his readers well on their journey toward even greater success.
Posted by terrybee on 02/27/12 10:22 AM
iecja! That is one of my favorite post's.
Alongside some of DB's articles ,-it's a virtual 'Know thyself' .
Thank's for being 'Free' too DB .
The Facebook /intel poison- chalice - legal- enforcers-claws have ensured a 'little' fee for the Grooveshark 'global' music-site & so many other's..nice prep' for a nominal nwo Tax/chipping (hope 'it' fails miserably though).
Posted by the_IRF on 02/27/12 03:49 AM
The numbers are up.
55 RESIGNATIONS FROM WORLD BANKS:
Click to view link
Posted by Danny B on 02/26/12 04:30 PM
"they have artificially limited the supply of that resource to the middle east,"
Ahh, yes. For the moment.
If Iran is attacked, the Straits of Hormuz will be closed for years. Probably, the Vale of Tears also. Like the Suez canal, it will remain closed by the insurance companies.
If Iran is not attacked, the dollar will be happily sidelined by ASEAN and others.
If Iran is attacked, oil will come from Russia, Venezuela, Brazil and the "oil kitchen" countries. They will sideline the dollar.
If the Straits are closed, Saudi and Japan will sell U.S. treasuries to stay solvent. If the Straits are closed, the oil-price shock would push much of the world off a cliff.
Either way, demand for U.S. instruments will be falling. Demand for FRNs may very climb at the same time as demand for instruments is falling. Demand for U.S. instruments is directly tied to maturity. The FED is buying 91% of 30 year notes. 90 day notes are still attractive to investors. FRNs are liquid. As the "trust horizon" shrinks, MZM is more attractive and long notes are being shunned or dumped.
Should be interesting.
Posted by jonnyh on 02/26/12 04:27 PM
"Then, when I got out into the real world, I found that I had to unlearn pretty much everything I'd been taught.
My professors were all Keynesians; reality is Misesian."
Posted by taxesbyanyothername on 02/26/12 03:32 PM
Good Post leceja. A better and far more concise explanation of todays world situation than I have read anywhere else.
Posted by Happyhippo on 02/26/12 02:53 PM
Soros and Buffet are both bought and paid for by the elite/bilderburg controllers. Nice guy but doesn't have a clue about what is really going on. When are you guys going to look at Lord Blackheath's statement in the House of Lords. Now that is interesting.
Posted by laceja on 02/26/12 02:42 PM
Mr. Tier sneaks up on, but fails to nail one very important fact about the US Empire. It is not really oil, but rather the US Dollar. The Rockefellers and Rothchilds only use oil as the object of insuring the world "needs" the US Dollar, which props up the empire. Control a people's currency and you control the people.
They have very effectively forced us to "need" the US Dollar by forcing us to "need" oil as our energy source. They have been so good at distracting us from very real alternatives, such as Liquid Fluoride Thorium Reactor (LFTR), that could be totally safe and produce zero dangerous waste, because they need to keep us focused on the need for oil. Along with that, they have artificially limited the supply of that resource to the middle east, forced the producers to accept only US Dollars for that resource, and created enough chaos in that region to keep the price high. Their manipulation has insured continued world demand for those US Dollars. The middle east is of strategic interest to the US, not for its oil, but for its unending support for the US Dollar. It's really the only important export of the US. That's why it is actually more important (to the bankers) for more and more manufacturing jobs be moved outside the US.
So, it's the dumbing down of America has two benefits for the Anglosphere elite (as you put it). First, it insures the rest of the world has increasing need of US Dollars, to buy oil to support production, and second, to insure the American public isn't smart enough to understand why there aren't any jobs for them... Keep those unemployment checks and food stamps coming. We don't need no stinking jobs!
This is the only reason the US has been able to live on Easy Street and become so very lazy and the bankers have become so very powerful. It is also the very reason for so much US military adventurism. In order for the powerful bankers to maintain their grip on the world, they must continue to enforce the need for those US Dollars, which is inextricably married to the British Pound. That's why London City has not allowed the Brits to adopt the Euro. My guess is, Mr. Tier may also be wrong about the longevity of the Euro. My guess is the Euro was only created as a vehicle for the Rothchilds and Rockefellers to plunder Europe. Especially the Mediterranean, which has always been coveted as the ultimate playground.
That said, this was an excellent interview and I very much appreciate DB's efforts to bring us Mr. Tier's insights on the mentality of successful investing. Truly enlightening! Thanks DB.
Posted by dslyoga on 02/26/12 01:30 PM
Sorry, I meant that to be a FIVE STAR rating.
The interview with Mr. Tier was really inspiring to me. ... The only thing I was hoping to read was if he had any insights into the differences between Soros and Jim Rogers.
Thanks for the GREAT interview.
David Scott Lynn
Posted by rossbcan on 02/26/12 12:22 PM
MT: "Soros, "reflexivity." It's really complicated"
No, it's not. It is really hysteresis, renamed to steal concepts from others, to add to faux "mystique":
Click to view link
Posted by Freeman on 02/26/12 12:19 PM
Great and very interning interviw. I will definitely pick up his books and have a read. Thank you for the introdroduction. DB.
Posted by rossbcan on 02/26/12 12:17 PM
MT: "Prediction is one of "The Seven Deadly Investment Sins."
I predict that so long as the unproductive continue to determine "who gets what" (no property rights, Pandora's Box pried wide open), the planetary economy will continue to implode and, financial "success" and, the trappings therof just put you higher on the predator list, a survival risk. This situation will persist until the stored wealth (seed corn) of civilization is consumed and, the "rule decreers" decide that genociding any more cuts into what they consider to be the "neccessary" feudal slave population:
Click to view link
Posted by alexsemen on 02/26/12 12:14 PM
BS by power BS
Posted by kenn on 02/26/12 12:09 PM
Financial Literacy... So this is what we've been witnessing last couple of years!