Being Ignorant

Benjamin Franklin once remarked, “Being ignorant is not so much a shame, as being unwilling to learn.” With this in mind we remark, “Shame on you, Mr. Greenspan.”

In two decades as Fed Chairman, The Maestro managed to weaken government restrictions on the financial industry, destroy the integrity of the capitalism, adamantly ignore the existence of bubbles and their consequences, and in fact, intentionally held interest rates near zero to inflate them.  Not exactly a great report card for our former Fed Chairman.  More concerning, is that the man apparently has learnt nothing from his mistakes. We strongly encourage our friends to read Michael Burry’s New York Times Op-Ed titled, I Saw The Crisis Coming. Why Didn’t the Fed?

Mr. Greenspan’s response – This guy is very likely just one of a “very, very small group” of people who “purely by luck” managed to guess the direction of the economy.

It would appear that Dr. Burry has a knack for “getting lucky.”  A cursory glance of his prior investor letters shows that he successfully navigated Greenspan’s last bubble as well, returning his shareholders 44.6% returns versus an S&P 500 of 11.9% in 2001.  In his then year-end letter, he stated:

It is my opinion that we have yet to find fantastic undervaluation on any scale of depth or breadth comparable to the overvaluation previously, and quite recently, wrought. In fact, common stocks of nearly every persuasion and category have found themselves today at price levels that can only be described as optimistic. To some extent, the events of September 11th may have created the feeling among investors that nothing short of another large scale terrorist attack or other national disaster could force stocks back down below the September lows. This is clearly not the case. Emotion may produce short-term market bottoms just as it may produce short-term market tops, yet logic that attempts to peg valuation levels of any gravity without first and foremost considering valuation is flawed logic at best.

Well said Doctor.  Well said.