Link: http://www.blog.sethroberts.net/2008/01/21/interview-with-gary-taubes-part-14-the-end/

I did a site search on Seth’s blog for “fructose” (On how to do these and improve your use of Google Search) as I was curious if Roberts had seen any negative impact to using fructose in his Shangri-La Diet. I wondered this because fructose is apparently sweeter than glucose, which per the SLD theory that flavor/calorie associations spur weight gain, might imply that ingesting fructose would actually cause weight gain (I was trying to tie this all together into Stephen at WHS’s recent post about sugar). Alas, apparently sugar-water using nothing but fructose works fine on SLD. I forgot that plain sugar water is tasteless regardless of the sugar used (I don’t understand how sugar is sweet, but sugar water is not, but it’s true)

Anyway, in a roundabout way I got to reading Roberts’ interview with Taubes (Only read the last two parts out of fourteen: need to find the time to read the rest!). It was at the end of this interview that Taubes made a fascinating comment about how people in the scientific community react to his research on insulin and carbohydrates. Specifically, these otherwise intelligent and reasoning folk tend to close their minds as soon as Taubes drops the “C word:” carbohydrates. One word shuts them down as they write off Taubes’ immense research by way of invoking the “Atkins diet” or any number of other “low-carb diets” that were all the rage a few years ago.

And I couldn’t help but think how this mental shutdown is what I’ve seen countless times with any person of religion — people who otherwise may agree with any number of points you make will completely shutdown on the invocation of certain words.

This is a fantastic example of rational people utterly failing to apply reason, and it is exemplified by scientists and people of faith, alike. Indeed, the common thread here is simply dogma. Interesting.

TAUBES I think that’s true, but there’s this contrary effect that happens. I said this in my lecture. The science I’m trying to get across can be accepted up until the point at which I say the the word carbohydrate, and then people shut down, and they think “Oh, it’s that Atkins stuff again.” Their minds close and they turn around and go back to their lives. Anyway, I look forward to seeing the interview and getting your book and reading it. I enjoyed this. Again, I like nothing better than talking about this stuff.

Link: http://www.jafra.gr.jp/eng/sumi.html

How appetizing is this? photo credit: jasja dekker

Prior to Seth Roberts mentioning it on his blog (here), I had never heard of the Japanese dish called “Natto,” which is a fermented soybean product. Apparently, it contains a great deal of Vitamin K2, is anti-bad-bacterial, and effectively lyses human thrombus. If you’re like me, that last bit probably made no sense to you, so below are some definitions until I paste liberally from an interview on Natto held with a Japanese expert on the food, Professor Hiroyuki Sumi, who has been nicknamed “Dr. Natto.”

• Nattō - “A high protein food consisting of sticky, fermented whole soybeans cooked in Bacillus natto.”
• lyse - “To dissolve or destroy.”
• thrombus - “A clot within the cardiovascular system. It may occlude (block) the vessel or may be attached to the wall of the vessel without blocking the blood flow.”
• fibrinolytic - “Fibrinolysis is the process wherein a fibrin clot, the product of coagulation, is broken down.”

The K2 angle on Natto is particularly fascinating, particularly in light of how expensive it is to supplement K2 via products like butter oil. I’ve been wondering in reading more into fermentation from sources like Seth Roberts when I would see a tie-in to Vitamin K2, which is produced by our own gut bacteria as noted below.

In an experiment conducted out of sheer curiosity, I found that natto contained a strong enzyme that lyses thrombus.

I am Japanese and regularly eat natto, so one day I took some natto to my laboratory. That was in 1980. I usually prepared thrombus in a laboratory dish and measured its strength by adding urokinase to it, but that day, I added natto instead. I found that natto contained a strong fibrinolytic enzyme, judging from the large area lysed. After coming back to Japan, I repeated various experiments, and first presented the results of my research in 1986. NHK and various newspapers reported my discovery of the enzyme named ’nattokinase ’,and before I knew it, I had become Dr. Natto. Originally, I was interested in fermentation. After I graduated from the Department of Fermentation Technology at Yamanashi University, I entered the Department of Medicine because I wanted to continue my study of enzymes further. In the field of fermentation, Japanese technology is the most advanced in the world. I think this is the field in which we achieve our most original results.

I studied more than 200 foods from all over the world, but none surpassed natto in terms of fibrinolytic activity.

…

――What are the functions of nattokinase and Vitamin K2, which are contained in natto?

Dr. Sumi: It is said that natto became a popular food in the Edo period, and that the voice of natto sellers was constantly heard in the city of Edo.Regarding the effects of natto,there are many anecdotes concerning its efficacy for stomachache, and flu, and for helping women give a birth. This is because natto has a high nutritive value and is easy for the body to absorb. In addition, natto has an antibacterial effect. In the old days, food poisoning was very common, and people used natto in order to prevent cholera, typhoid and dysentery.

Natto is highly antibacterial, and also contains di-picolinic acid, which suppresses O-157.

In a food dictionary of the Edo period, it is written that natto neutralizes poisons and stimulates the appetite.Neutralize poisons refers to an antibacterial effect. Recently, it has been found that natto contains di-picolinic acid, which suppresses O-157, and that natto has an antibiotic effect. Natto suppresses the growth of harmful bacteria while encouraging the growth of beneficial bacteria such as lactobacillus. The best-known component of natto is nattokinase, an enzyme that lyses thrombus. Recently, the Japanese diet has come to resemble the American one, and consequently, the incidence of thrombosis in Japan has increased. The incidence of thrombosis in the heart and brain is higher than that of cancer, if myocardial infarction and cerebral infarction are included in the total. Natto has attracted attention as a food that helps to prevent senile dementia, which is one type of thrombosis, because nattokinase lyses thrombus for a very long time when eaten directly instead of taken by injection.

Vitamin K2 in natto is essential for preventing osteoporosis.

Natto contains another useful component, named Vitamin K2. It is said that 60% of women over the age of 60 suffer from osteoporosis, which Vitamin K2 helps to prevent. In order to maintain healthy bones, a number of studies suggest that it is important to obtain Calcium and Vitamin D from milk. Recently, however, it was found that a protein named osteocalcin acts as a kind of glue that helps to incorporate Calcium into the bones, and that Vitamin K2 is necessary in order to produce this protein. Furthermore, according to the results of recent epidemiological research, the amount of Vitamin K2 in the body of people who suffer from osteoporosis is decreasing compared with that of healthy people.

Obtaining sufficient Vitamin K2 is not a problem for healthy people, because they have a colon bacillus that is constantly producing Vitamin K2 in the alimentary canal. However, when people become older, or take medicine containing antibiotics, this bacillus weakens and produces less Vitamin K2. It is becoming clear that Vitamin K2 produced by this bacterium is closely connected with the prevention of osteoporosis, and the Ministry of Health and Welfare has approved Vitamin K2 as a medicine for osteoporosis. Unlike natto, yeast, a lactobacillus, and Koji do not contain Vitamin K2 that comes from a bacterium. Bacillus natto is a unique bacterium throughout the world, and moreover people can ingest it in the raw. Therefore, natto is receiving considerable attention as the only food that contains Vitamin K2 from a bacterium.

Vitamin K2 has the chemical name menaquinone 7. At present, Vitamin K1, or menaquinone 4, is synthesized for use in the medicines approved by the Ministry of Health and Welfare. When the components of blood are analyzed, one vitamin that is found more often in healthy people than in osteoporotic people is menaquinone 7. A lack of menaquinone 7 causes osteoporosis. Because Bacillus natto produces menaquinone 7, eating natto helps to prevent osteoporosis. It is important to obtain the fundamental components of bones by consuming milk and Shiitake mushrooms, but Vitamin K2 is also necessary. Menaquinone 7 has only recently appeared in the analysis data of the Science and Technology agency, and samples are not on sale yet.

It is possible to obtain enough vitamin K2 from one packet (100 g) of natto.

One hundred grams of natto contains approximately 1,000μg of menaquinone 7. A normal person is supposed to consume 1μg per 1 kg of body weight each day, which means that a person of 60 kg should consume 60μg of menaquinone 7. Therefore, 10 g of natto supplies enough menaquinone for one day. If the colon bacillus is weakened, a packet of natto supplies a sufficient amount of menaquinone 7.

…

As a result of attempts to make natto more palatable, the amount of its effective components decreased.

Extremely undeveloped natto has been increasing as a result of attempts to make natto more palatable, especially for people in the Kansai area in Japan. Such natto has a weaker odor and is less sticky. When the US authorities occupied Japan in 1945, they prohibited the sale of natto because they thought that cholera and typhoid were often caused by such a rotten food. Since then, about three types of purely cultured bacillus have been used to make natto. As a result, natto became tastier and safer, but on the other hand, the amount of the anti-bacterial material, Vitamin K2, and nattokinase decreased. Comparing a 1936 report on the components of natto and its activity with current data, it is found that the anti-bacterial component has dramatically decreased.

Link: http://conditioningresearch.blogspot.com/2009/01/erwan-le-corre.html

For all things Erwan Le Corre, MovNat, Methode Naturelle, Georges Hebert that I’ve been tracking, be sure to see this Link Repository

Conditioning Research had a fantastic interview with MovNat’s creator Erwan Le Corre, who has recently been in the fitness and health limelight thanks to an article in Mens Health. In this interview Le Corre comes off as more a philosopher than a modern-day Tarzan. Le Corre’s philosophy drives not so much at being able to speed through a jungle but as to our biological, evolutionarily-endowed “true nature,” which he sums up simply as: “to be strong, healthy, happy and free.”

So much of what Le Corre speaks about resonates within me that I need to dedicate my thoughts to their own post. For now, I’m going to link down heavily from the interview because it is excellent and worth further review, particularly since there is an obvious scarcity of material on Erwan Le Corre, Georges Hebert (Methode Naturalle), and MovNat.

Just two last notes. I find it oddly refreshing that Le Corre’s MovNat philosophy essentially skips on including bromides about morality. Why does reversion to nature need to bring with it a clearcut moral code anyway? Does our DNA (life) know any morality other than survival? Perhaps understanding the morality that flows from nature is less a matter of reflection and prescription as it is a matter of practice and action first. I don’t know.

The zoo analogy is fantastic. It is incredibly evocative of The Matrix and is much more palatable than “human domestication,” which is what we’re really talking about. Fitness should be about function. It should be playful and fun or productive hard work — both of these purposes are both means and ends, an ideal marriage. I can’t help but read Le Corre’s words and think about gyms as the wheels on which hamsters run. Is the fact that we all willingly enter such droll rigidity a testament to the state of our minds? Our lives?

Le Corre:

1 Who is Erwan Le Corre? Can you give us some idea of your background in sports / fitness …

I practiced a training and philosophy called “Combat Vital” for 7 years in Paris, which had many similarities with the Methode Naturelle. That’s when I started training barefoot. We would train most of the time at night so as not to be seen, climbing bridges, balancing on the top of scaffoldings, kicking walls to toughen our bare feet, moving on all fours, swimming in the river even in the freezing cold of the winter…some kind of “Fight Club” of natural movement if you will! They are unbelievable memories: quite a conventional-wisdom-defying kind of philosophy and practice. …

2 How did this background bring you to your current philosophy and approach to exercise? …

The more I was thought about [Methode Naturalle], the more I thought that while the core of the 100 years old method was excellent, an update of the pedagogy and methodology of Methode Naturelle was needed; it also became clearer that my personal approach couldn’t and wouldn’t avoid addressing the zoo human predicament and the many issues modern humans have to deal with regarding their body and mind’s health and quality of life. …

So despite the core practice being natural movement skills, MovNat is not only an approach of exercise but also a more holistic education system. Not a guideline, certainly not a set of morals, but both an experiential and conceptual knowledge: an array of solutions and alternatives people can learn and apply to an extent that is entirely up to them.

3 Your website talks about us being “zoo humans” – far from our natural habitat and lifestyle. How do we start to escape from the zoo – what might be the first steps in this approach?

The first step is a change of perception. It is becoming aware of this predicament, because you can never change something you deny or for which you take no personal responsibility. Understanding what our true nature is from a biological and evolutionary perspective and understanding the workings of the zoo is the first step.

The zoo is not just an environment, it is a phenomenon, a process, which is designed to keep you a captive of both external and internal cages. It is something that conditions many of your behaviours: clearly it is to me a domestication system, no less. The zoo impairs our ability to experience our true nature which is to be strong, healthy, happy and free.

We’re not born to be weak, sick, depressed and enslaved and, more than that, we should never accept this becoming the norm or a “fatality” (our fate). So the first step is a reaction and a form of resistance, it is a life-affirming reawakening. Once your perception is changed and that which is commonly regarded as “normal” is not acceptable to you anymore, it is time to look for rational alternatives, to find ways to apply them in order improve your own experience of life.

It requires critical thinking, knowledge, time, commitment and - depending on individuals - a tremendous courage.

So first step? I would say that being ready to defy conventional wisdom is a fundamental start.

4 “Evolutionary Fitness” has gained some popularity recently, but somehow the prescription often leads us back into the gym, lifting weights, using machines or sprinting to fixed intervals. This seems a long way from nature. Should we abandon the gym and go to the playground? …

So it is not the gym per se that is a problem to me, but what you’re going to perform in a gym. Bringing a leg extension machine into the woods won’t make your training more natural, but crawl on the floor of a gym and there you’ll start to unleash your inner animal. Ideally of course, you want to be in touch with nature, breath good air, expose your skin to natural light, capture the energies of the vegetation around, well, spend as much time outdoors as you can. Thing is, it would be really difficult to recreate natural conditions in a gym, such as mud, wet surfaces, unpredictable dangers etc…which are also essential parameters that require specific adaptation.

That’s the difference between capability and adaptability. The more your movement skills are adaptive, the more you’ll expand your comfort zone in dealing with a variety of real-world circumstances. So the more varied is the environment where you train, the more you’ll increase your movement adaptability. …

I see this split coming: a so-called “upstream” but in fact downstream, super zoo approach of fitness going on on the one hand, then the come back of an upstream, though so far too often seen as backward, wilder and healthier fitness orientation on the second hand, that will produce new generations of amazing natural athletes or if you will of strong, healthy, happy and free individuals. No doubt. To me, the revolutionary is now in the evolutionary. …
5 I’ve seen your ideas presented as an updating of the “Methode Naturelle” of Georges Hébert. From what I’ve read, his philosophy is holistic – much broader than exercise. Can you indicate some of the wider consequences of the motto - - Être fort pour être utile"–"Being strong to be useful.” …

Methode Naturelle was not only a physical but a moral education based on altruism, hence the motto “to be strong to be useful". But I personally have a problem with morals or ethics when it comes to deciding what is good or what is not good for me, what is done and what’s not, what I should do or what society expects me to do or would like to impose to me as some form of duty.

After all, a tool is useful, a cog in the machine is useful right? I accept no institutional duty. Free will is the most precious thing in my eyes. If I choose to be helpful to others, which I in fact often do because I tend to like others, it is because I decide so and not because I have to. The problem is, many people often think of altruism as sacrificing oneself or one’s resources unconditionally for others, even for those that are total strangers to you or even if it’s going to be seriously detrimental to yourself. I prefer to impose no moral code in MovNat and leave it up to each individual to decide for themselves what is best when it comes to investing their energy or risking their physical integrity for others, because each situation is different. MovNat training will greatly increase your preparedness so that, in time of need, you have the ability to respond efficiently to practical challenges. Now if your goal is to save lives it’s best to consider becoming a firefighter for instance. These guys save lots of lives!

MovNat stands for a different motto which is “Explore your true nature". First, people undergoing the zoo syndrome shouldn’t think of helping others first but make sure they’re recovering their own strength and vitality before anything. They want to rehabilitate themselves and get stronger and healthier before anything and this should be their absolute priority. They need a training and education that is liberating and empowering.

Again, I am convinced that our true nature is not only to be strong but also healthy, happy and free. If you become such an individual, then there’s many ways you can help others, if such is your intention. It’s entirely up to you. …
6 What implications does your particular philosophy have in terms of diet? Sleep? Posture? …

[Le Corre advocates a fairly typical paleo / hunter-gatherer lifestyle approach of natural, pre-agriculture foods (no dairy), plenty of sleep, and an activity pattern that is active]

That’s a few insights, though in my opinion no personal lifestyle should ever become an obsessive application of overly strict rules. It’s all a matter of paying attention, of awareness, and when for some reason you know you’re not really respecting the needs of your true biological nature, make sure you’ll re-establish balance very soon.

7 One of the movement patterns that you recommend is “defence” – grappling / boxing etc. I’ve recently begun to train in Krav Maga and am really enjoying it for the coordinated /useful movements. But the social side is great too – supporting and helping each other in class. Is there a social side to movement that we also need to recover?

Obviously yes.

I believe the self-obsessed, cosmetics-driven fitness practitioner is missing an important point among others, which is a healthy, cooperative interaction with others. The result in thinking isolation is that in addition to isolating your muscles, you tend to isolate yourself. Is there any fitness machine designed for two people to work out cooperatively and coordinate their movements? Now imagine yourself as part of a small tribe 100,000 years ago, would you spend your time figuring out the most efficient strategy to build big guns fast? Or the latest scientific discovery that will allow you to get six-pack abs in no time?

No, you would rather find ways to work cooperatively with other members of the tribe and would expect all tribe members to do so!

It would be a matter of survival at individual and collective level. A lack of cooperation could have you banned from the band …….and an isolated individual would have been so much more vulnerable. Not the smartest type of behaviour.

Thank you Chris for doing this interview. Fantastic, thought-provoking stuff.

Related Link on Human Nature and our Hunter-Gatherer, Non-Specialist Evolutionary Roots

• Human Happiness, the Human Condition, and our Hunter-Gatherer Forebears
• Day in the Life of a Hunter-Gatherer
• Is Technology Making us Miserable?
• Transcending the Authority Complex

Link: http://www.thedailyshow.com/full-episodes/index.jhtml?episodeId=220533

Just watched the showdown between Jim Cramer and Jon Stewart from The Daily Show on Comedy Central last night. It’s worth watching if you’ve kept up with the back and forth and the original CNBC takedown by Stewart (See Jon Stewart Throttles CNBC).

I enjoy Stewart’s ongoing crusade against network television. He has similarly gone after CNN (Crossfire) for being more about entertainment than about reporting. Stewart is clearly in a better position to throw stones as he can pull apart the mistakes (and there are many) of the mainstream media; however, he is doing hard reporting. That it gets the networks up in arms is a testament to Stewart’s progress.

Having said that, I think there is a bigger picture that is widely being overlooked. That is that media outlets usurp individual authority on a very subtle and sinister level. Many Americans outsource their own analysis and thinking to these talking heads on tv. Ultimately, it is the Americans who put their trust in Cramer, who go to Fox News for “facts” and come away with more opinions, and who fail to take responsibility for their own behaviors and perpetuate their own victimized demise.

So even as I like how Stewart is going after the networks, I think the fingers should be pointed elsewhere – at the American people.

It is for that reason that the below clip, which is from around the 17 / 18 minute mark of the Hulu/Yahoo TV 21 minute snippet from last night, is fantastic.

Secondarily, I think Cramer’s explanation of how they were essentially duped into thinking 35:1 leverage ratios were okay is spot-on — at least, it fits extremely well with the business cycle argument that excess credit leads to seemingly prosperous or booming times. These booms more-or-less trick investors/businessmen/entrepreneurs into believing that things are fundamentally sound and returns will continue going up in perpetuity. Nothing could be farther from the truth, and beyond the infomercials that try and tell you otherwise, we human beings should realize when someone is trying to sell us snake oil!

So here we have some actually solid television programming — on a tv station that is centered around laughs.

JON STEWART: Honest or not, in what world is a 35 to 1 leverage position sane?

CRAMER: The world that made you 30% year after year after year from 1999 to 2007 . . .

STEWART: But isn’t that part of the problem. Selling this idea that you don’t have to do anything. Any time you sell people the idea that, “Sit back and you’ll get 20% on your money,” don’t you always know that that’s going to be a lie? When are we going to realize in this country that our wealth is work? That we’re workers. And by selling this idea that, “Hey man I’ll teach you how to be rich!” How is that different than an infomercial?

Link: http://themessthatgreenspanmade.blogspot.com/2009/03/wyke-big-revision-in-gold-price.html

Tim at TheMess has a fantastic quote from Christopher Wyke which, in only a few sentences, pretty much sums up the strength of gold as an asset class (I am unabashedly long gold, and this is not to be considered investment advice!).

Here’s Wyke:

Wyke: I think people have been investing in gold as a safe haven, as an alternative to stocks. But what’s really impressive is that the gold price is up by about 25 percent in the last four months at a time when the dollar’s been strong and no one’s been worried about inflation. I think, when that turns around, when the inflation concerns arise again, and if the dollar is to fall again, then gold could move very sharply ahead.

Warren Buffett a.k.a. “The Oracle of Omaha” was interviewed by CNBC yesterday via Becky (Not-so) Quick and Joe Kernan. The interview was apparently three hours long; however, I’ve only watched and quoted about 25 minutes of Buffett via the first two online videos on CNBC.com, listed below:

• Warren Buffett: U.S. Economy Has Fallen Off a Cliff - 16 min
• Ask Warren: Banks Should Get Back to Banking - 10 min

I have compiled some Buffett quotes from the first two videos and additionally will cite “Oracle” quotes compiled by John Hempton of Bronte Capital, as John’s quotes are clearly from one of the other six videos I have not seen. For a deep-dive into all things Buffett, CNBC has a full transcript of the interview from yesterday as well as all other previous interviews with Buffett. I’m not sure it’s a wealth of information, but it sure is a lot. Find CNBC’s Buffett Archive here.

A great deal of deference is given to Warren Buffett. After all, he managed to eek out steady, 20% plus returns via Berkshire Hathaway for decades. He has won over pundits, believers in efficient markets, and investors worldwide with his folksy charm. You don’t get a moniker like “The Oracle” for nothing!

Full disclosure, I am a former stockholder of Berkshire: I owned a paltry single B class share of Berkshire from 2003 to August 2007 and made a little off of it in the sale. I also use GEICO and have recently become a Wells Fargo customer (via the shell that was Wachovia). Further still, I was a bit of a Buffett junkie in year’s past. From a post on Warren Buffett over at autoDogmatic I made back in July of 2006:

He’s also a hero of mine. Ever since plowing through Roger Lowenstein’s Buffett: The Making of an American Capitalist and subsequently picking up The Essays of Warren Buffett: Lessons for Corporate America, only to go on to read Benjamin Graham’s The Intelligent Investor, I’ve recognized the Oracle of Omaha as an avatar for capitalism.

My take on Buffett has changed and changes still. Berkshire hasn’t been nearly as successful in the past decade: why is that? Has Buffett’s luck simply run out? I can’t help by reread a portion of my autoDogmatic post which included Buffett’s own analysis of his success — look at the bolded bit in the blockquote:

When Buffett announced that he would give his wealth to the Gates Foundation, he said the following:

We agreed with Andrew Carnegie, who said that huge fortunes that flow in large part from society should in large part be returned to society. In my case, the ability to allocate capital would have had little utility unless I lived in a rich, populous country in which enormous quantities of marketable securities were traded and were sometimes ridiculously mispriced. And fortunately for me, that describes the U.S. in the second half of the last century.

In light of what we have seen in recent years, is it not clear that bubbles have dominated the American economy over the past few decades? Commodities reached unprecedented highs in the 1970s. From there, we had a bubblicious double-decade secular equities bull market that began in the 80s and ended with the dotcom bust. Finally, our credit-based bubble economy blew what will likely go down in history as the greatest real estate bubble ever.

Buffett has assuredly been fantastically astute at picking up mispriced assets and he’s also a sort-of folksy philosopher regarding business; however, he also has been fantastically lucky. In the above quote, Buffett isn’t being merely honest, he’s being downright profound: his success was predicated on our finance-driven ("enormous quantities of marketable securities were traded"), bubbling ("ridiculously mispriced” assets) economic system!

Today, Buffett has been struggling to make use of the above one-two punch that served him so well. Even worse, he is starting to seem out of touch if not downright confused. Simply read a few of his quotes below. What should strike you most are his comparisons of our current situation to a war — even though the Obama Administration has yet to take a play from George W. Bush’s book (yet), Buffett has clearly decided that there is a “War on the Economy,” a war that must be won and we should all toe the line! Throughout his interview with Quick, Buffett analogizes the current credit crisis to Pearl Harbor. That’s evocative imagery that may stoke the flames of patriotism and may be appropriate in describing the direness of our current predicament; however, we are talking about banking and finance and not foreign invaders! Haven’t we seen the dangers and fundamental futility of waging a war on an intangible idea? For reference, just look at how things have turned out with the “War on Terror” or the “War on Drugs.”

Donald Ruffkin elaborates further on Buffett’s bizarre War analogy in his post Come on, Buffett! Here’s a quote from Ruffkin:

I noted then, as I will now, that it is disingenuous at best for Buffett to be calling this an “Economic Pearl Harbor”. (1) There is no external aggressor. (2) We are more like a drug addict or an alcoholic than a populus being attacked. (3) His metaphor implies we are not at fault - we just need to fight back against the force which is fighting us. In many, many ways this is not an appropriate metaphor. I understand that he is trying to convey a sense of urgency, and a need to put aside our differences to reach a good solution. But the gaping holes in the metaphor are so large that I am left with the impression that he is simply trying to scare us into following the prescription of Obama.

It would seem that not all out of the CNBC interview with “The Oracle” sounds as crazy as the war analogy. John Hempton of Bronte Capital’s transcript of a portion of the interview (the portion I did not watch) where Buffett discusses the toxic assets on bank balance sheets is worth discussing (See Hempton’s post here). For just a flavor of this discussion, here is Hempton:

[Buffett] says the problem of American banks are not overwhelmingly toxic assets. This is a radical view – but it is in my view correct. The problem with the banks is that nobody will trust them and they have not been able to raise funds. The view that this is a liquidity crisis – and not a solvency crisis – has long been a staple of the Bronte Capital blog. It is radical though. Krugman, Naked Capitalism and Felix Salmon think alike – asserting – seemingly without proof – that the problem is solvency. Buffett doesn’t even think the US banks (on average) require capital – a view that most people would find startling (though again I think is correct provided appropriate regulatory forbearance is given).

It is hard for me to be as sanguine about Buffett’s viewpoint as Hempton, and I question (as does Hempton via his post title!) whether channeling Buffett’s current prognostication is any indication of the insight or accuracy of one’s conclusions.

Quotes from Warren Buffett’s discussion with Becky Quick

Much, much more could be said about Buffett’s interview, but for the most part, many of the holes in Buffett’s remarks are so obvious that they need no discussion but I did emphasize comments worth further thought or questioning.

• “Well we went wrong originally because we had a belief that — everyone had the belief — I had it, the government had it mortgage lenders had it borrowers had it the media had it everybody thought house prices could go nothing but up and or at least they couldn’t go down a lot and once you had that belief and that was nationwide it didn’t make any difference what you lent on a house because if the guy couldn’t pay you’d sell it at a profit anyway or you wouldn’t lose much money. So you had 11 trillion of residential mortgage debt built upon this theory that who was borrowing and what their income was wasn’t that important b/c the house itself had to go up in price. And when that tumbled … a) it’s a huge amount out of people’s net worth and then secondarily all these instruments that were built upon it that people didn’t understand too well started toppling to various degrees in value and then that exposed other things … I mean it was like you know some kid was saying the emperor has no clothes and then after he says that on top of that the emperor has no underwear either!”
• “If you’re in a war if we really are in an economic war if there is a obligation to the majority to behave in ways that don’t go around inflaming the minority . . . I think I think that the minority really does have an obligation to support things that are clearly designed to fight the war in a big way. . . . Job one is to win the economic war. . . . I would do no finger pointing whatsoever.“
• “We have a system, largely free market, rule of law, quality of opportunity that caused the potential of humans be unleashed . . . but the machine gets gummed up from time to time.”
• “There was a paralysis of confidence in banks and which is silly now because of the FDIC. . . . If you don’t trust where you have your money the world stops. And they recognized that but it was a little belatedly and they didn’t put in deposit insurance until the start of 1934 with the Glass-Steagall act. We have a system that is far better organized to deal with that. The trouble is that a lot of people don’t believe in the system. . . . No one should be worrying about having their money in a bank in the United States.“
• “Patriotic democrats and patriotic americans will realize this is a war; and if they didn’t realize it immediately, it’s not as dramatic as a physical war when the news comes over and you know you’re under attack; but it is virtually as serious and I think that once the degree of that seriousness becomes apparent to both parties overwhelmingly they will behave well.”
• “We need clarity on the financial system.”
• “The American banking system is too big to fail.”
• “We have to deal with all large quasi-financial institutions as well as all of the banks and people can’t be worried about them and we can’t have a contagion like we almost had in September. The world almost came to a stop in September . . . We need to get banks back to banking. . . . we should not be giving lectures to people. . . . [Money]’s cheap its abundant and the spreads are terrific.“
• [In retort to Quick’s comment about whether Wall Street should be profitable given their involvement in creating the crisis] “Well the shipowners made money in World War II. [and nobody was questioning them]”

Additional Transcript from John Hempton

BUFFETT: Yeah, the interesting thing is that the toxic assets [of American banks is] if they’re priced at market, are probably the best assets the banks has, because those toxic assets presently are being priced based on unleveraged buyers buying a fairly speculative asset. So the returns from this market value are probably better than almost anything else, assuming they’ve got a market-to-market value, you know, they have the best prospects for return going forward of anything the banks own. The problems of the banks are overwhelmingly not toxic assets, you know. They may have been one or two at the top banks, but they are not going to do in–if you take those 20 banks that are subject to the stresses, they’re not going to do those banks in. Those banks have the earning power which has never been better on new business going out of this to build capital positions if they pay low dividends which they’re starting to do now.

JOE: Hm.

BUFFETT: Toxic assets really are not the problem they were. Now, when I said it was contingent–I didn’t remember being exactly contingent on TARP, but it was contingent on the government jumping in.

JOE: Right.

BUFFETT: The government needed to act big time in September, I will tell you that.

JOE: So…

BUFFETT: And they did act big time.

JOE: So you are OK with the shift to providing the banks with capital as opposed to the original intention of the TARP for actually getting the toxic assets off the books?

BUFFETT: Yeah, and interestingly enough, they don’t need to supply the banks, in my view, with lots of capital. They need to let almost all of–I mean, the right prescription with most of the banks is just let them pay very little in the way of dividends and build up capital for awhile, and they will build up a lot of capital. The government has needed to say–what the government needs to say is nobody’s going to lose a dime by having their deposits in these banks. They’re going to make lots of money with the deposits.

JOE: Hm.

BUFFETT: The spreads have never been wider. This is a great time to be in banking, you know, if you just get past the past and they are getting past the past. I mean, right now every time a loan is made to somebody to buy a house–and we’re making, you know, making millions of loans–four and a half million houses will change hands this year out of a total stock of less than 80 million. So those people are making good mortgages. You want those assets on your books and you get a great spread in putting them on now. So it’s a great time to be in banking, but you do have to get past this past. But the toxic assets, in my view, you know, if they’ve been written down to market, I’d rather buy those assets from the bank than any other assets they’ve got.

JOE: Hm. OK…

Post-script — In all seriousness, I think it’s time Warren consider laying off the Cherry Cokes (See my post on Ketones and Alzheimer’s) as he may be showing initial signs of senility. That’s a scary thing to say, and I hope it is not true, but after watching these interviews, hearing such a nonsensical war analogy beaten to death, and hearing Buffett blame the crisis on a symptom rather than a cause (bolded quote below), I’m starting to wonder.

Link: http://www.youtube.com/watch?v=-u9gPykOkdA

Quotes from Jim Rogers’ interview (video at bottom):

• “We’re still going to eat probably. We’re still going to wear clothes probably. You know nobody – Farmers cannot get loans for fertilizer right now. So the supply of everything is going to continue under pressure. Uh the inventories of food are the lowest they’ve been in 50 years. We have serious supply problems developing for many mining goods, oil, agriculture. So even if demand goes flat or down as it did in the 30s as it did in the 70s you can still have a nice market.”
• “What we’re doing is buying land in Brazil and the other is buying land in Canada. … If I’m right agriculture is going to be one of the great industries of the next 20 years or so … 30 years … maybe we can change this to CNBC agriculture.”
• “We are buying some land … and turning raw land into farm land. . . . we are hiring farmers.”
• “You know the IMF is trying to sell their gold and if they do then they may drive the price of gold down a lot and if they do Martin you better buy all you can because that will be the last opportunity to buy gold in a long, long time.”
• “Throughout history when governments have printed huge amounts of money it’s always - it’s always led to higher prices.”
• “I still own the yen and hope to buy some more yen if it continues to consolidate for awhile.”
• “I expect to own commodities for years.”

(H/T to Tim)

Rogers has been busy lately (Or in high demand). Here’s more from him:

• Jim Rogers on The Oracle with Max Keiser
• Jim Rogers Doesn’t Mince Words About the Crisis

@ http://www.youtube.com/watch?v=-u9gPykOkdA

Link: http://www.youtube.com/watch?v=k7PWkHgxkTI

I’ve not seen Max Keiser’s program The Oracle before, but since my current favorite billionaire Jim Rogers was on the show, I had to watch.

It’s about a ten minute clip and I can’t say there’s anything particularly new that comes out of it from Rogers (You can get almost all the same soundbytes from reading Jim Roger’s most recent interview with Maria Bartiromo). The new tidbits I did enjoy are paraphrased as follows:

• Rogers doesn’t have much respect for the IMF and believes they will likely end up selling all of their gold before going the way of the dinosaur.
• He points out how the Swiss banks are bigger than the Swiss government; the takeaway being that if the Swiss government tries to bail out the Swiss banks, they are likely to go bust themselves – the Swiss government being like a lifeguard trying to save a panicking man from drowning when the man can’t swim and is twice the lifeguard’s size.
• When asked in a jocular manner if he had any gold coins on him at that moment, wouldn’t you know it he did (he pulled out a coin from his pocket)
• Rogers is currently in Singapore. He’s moved to Asia (and sold off his NYC house), so this isn’t surprising though I think he’s officially calling China home these days.

(H/T to Ritholtz)

Link: http://www.businessweek.com/magazine/content/09_10/b4122017811535.htm

The title of this interview with Maria Bartiromo is dead-on as billionaire investor Jim Rogers speaks the hard truth about what has happened and should happen on Wall Street as well as what he sees coming down the pipeline.

Rogers’ comments are brief, succulent and refreshing — so much so that they make me wonder why we don’t hear these things from the other members of the billionaire club. By way of poignant comparison (Soros co-founded the Quantum Fund with Rogers), George Soros’ flip-flopping in recent weeks makes him come off as a sort of Elmer Fudd (See George Soros finally gets it). What is going on? Why is Rogers so cocksure of himself? Why is he so brutally honest?

One argument is that Rogers, like many other commodity bulls, is just talking his book. And even though talking your book doesn’t make you wrong, it inevitably makes you biased.

I think there’s a bigger reason Jim Rogers is being so frank. He can afford to be. Compare him with Warren Buffett or George Soros, two other wizened investors who are considered go-to gurus on the economy. Both of these guys* are hugely invested in the United States both financially and politically. Meanwhile, Rogers sold-out his house in New York and seems to have moved most of his investments into real assets (Agriculture, metals, etc.) and China. Jim Rogers has protected his wealth and situated himself for economic turmoil!

He has no reason to be afraid of telling the truth. Let the banks go bankrupt. Call out the CEOs who made millions while destroying their companies!

It really doesn’t matter that he’s talking his book when he’s right, does it?

The full interview isn’t long, but my favorite parts are snipped below. For all the folks out there (like us) who held out and didn’t buy a house in the boom, can I get an “Amen!?” How about the ones who didn’t buy into the bull market bull and went short only to get wiped clean by Fed market intervention?

Thank you, Jim!

What do you think of the government’s response to the economic crisis?

JIM ROGERS: Terrible. They’re making it worse. It’s pretty embarrassing for President Obama, who doesn’t seem to have a clue what’s going on—which would make sense from his background. And he has hired people who are part of the problem. [Treasury Secretary Tim] Geithner was head of the New York Fed, which was supposedly in charge of Wall Street and the banks more than anybody else. And as you remember, [Obama’s chief economic adviser, Larry] Summers helped bail out Long-Term Capital Management years ago. These are people who think the only solution is to save their friends on Wall Street rather than to save 300 million Americans.

…

So what should they be doing?

What would I like to see happen? I’d like to see them let these people go bankrupt, let the [banks] go bankrupt, stop bailing them out. There are plenty of banks in America that saw this coming, that kept their powder dry and have been waiting for the opportunity to go in and take over the assets of the incompetent. Likewise, many, many homeowners didn’t go out and buy five homes with no income. Many homeowners have been waiting for this, and now all of a sudden the government is saying: “Well, too bad for you. We don’t care if you did it right or not, we’re going to bail out the 100,000 or 200,000 who did it wrong.” I mean, this is outrageous economics, and it’s terrible morality.

What about Citigroup ©? What about the car companies?

They should be allowed to go bankrupt. Why should American taxpayers put up billions to save a few car companies? They made the mistakes! We didn’t make the mistakes! I’m sure they’ll give them the money, but I’m telling you, it’s a mistake. It’s a horrible mistake.

I totally understand what you’re saying, but the banks are under massive pressure.

They all took huge, huge profits. Who was the head of Citigroup? Chuck Prince? I mean, how many hundreds of millions of dollars did Prince take out of the company? How many hundreds of millions of dollars did other Citibank execs take out of the company? Wall Street has paid something like $40 billion or $50 billion in bonuses in the past decade. Who was that guy who was the head of Merrill Lynch (MERR)?

Stan O’Neal?

Right, Stan O’Neal. He got $150 million for leaving, even though he ruined the company. Look at the guy at Fannie Mae (FNM), Franklin Raines. He did worse accounting than Enron. Fannie Mae and Freddie Mac (FRE) alone did nothing but pure fraudulent accounting year after year, and yet that guy’s walking around with millions of dollars. What the hell kind of system is this?

…

Which commodities are worth buying or holding on to?

I recently bought more of all of them. But I really think agriculture is going to be the best place to be. Agriculture’s been a horrible business for 30 years. For decades the money shufflers, the paper shufflers, have been the captains of the universe. That is now changing. The people who produce real things [will be on top]. You’re going to see stockbrokers driving taxis. The smart ones will learn to drive tractors, because they’ll be working for the farmers. It’s going to be the 29-year-old farmers who have the Lamborghinis. So you should find yourself a nice farmer and hook up with him or her, because that’s where the money’s going to be in the next couple of decades.

*I’m uncertain as to how Soros’ portfolio weighs out though he’s certainly made some bad bets in the recent market crash (See stockpickr)

Link: http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vmMd4PSxEKeE.asf

Just watched a fifteen minute interview by Bloomberg of Nassim Nicholas Taleb (The Black Swan). In the interview Taleb discusses the current crisis, robust systems, nationalizing the banks and the fallacy of using narratives of history to guide present-day policy/response.

Below are some quotes from NNT, which I’ve organized into like-nuggets of wisdom:

• Looking at biology, things that survive have redundancy . . . we have spare parts, which is the exact opposite of leverage. . . . We have diversity and nothing is too big. Things fail early. . . . Banking is organized in a completely opposite way. . . . Complex systems have properties that banks don’t have. And biological systems have survived.
• [We have an] Illusion of stability and then blow-ups are larger. Imagine if half-country was fed by one restaurant it’d be okay except one day people would starve.
• Bad news travels immediately . . . This environment won’t tolerate the smallest mistake . . . I don’t know the system can allow for too much leverage.
• People can invest in real things - they don’t have to invest in paper. . . .
• What we have is a system of deposit where people buy a company, they borrow against it, and buy another company. . . . If that disappears we have less growth but it would be a more robust economic system.
• The government is neither nationalizing the banks nor letting them break.
• [With regard to banking,] separate the payment system from the risk taking system.
• It looks like we have no control. The government has no control over what the banks are doing. The banks aren’t in control of what they are doing.
• The press reports everything except the important stuff. September 18th . . . we had the run on money market funds and the government had to step in.
• The situation is not comparable to the Great Depression. The situation is very different.
• This crisis is not so much a Black Swan to me. It’s like saying you’ve got a pilot who doesn’t know about storms. . . . The Black Swan for me would be to emerge out unscathed and go back to normalcy.
• We should be very careful when we make a historical analogy like the Great Depression because the world is not like it was in the Great Depression.
• Capitalism is you let what’s breakable break fast.

Bloomberg also ran an article on the interview with Taleb, but it is spartan as far as quotes or insights from the actual interview.

From what I can tell, it seems Taleb views bank nationalization as similar to taking out plane hijackers. It’s an interesting, more palatable way to look at nationalization in that it frames the situation as one where the public will be harmed unless someone (in this case the government) steps in and takes drastic action.

Having said that, I don’t get the impression that Taleb is a proponent of long-term nationalization. NNT would prefer banking be structured similarly to a biological system where there are redundancies and fragile things “break early.” This system wouldn’t foster as much leverage and therefore would slow growth, but it would be considerably more robust.

This is more or less what I believe, as well. A free market is an organic, naturally forming system that is decentralized and redundant. It’s robust because market actions failing apart at any micro level will not break the entire system.

How do we get there from here? Good question.

(H/T to Jesse)