A Book Review

I have decided to review the book, Endgame, in this blog rather than on Amazon where I put most of my reviews. I do this for the reason that it appears, from some experience, that certain authors and companies seem to have “followers”, who, upon seeing a negative review, bombard the review with “not helpful” and thus the review gets crammed down. I feel a review should stand on its own and should be identified by its author and if there are any comments then feel free to send them.

Furthermore this review is solely my personal opinion since I have never met the author but have scanned his newsletters from time to time. In my opinion and in many ways this book seems to appear as a cut and paste of his newsletters, but I have not gone back to the newsletter to validate that conclusion.

There are three areas of comment in this review; content, namely what he says when he says something; style, how he writes and presents his material, and presentation, namely how the material is visually presented.

Content

The author or authors. at time I am confused as to one or the other, state that the book is divided into two sections. See p 8. The first they contend is to explain the situation, namely the economic situation. It appears to me that they are trying to give a snapshot of where the economy is at the time of the writing of the book, as so many others have tried to do. No looking back, just looking at the specific point in time. The second half allegedly is a country by country review of some major countries and their chances going forward. Part Three seems to be basically a set of suggestions. On the one hand if there is deflation and on the other hand if there is inflation. They argue that we will first have deflation and then inflation, not spelling out when or really how to determine when each occurs. Thus although their recommendations for each state are common sense they are contrary for the other state. Their advice in my opinion is buy low and sell high without telling you how to determine what is low and what is high, just that now we have a mess.

On p 16 he uses an interesting chart which shows total US debt to GDP. Now the real issue is Government debt since personal and corporate debt have grown but a main reason was the expansion of credit. Yes there was also the explosion of real estate debt but that was an added 10-15%, not the dominant portion. Clearly if debt was personal and short term then it would have put more cash in the economy via increased velocity of money which he later shows we did not have. This may be a terrifying chart but the real terror is Government debt. What is not included here is the unfunded liabilities such as pensions. That is in many ways the real hidden explosion.

On p 20 he shows debt by segment. On the Fig 1.5 he shows what appears to be corporate debt. This reflects different capital structures. The question is what is the assets under the debt. Who cares about corporate debt if the assets pay it back. That is the question. Personal debt also has a similar effect. More consumer debt means more expenditures means greater GDP. So in a sense for GDP growth it is good. The question is what is the quality of that debt. It clearly has not driven inflation. However it has resulted in a collapse of real estate. The real problem is Government debt, Federal and State!

On p 47 he starts with the discussion of GDP and its definition. Now on p 49 he has the equation:

ΔGDP=ΔPopulation+ΔProductivity

There is a problem here, at least two specifically. First the equation may not be true. If you get more people then depending on the people you may increase, decrease or have no change in the GDP. In fact if you have many uneducated and marginally employable types then the social and governmental costs of maintaining them may exceed any contribution they make to the GDP. He alludes to that later but this equation has problems. As to the productivity factor, one can imagine that increased productivity puts people out of work, thus decreasing buying power and thus reducing GDP.

The chart on p 50 is critical. It is well placed and makes the argument that only start up companies create jobs, specifically entrepreneurial start-ups. Large old-line companies actually shed jobs. This fact is totally missed by the current Administration. But alas if you have never created wealth you may never have a clue.

On p 56 he presents a table which is a classic example of the excesses of spread sheets. Namely he shows that if your growth in Debt exceeds growth in GDP you get in trouble. The question is why not just say that, the table contains no more value than that statement. For those with some expertise it is obvious, for those with none it is incomprehensible.

On p 57 he speaks to Rogoff and Reinhart, the now classic study of financial collapses over the past few centuries. Yes, there is a slippery slope, and as I noted a few decades ago regarding Black - Scholes, there are instabilities when you assume linear models, and the real world does have those tipping points. Where they are is still a mystery, and in fact they are often driven by human perception rather than fact.

On p 60 he makes an interesting argument which may be extended. The paradox of thrift may no longer apply as stated. Back in the 1930s people had limited or unknown balance sheets. Today with 401Ks it is the balance sheet that means even more than the income statement. People now think they can work around a blip on an income statement but when the balance sheet collapses in front of their eyes there is abject terror. Thus the collapse of housing and the stock market causes a crisis.

Now on p 91 and throughout Chapter 5 it appears to be a condensed version of Reinhart and Rogoff. Good quotes from other people but what is he trying to do, show us he read it? Then on p 94 and throughout the chapter we see his interview of the authors and we see his name again and again. Does this make things better? It does show the reader that he has personally interviewed them. Yet there is this stylistic dissonance which goes from text, to quotes to interviews to letters. It just makes for a very rough ride. Again in Chapter 6 we have the same extensive references, lengthy and detailed.

On p 113 he does make a critical point that the current Administration fails to grasp. Namely that public debt crowds out productive private investment.

On pp 142-144 he has a reasonably good introduction to the velocity of money issue. However with the explosion of personal debt he discussed early on one should have expected on p 145a substantial increase in velocity in a buildup to the collapse but it does not appear to be so. Also one should compare the Bloomberg numbers to the St Louis FED numbers for this variable.

On pp 146-147 he goes a bit astray in my opinion. Clearly in Fig 7.6 he shows M2 and the Monetary Base. We have written extensively on this as it was happening. This is the FED pumping money into banking and most likely we will see a substantial reverse. They are uncoupled and the MB is an artifact of the FED and in my opinion not something of current concern.

I read through the chapters on countries and they stand by themselves.

On pp 294-295 the author make a conclusion. Namely, things will deflate then inflate. Before they deflate do A and before they begin to inflate get out of A and do Z! Great, but how do I know when? Buy low and sell high, we all know that but when is low and when is high. What are the telltale signs?

Style

The author has a style which is best described as a combination of writing as he speaks and an insistence of telling the reader about all the important people he knows.

The author has the annoying habit of using euphemisms and aphorisms in all the wrong places, namely anywhere he so desires.

There appear to be two authors. Yet they have the annoying habit of referring to “John” repeatedly to make some point. Often the point is self-aggrandizing in my opinion. The interjections begin on p 1.

On p 33 he begins a letter to his children. Frankly this is out of pace. It breaks the style of presentation. We all know he has many children and is a good parent. As a reader we want not what he told his children but what he will tell the reader. This continues for 11 pages until p 44. The recommendation: “work hard, save, watch your spending, and think if your job is the right one if we have another recession” Frankly this is the advice from any reasonable parent to a child if you want to seek safety. On the other hand one could say take risks, go where others have not, think big, and find others to follow you. Namely as an entrepreneur, you create true value and wealth, not just transfer it from others for advice.

On p 59 he has a chart again without axes titles but now with a term “Ratio”. Well ratio of what?

On pp 62-63 he has another of his long quotes. This becomes annoying for a book of this type. He is not writing a scientific treatise where primary results are critical but his analysis of the situation and thus one should see his views not the cut and paste of others. We will see this many times again.

On p 68-69 he discusses the increasing of taxes on fuel and the assumption that the tax will be used to fix infrastructure. Nice idea but give Congress even a penny and they will attach it to some special project, an ear mark. I have seen this Pigou type argument again and again, and it never holds water. Congress is the fault.

On p 73 is one of his many aphorisms. “Trees tend to grow, and economies do, too.” I think this means something. Like “Delay is the deadliest form of denial” or “Prior planning prevents poor performance” but my aphorisms in my opinion make some modicum of connective sense. In the ones he uses they all seem somewhat out of context or even non sequiturs.

There is a paucity of source referencing for many of the charts.

Presentation

The book appears to be printed on newspaper print. That is a Wiley problem but the author could most likely have had some input to stop it. As such it appears as yesterday’s newsprint and one knows what that is used form

The graphs in my opinion are for the most part unusable. They were most likely done in color and they are black and white and one finds it difficult to read them. Also there are no vertical axes labels so one is always trying to figure which curve is what. Also there are abbreviations for what is on the curve and you have to figure out what he is talking about. Finally the sources for the graphs is totally missing. In summary it appears as if he just took some graphs he had lying around and connected them with words.

On p 19 we have a graph of debt and 10 year yield. The colors are missing and the axes are unlabeled. This problem is pandemic throughout the text and only get worse. The authors seem to have just thrown charts in from the newsletters and this what you get on your computer you have gotten in black and white here.

P 20 is an even worse example where they show the components of debt. This is a critical chart but it fails in black and white.

On pp 288-289 the charts appear to me to be unreadable, they appear to me as if they were copied from a Bloomberg terminal. If the author has a point to make then careful presentations are essential. If we just want to show what appears to be a Bloomberg terminal then fine but so what?

Throughout there should be a stipulation for the basis for each of his assertions, whenever he makes them.

Throughout, this book appears to be a cut and past of "talks" rather than a well though out presentation. In my reading of it it provided no enlightenment but rather just added to the pile of confusion. The author is neither an economist, for that I am glad, nor a financial expert. Thus I wonder who the target market is for the book as well.

Finally there are many times when the author(s) make(s) an assertion that I have asked what basis he has for that assertion. Perhaps it is my academic training as well as legal experience which forces that response. After all this is a general public book not apparently directed at the professional audience.