Friday, October 23, 2009

Harvard's Greg Mankiw Is a Clueless Investor

Best selling heavyweight economic textbook author and Harvard professor, Greg Mankiw, has one of the dumbest portfolios I have ever seen, going into the crisis period ahead.

Get this, he has a third of his portfolio in bonds!! The other two thirds is in the stock market, he told The Harvard Crimson.

This suggests that he might actually believe the nonsense he writes in his textbook.

I should add this is in contrast to the savvy investing of the former heavyweight economic textbook champion, Paul Samuelson.

While attacking gold in every edition of his best selling text, in the 1970's Samuelson turned a good chunk of his fortune over to Princeton Commodities, who then proceeded to make another fortune for him by buying gold and other commodities that soared in price during that period.

Mankiw is going to lose his butt in his bond position, and who knows what mad strategies he is employing in his stock portfolio, which he said is in low cost index funds, including some international funds. Since I think the U.S. stock market is about to tank he will lose at least 25% on his U.S. portfolio and his international funds will get killed by the coming strength (short to medium term) in the dollar.

Bottom line, when it comes to managing money by these textbook heavyweights, Samuelson is the George Foreman of the group and Mankiw is the Mike Tyson. Mankiw might as well do what Tyson does and blow the money on cars, furs, women and gold teeth. The money is going to be gone anyway (except for the gold in the teeth).


  1. Hey Robert,

    not sure how you are calling for a dollar rally, stock market decline, yet you expect bonds to get crushed too.

    you can't have all of these :)

    treasuries would likely rally in a return to the bear market

  2. @Daniel,

    What if you have bonds falling (which means interest rates climbing), which kills the stock market, but the rising rates attracts foreign demand for dollars?

    We are living in interesting times. It will be all about sequencing, but the above is one possible sequence.

  3. Warren Buffett went on record in September as a bond buyer. Perhaps some professors are merely riding his coattails.

    The dollar could rally on rising interest rates which could hurt bonds and the market. Rising dollar will nominally hurt US stocks, but not the value of shares cross-listed in other countries and that could attract foreign demand.

    The official deficit for 2009 was $1.4T, but the debt grew by nearly $3T. Trade deficits in a good economy can coerce foreigners to buy $300B of debt. Ultimately the rest will be monetized.

    Cyclical rallies aside, the dollar will continue its 90 year long secular decline.