Munger On Madness, NASDAQ 5,000, And Politicians‏

Madness is something rare in individuals, but in groups,parties, peoples, and ages, it is the rule.' ~ Friedrich Nietzsche, Beyond Good and Evil

In looking at the current environment, it appears our friend Mr. Nietzsche was on to something.

As the pertinent domain centers around finance, consider the following remarks by someone who is certainly not mad, one Charles Munger.

This has basically never happened before in my whole life. I can remember 1 and one half percent rates. It certainly surprised all the economists. It surprised the people who created the life insurance industry in Japan, who basically all went broke because they guaranteed to pay a 3% interest rate. I think everybody's been surprised by it, including all the people who are in the economics profession who kind of pretend they knew it all along. But I think practically everybody was flabbergasted. I was flabbergasted when they went low; when they went negative in Europe. I'm really flabbergasted. How many in this room would have predicted negative interest rates in Europe? Raise your hands. [No hands go up]. That is exactly the way I feel. How can I be an expert in something I never even thought about that seems so unlikely. It is new territory.'

I think something so strange and so important is likely to have consequences. I think it is highly likely that the people who confidently think they know the consequences, none of whom predicted this... now they know what is going to happen next? Again, the witch doctors. You ask me what is going to happen? Hell, I don't know what is going to happen. I regard it all as very weird. If interest rates go to zero and all the governments in the world print money like crazy and prices go down of course I am confused. Anybody who is intelligent who is not confused does not understand the situation very well. If you find it puzzling, your brain is working correctly.' ~ Charles Munger, age 91, vice chairman of Berkshire Hathaway (NYSE:BRKa) on 3/25/2015

Clearly, our friend Charlie thinks something is amiss. Building on the idea, let us consider the remarks of legendary bond investor Bill Gross, who now resides at Janus- Bill Gross, the bond manager who joined Janus Capital Group Inc. last year. He said the German 10-Year bund is the 'short of a lifetime.' Gross said he is betting against German government bonds because of the slow economic expansion in the euro area, the European Central Bank's stimulus measures, and as concern about Greece's debt burden grows.

Even further, high profile investor and renowned short seller Doug Kass also believes paying European governments to store money is a foolish idea and has been willing to bet against the current state of affairs in the fixed income market. If we look at these remarks and strategies and combine them with the current state of equity markets, especially in the United States, where the NASDAQ reclaimed the 5,000 mark, one could not be blamed if you came to the conclusion financial markets are being altered by global central banking actions. Still, regardless of your analysis of the existing investment conditions, one has to play the cards they are dealt.

For those of us who are not willing to accept the ever so generous below 2% yields on 10 year paper (and that is superior to what is available in Europe!), the stock market awaits, and, so far so good. This week brought an avalanche of earnings reports across nearly every industry all over the connected planet. In the consumer staples area, volumes at Coke and Pepsi improved, although the ever present currency issues affected bottom lines. Results were pretty solid in the telecom terrain as Verizon (NYSE:VZ), AT&T (NYSE:T), and China Mobile (NYSE:CHL) showed better than expected subscriber growth and lower churn. In the housing hemisphere, existing home sales were strong but not so much with new abodes.

Turning to areas of strength in the market, nearly every restaurant and quick service chain posted better than expected figures, sans McDonald's (NYSE:MCD). Even their numbers were seen favorably because of the idea the leadership at Micky D's finally has the right ingredients, or better ones anyway, to right the ship. In technology, four of the NASDAQ's big boys, Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOGL), and Microsoft (NASDAQ:MSFT) impressed investors with top line growth, cash flow, profits, or a combination of all three. When you throw in Starbucks (NASDAQ:SBUX) impressive results after the bell on Thursday, it made for a nice way to end the week. Many are making the argument this may be deja vu all over again with the NASDAQ, but if you look at nearly any financial metric and compare 2015 with 2000, there really is no comparison. Could the market have a correction and fall 20%?

Absolutely, but you could have said the same thing for the last seven years, and how would that have helped you? In my little neck of the woods, one of the companies I mentioned in my interview on TheStreet.com got taken to the woodshed on Monday. It was the subject of a few negative articles and recently a couple of executives 'pursued other opportunities.' Always nice to go out a limb and have the branch sawed out beneath you.

Still, I have confidence in the position and we will know more in due time, especially around the holidays, if we all don't go crazy by then. Elsewhere in the market, I think I saw where a little merger could not be consummated because of government regulation. There is a famous quote about politicians- An honest politician is one who, when he is bought, will stay bought. Simon Cameron At least Hillary learned the lesson rather well. Next week brings another earnings deluge, with big oil and media concerns holding center stage. Further out, sell in May and go away remains a common strategy, and trading volumes are probably going to start to dry up pretty quickly. No matter, for those of us who remain interested, we are left to participate in the madness.