Credit Bubble; Pabrai Video

What causes a credit bubble to collapse

is not a malfunctioning entrepreneurial impulse, but an artificial lengthening of production and overcapacity in fixed assets induced by the fractional reserve banking system. Everyone who keeps funds in the market or in a bank is vulnerable, since it is cash deposits that banks use to fund the reckless expansion. When the banking system blows up—as it must—conservative savers lose their savings just as surely as ardent speculators: that is the real horror and also why the existence of a dynamic sector in the economy does not change the credit bubble analysis.

Performance_Update_2017_05   A must read.

New Pabrai Video Talk at Google: https://youtu.be/kNAuELYN5X4

Also, note the research report he recommends: beyondproxy.com-My Investment Thesis on Rain Industries

I wonder how Mr. Pabrai thinks the market misprices a security by 90%.   It has been my experience that when you think you have a company priced at $10 per share but worth $100, you had better check your valuation.   For a stock to go up 10 times, you are betting on profitable growth or a change in the environment.

The value of the video is given in the reminder to go through your value lines or stock guides to give you context and ideas!  In the course I am designing, we will have access to Value-Line to constantly search.

 

2 responses to “Credit Bubble; Pabrai Video

  1. John, what are your views concerning the legality of fractional reserve banking?

    To me, as long as banks make it transparent to the public that that is how they function, then it should be allowed.

  2. It is not for banks to decide. The political environment + central bank Of the country decides.

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