Leithner Letter Nos. 200-204
26 July - 26 October 2016

Nobel Prize winning economist and former vice-president of the World Bank, Joseph Stiglitz, praised Venezuela’s economic growth and “positive policies in health and education” during a visit to Caracas on Wednesday. “Venezuela’s economic growth has been very impressive in the last few years,” Stiglitz said … “President Hugo Chávez appears to have had success in bringing health and education in the poor neighborhoods of Caracas …”

Joseph Stiglitz, in Caracas, Praises Venezuela’s Economic Policies (11 October 2007)

By morning, three newborns were already dead. The day had begun with the usual hazards: chronic shortages of antibiotics, intravenous solutions, even food. Then a blackout of power swept over the city, shutting down the respirators in the maternity ward. Doctors kept ailing infants alive by pumping air into their lungs by hand for hours. By nightfall, four more newborns were dead. … The economic crisis in this country has exploded into a … health emergency, claiming the lives of untold numbers of Venezuelans.

“This is criminal that we can sit in a country with this much oil, and people are dying for lack of antibiotics,” said Oneida Guaipe, a lawmaker and former hospital union leader. But [President Nicolás] Maduro, who succeeded Hugo Chávez, went on television and rejected [his opponents’ efforts to accept international aid], describing the move as a bid to undermine him and privatize the hospital system. “I doubt that anywhere in the world, except in Cuba, there exists a better health system than this one,” Mr Maduro said.

Dying Infants and No Medicine: Inside Venezuela’s Failing Hospitals
The New York Times (15 May 2016)

Credible Nobel Laureates and the World’s Greatest Investor
Reckon Markets Are Greatly Overvalued: Are You Listening?

A year ago, in the wakes of ructions in China, Greece and elsewhere, Australians asked themselves: “Are stocks attractively cheap, reasonably priced or unduly dear? Are their prospective returns good, fair or poor?” As they virtually always do, so they did in 2014-2016: “experts” advised that all’s well and that the crowd should buy. “Four Reasons Why It’s Time to Buy Shares Now” (The Australian Financial Review, 15 May 2015) typified their mantra:

Savvy investors should start buying up shares, according to Deutsche Bank and AMP Capital, with the recent dip in the market [during April-June the ASX/S&P 200 Index fell from almost 6,000 to 5,400] presenting some good buying opportunities. … The four reasons [to buy shares] are: the dip [during April-June] was due; valuations are reasonable; earnings momentum looks OK; and the current lack of investor sentiment is actually positively correlated to market performance. … Deutsche added that its [one-year prospective] price-earnings ratio model suggested that fair value was a PE ratio of 15.7. The current market [has] a ratio of 16 [see also Figure 5]. “Valuations have dropped to reasonable levels,” said Deutsche. “[They are] justified given record low interest rates.”

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Chris Leithner


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