R.I.P Richebacher
LETTER TO THE ONLY PEOPLE I KNOW THAT READ RICHEBACHER (ex. Matt Kelley whose email I didn't have at Work)
Fellas,
You three guys are the only people I know that read the Dr.'s work regularly, but in my two and half year subsription period I think that I owe alot of the way I think about economics (i.e. unlearning the garbage fed to me in undergrad and grad school) & the broaders markets to reading the Richebacher Letter. It is truly unfortunate that the Dr. passed away right at the peak of the credit boom leaving us without a navigator in the choppiest waters any of us has been in since we have been involved in market decision making. However, I think it is kind of a tragic irony and fitting that the man who called out so many of the egregious financial markets early in the face of an extremely strong consenus opinion otherwise died before the collapse when the consensus opinion finally started to change its tune - a tune that is not nearly what it will be down the road in my opinion. Nonetheless, to me I viewed reading his work the last two years (and a great deal of the back issues) as training to prepare me for what likely will be a future 5yrs to 10yrs that will play out very different in the markets than the past 5 to 10yrs. The lessons that I quote regularly from the Dr. are that "It is a law of nature that the amplitude of the economic boom must be matched by the amplitude of the economic bust" - a concept that suggests our double up cycle of the last 8yrs likely could be met by a double down cycle - aka another depression type event. Another favorite is that it is key to look at incremental credit vs. incremental gdp growth / consumption spending to evaluate whether the economy is expanding due to job / income growth or due to excess easy money / credit in the system - one is a sign of health and one is a HUGE RED FLAG....I think everyone of you know what has fueled our growth in the 10yrs. Finally, and probably the best lesson I learned from reading from the Dr., I will always remember the lessons in inflation that this man taught me, which I have tried to in turn relay on to non-Richebacher readers but usually was only given apathetic & defensive responses. The concept that inflation goes beyond simply the price of goods and services and actually can also show up in asset prices and trade deficits is something that still is only understand by a very small percent of people in the markets and a much smaller percent of the broad population.
I apologize for the sappy email, but I am kind of sad that we will no longer be receiving the good Dr.'s guidance and wisdom each month...BTW, read the P.S. at the bottom of the letter - I will be buying that book.
Ben
LETTER FROM EDITOR OF RICHEBACHER LETTER
Dear Reader,
Around this time last year, I had the honor of traveling with my family to Cannes, France, and spending the entire month of August working side by side with Dr. Kurt Richebächer. Over many a bottle of wine, and in between discussions of the global economy and credit markets, Dr. Richebächer would share stories about his long and fascinating life. We took time every day to sit on his balcony overlooking La Croisette and the Mediterranean beyond while Kurt remembered…
He left home when he was 19. One night, he was at dinner with his father, brother and British girlfriend when a German U-boat sank a British ship in a British harbor. This was before the true hostilities of World War II began. His father and brother cheered. But Dr. Richebächer was incensed. He pulled the tablecloth out from under the plates, grabbed his girlfriend's hand and left the house. He never returned to live at home again…
But he was quick to mention that he always had respect for his parents.
"I didn't agree with his opinions," he said of his father, "but I always respected the man… and the institution of family."
I can't think of a better way to describe Dr. Richebächer, either. We didn't always get along, and we didn't always agree. But he had my utmost respect, and I came to see him as a close friend.
Over the course of his 70-plus years studying finance and working in the banking industry, Dr. Richebächer developed many close relationships. Longtime market guru Richard Russell... best-selling financial authors Doug Casey and William Bonner... Barron's contributor and editor of Grant’s Interest Rate Observer Jim Grant... former Federal Reserve Chairman Paul Volcker... all called Dr. Richebächer a personal friend.
Paul Volcker himself once said, "Sometimes I think it's the job of each Fed chairman to try to prove Richebächer wrong."
John Exter, once vice president of the Federal Reserve Bank of New York and the man who first warned Washington against taking the dollar off the gold standard back in the 1970s, was also a big fan. Of Dr. Richebächer, Exter said, "I have the greatest respect for Dr. Richebächer. He is one of the best economic analysts in the world."
As his publisher, I wholeheartedly agree. His letter was born in the 1970s while he was still working at the Dresdner Bank. He’d been an outspoken critic of the deficit spending of the German government at the time and began writing so in a letter to the bank’s clients. Because of the bank’s influence at the time, pressure was put on the bank president by the then minister of finance to silence Richebächer’s voice. The bank president did, in fact, fire Kurt. But on the condition that he continue writing for distribution to the bank’s clients. The Richebächer Letter was born.
During the years that I published his letter, he warned of economic disasters time and time again… with frightening accuracy.
He first warned of the housing bubble in his September 2001 letter to his subscribers, saying, “The new housing boom is another rapidly inflating asset bubble financed by the same loose money practices that fueled the stock market bubble.”
He followed up that prediction just a few months later with a warning that low interest rates combined with increased mortgage refinancing and the creation of “creative” mortgage loans would prop the housing market up to unsustainable levels. In his December 2001 issue, he wrote…
Most unusual, furthermore, is the peculiar mode in which the strong housing market has been propping up the economy. Oddly, it has not occurred through the usual channel of a significant rise in building activity, but rather through a monstrous surge in home mortgage refinancing (“refis”), delivered by a hyper-efficient home loan industry. Inspired by increasing house prices and the lowest-ever mortgage rates, the frenzy of mortgage refinancing has been pouring billions of dollars into consumers’ pockets.
In one of the final issues that we were able to publish, he concluded, “The recklessness of both borrowers and lenders has vastly exceeded our imagination.”
He went on to predict “that the housing bubble — together with the bond and stock bubbles — will invariably implode in the foreseeable future, plunging the U.S. economy into a protracted, deep recession.”
In recent weeks, his prediction is finally hitting the mainstream market… playing out exactly how Dr. Richebächer believed it would.
“You know,” he told me during my stay in Cannes last August, “many people accuse me of being a gloom and doomer. But I don’t see it that way. I merely criticize those events and people who need to be criticized. What would be the point of writing about all the things that don’t need to be analyzed… what would be gained or learned by simply writing about things that are right with the world?”
I’m sad to say that at age 88, Dr. Richebächer has passed away. He was a strong, temperate soul. An old-world gentleman. Literate, well traveled, intelligent and critical. And despite all the difficulties he’d seen in his lifetime — war, depression, illness and many long years after his wife passed away — he still enjoyed a good wine, a fine meal and a challenging conversation.
He will be missed.
As I told you in May when we learned of his illness, I’m working hard to find an editor to continue on with The Richebächer Letter. I’ve had some very positive discussions with a number of potentially interested parties and with his family. When we move forward, it will be in the interest of everyone involved. Thank you for your patience in the matter. The good doctor is not an easy man to replace.
In the meantime, to pay tribute to Dr. Richebächer, I’d like to take the next six months to republish some of his classic issues. Once a month, I’ll be sending you (in both mail and e-mail) a classic issue with a note at the top explaining where in the process we are with finding someone to take over the reins of the letter.
These next six months will be completely free for you. You won’t have to do anything to accept them. Please consider them a tribute to Dr. Richebächer. You should receive your first republished classic in early October.
If you have any questions about your subscription, please feel free to call our customer service center at 1-800-708-1020.
Whether you’ve been a subscriber to The Richebächer Letter for a month or for many years, you’ll know that his passing is truly a sad day for anyone in the financial community.
Sincerely,
Addison WigginExecutive Publisher, The Richebächer Letter
P.S. Last year, Kurt was hard at work on a book. He believed he’d refuted the monetarist’s view of the Great Depression, of which Ben Bernanke is one of the most current, famous and influential devotees. The book was, in fact, the reason I had brought my family to Cannes.
I’m afraid work stopped on the book early in 2007. But we have been discussing the manuscript with the Richebächer family. And it is my hope to be able to bring his ideas to fruition. An important work, the book would be the first substantial critique of the Bernanke Fed and quite important in light of recent market events.
He was trying to show that monetary policy can work for a time, but one crisis begets another and eventually monetary policy becomes “completely ineffective” and exacerbates any problem the central bankers are trying to solve. With the right editor and research team, we hope to be able to pick up where Dr Richebächer left off and finish the book in time for his work to help investors before it is too late.
Fellas,
You three guys are the only people I know that read the Dr.'s work regularly, but in my two and half year subsription period I think that I owe alot of the way I think about economics (i.e. unlearning the garbage fed to me in undergrad and grad school) & the broaders markets to reading the Richebacher Letter. It is truly unfortunate that the Dr. passed away right at the peak of the credit boom leaving us without a navigator in the choppiest waters any of us has been in since we have been involved in market decision making. However, I think it is kind of a tragic irony and fitting that the man who called out so many of the egregious financial markets early in the face of an extremely strong consenus opinion otherwise died before the collapse when the consensus opinion finally started to change its tune - a tune that is not nearly what it will be down the road in my opinion. Nonetheless, to me I viewed reading his work the last two years (and a great deal of the back issues) as training to prepare me for what likely will be a future 5yrs to 10yrs that will play out very different in the markets than the past 5 to 10yrs. The lessons that I quote regularly from the Dr. are that "It is a law of nature that the amplitude of the economic boom must be matched by the amplitude of the economic bust" - a concept that suggests our double up cycle of the last 8yrs likely could be met by a double down cycle - aka another depression type event. Another favorite is that it is key to look at incremental credit vs. incremental gdp growth / consumption spending to evaluate whether the economy is expanding due to job / income growth or due to excess easy money / credit in the system - one is a sign of health and one is a HUGE RED FLAG....I think everyone of you know what has fueled our growth in the 10yrs. Finally, and probably the best lesson I learned from reading from the Dr., I will always remember the lessons in inflation that this man taught me, which I have tried to in turn relay on to non-Richebacher readers but usually was only given apathetic & defensive responses. The concept that inflation goes beyond simply the price of goods and services and actually can also show up in asset prices and trade deficits is something that still is only understand by a very small percent of people in the markets and a much smaller percent of the broad population.
I apologize for the sappy email, but I am kind of sad that we will no longer be receiving the good Dr.'s guidance and wisdom each month...BTW, read the P.S. at the bottom of the letter - I will be buying that book.
Ben
LETTER FROM EDITOR OF RICHEBACHER LETTER
Dear Reader,
Around this time last year, I had the honor of traveling with my family to Cannes, France, and spending the entire month of August working side by side with Dr. Kurt Richebächer. Over many a bottle of wine, and in between discussions of the global economy and credit markets, Dr. Richebächer would share stories about his long and fascinating life. We took time every day to sit on his balcony overlooking La Croisette and the Mediterranean beyond while Kurt remembered…
He left home when he was 19. One night, he was at dinner with his father, brother and British girlfriend when a German U-boat sank a British ship in a British harbor. This was before the true hostilities of World War II began. His father and brother cheered. But Dr. Richebächer was incensed. He pulled the tablecloth out from under the plates, grabbed his girlfriend's hand and left the house. He never returned to live at home again…
But he was quick to mention that he always had respect for his parents.
"I didn't agree with his opinions," he said of his father, "but I always respected the man… and the institution of family."
I can't think of a better way to describe Dr. Richebächer, either. We didn't always get along, and we didn't always agree. But he had my utmost respect, and I came to see him as a close friend.
Over the course of his 70-plus years studying finance and working in the banking industry, Dr. Richebächer developed many close relationships. Longtime market guru Richard Russell... best-selling financial authors Doug Casey and William Bonner... Barron's contributor and editor of Grant’s Interest Rate Observer Jim Grant... former Federal Reserve Chairman Paul Volcker... all called Dr. Richebächer a personal friend.
Paul Volcker himself once said, "Sometimes I think it's the job of each Fed chairman to try to prove Richebächer wrong."
John Exter, once vice president of the Federal Reserve Bank of New York and the man who first warned Washington against taking the dollar off the gold standard back in the 1970s, was also a big fan. Of Dr. Richebächer, Exter said, "I have the greatest respect for Dr. Richebächer. He is one of the best economic analysts in the world."
As his publisher, I wholeheartedly agree. His letter was born in the 1970s while he was still working at the Dresdner Bank. He’d been an outspoken critic of the deficit spending of the German government at the time and began writing so in a letter to the bank’s clients. Because of the bank’s influence at the time, pressure was put on the bank president by the then minister of finance to silence Richebächer’s voice. The bank president did, in fact, fire Kurt. But on the condition that he continue writing for distribution to the bank’s clients. The Richebächer Letter was born.
During the years that I published his letter, he warned of economic disasters time and time again… with frightening accuracy.
He first warned of the housing bubble in his September 2001 letter to his subscribers, saying, “The new housing boom is another rapidly inflating asset bubble financed by the same loose money practices that fueled the stock market bubble.”
He followed up that prediction just a few months later with a warning that low interest rates combined with increased mortgage refinancing and the creation of “creative” mortgage loans would prop the housing market up to unsustainable levels. In his December 2001 issue, he wrote…
Most unusual, furthermore, is the peculiar mode in which the strong housing market has been propping up the economy. Oddly, it has not occurred through the usual channel of a significant rise in building activity, but rather through a monstrous surge in home mortgage refinancing (“refis”), delivered by a hyper-efficient home loan industry. Inspired by increasing house prices and the lowest-ever mortgage rates, the frenzy of mortgage refinancing has been pouring billions of dollars into consumers’ pockets.
In one of the final issues that we were able to publish, he concluded, “The recklessness of both borrowers and lenders has vastly exceeded our imagination.”
He went on to predict “that the housing bubble — together with the bond and stock bubbles — will invariably implode in the foreseeable future, plunging the U.S. economy into a protracted, deep recession.”
In recent weeks, his prediction is finally hitting the mainstream market… playing out exactly how Dr. Richebächer believed it would.
“You know,” he told me during my stay in Cannes last August, “many people accuse me of being a gloom and doomer. But I don’t see it that way. I merely criticize those events and people who need to be criticized. What would be the point of writing about all the things that don’t need to be analyzed… what would be gained or learned by simply writing about things that are right with the world?”
I’m sad to say that at age 88, Dr. Richebächer has passed away. He was a strong, temperate soul. An old-world gentleman. Literate, well traveled, intelligent and critical. And despite all the difficulties he’d seen in his lifetime — war, depression, illness and many long years after his wife passed away — he still enjoyed a good wine, a fine meal and a challenging conversation.
He will be missed.
As I told you in May when we learned of his illness, I’m working hard to find an editor to continue on with The Richebächer Letter. I’ve had some very positive discussions with a number of potentially interested parties and with his family. When we move forward, it will be in the interest of everyone involved. Thank you for your patience in the matter. The good doctor is not an easy man to replace.
In the meantime, to pay tribute to Dr. Richebächer, I’d like to take the next six months to republish some of his classic issues. Once a month, I’ll be sending you (in both mail and e-mail) a classic issue with a note at the top explaining where in the process we are with finding someone to take over the reins of the letter.
These next six months will be completely free for you. You won’t have to do anything to accept them. Please consider them a tribute to Dr. Richebächer. You should receive your first republished classic in early October.
If you have any questions about your subscription, please feel free to call our customer service center at 1-800-708-1020.
Whether you’ve been a subscriber to The Richebächer Letter for a month or for many years, you’ll know that his passing is truly a sad day for anyone in the financial community.
Sincerely,
Addison WigginExecutive Publisher, The Richebächer Letter
P.S. Last year, Kurt was hard at work on a book. He believed he’d refuted the monetarist’s view of the Great Depression, of which Ben Bernanke is one of the most current, famous and influential devotees. The book was, in fact, the reason I had brought my family to Cannes.
I’m afraid work stopped on the book early in 2007. But we have been discussing the manuscript with the Richebächer family. And it is my hope to be able to bring his ideas to fruition. An important work, the book would be the first substantial critique of the Bernanke Fed and quite important in light of recent market events.
He was trying to show that monetary policy can work for a time, but one crisis begets another and eventually monetary policy becomes “completely ineffective” and exacerbates any problem the central bankers are trying to solve. With the right editor and research team, we hope to be able to pick up where Dr Richebächer left off and finish the book in time for his work to help investors before it is too late.
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