Economic Analysis

How Global Interest Rates Deceive Markets

Thoughts from the Frontline

January 25, 2015

“You keep on using that word. I do not think it means what you think it means.”

– Inigo Montoya, The Princess Bride

“In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.

“There is only one difference between a bad economist...

The Cult of Central Banking

Outside the Box

January 20, 2015

In today’s Outside the Box, good friend Ben Hunt informs us that we have entered the cult phase of the Golden Age of the Central Banker:

We pray for extraordinary monetary policy accommodation as a sign of our Central Bankers’ love, not because we think the policy will do much of anything to solve our real-world economic problems, but because their favor gives us confidence to stay in the market. I mean, does anyone really think that the problem with the Italian economy is that interest...

The Swiss Release the Kraken!

Thoughts from the Frontline

January 19, 2015

“Below the thunders of the upper deep,
Far far beneath in the abysmal sea,
His ancient, dreamless, uninvaded sleep
The Kraken sleepeth: faintest sunlights flee….

“There hath he lain for ages, and will lie
Battening upon huge sea-worms in his sleep,
Until the latter fire shall heat the deep;
Then once by man and angels to be seen,
In roaring he shall rise and on the surface die.”

– Alfred, Lord Tennyson, “The Kraken

"The exact contrary of what is generally believed is often the...

A War Between Two Worlds

Outside the Box

January 15, 2015

The terrorist attacks in Paris have fixated the world’s attention on the contrast between competing worldviews and what constitutes acceptable behavior in modern society. What are the principles by which society should be organized and run? Who gets to set those rules, and to what standards should others who do not believe in them be held?

While at their core these are philosophical questions, the way we answer those questions can have profound economic consequences. They are especially...

2015 Five-Year Global Financial Forecast | Mauldin Economics

Thoughts from the Frontline

January 12, 2015

Seven major trends are likely to produce an economic tsunami over the next five years, wreaking havoc but delivering opportunities to the savvy investor.

It is the time of the year for forecasts; but rather than do an annual forecast, which is as much a guessing game as anything else (and I am bad at guessing games), I’m going to do a five-year forecast to take us to the end of the decade, which I think may be useful for longer-term investors. We will focus on events and trends that I think...

Stray Reflections

Outside the Box

January 8, 2015

’Tis the season for making forecasts. I will be sending my own five-year projections this weekend, but today for your Outside the Box reading pleasure we look at some similarly longer-term prognostications from the newest member of the Mauldin Economics writing team, Jawad Mian. Jawad writes a monthly global macro advisory publication called Stray Reflections, which is read by some of the world's largest hedge funds, family offices, and asset managers. I and my team have become fascinated...

Why the World Needs the US Economy to Struggle

Thoughts from the Frontline

January 4, 2015

The headlines this morning talk about the US dollar hitting an 11-year high. I have been saying for years that the dollar is going to go higher than anyone can imagine. This trade is just in the early innings. And the repercussions will be dramatic, not only for emerging markets that have financed projects in dollars, but also for commodities and energy, gold, and a variety of other investments. The world is at the doorstep of a new era of volatility and currency wars.

In this week’s...

15 Surprises for 2015

Outside the Box

December 31, 2014

It’s that time of year when people start thinking about New Year’s resolutions and investment planning for the future. It’s also the time of year when analysts feel more or less compelled to offer up forecasts. My friend Doug Kass turns the forecasting process on its head by offering 15 potential surprises for 2015 (plus 10 also-rans).  But he does so with a healthy measure of humility, starting out with a quote from our mutual friend James Montier (now at GMO):

(E)conomists can't forecast...

The US Dollar and the Cone of Uncertainty

Thoughts from the Frontline

December 22, 2014

Currently we have an international monetary non-system. Nobody has to follow any rules. Everybody does what they consider is in their own short-term best interest. The real difficulty is: What is in their short-term interest – for example, following ultra-easy monetary policy – could well backfire somewhere. It might be not in their long-term best interest. And as the easy monetary policy influences the exchange rates, it influences other countries. Almost every country in the world is in...

The Burning Questions For 2015

Outside the Box

December 18, 2014

Louis Gave is one of my favorite investment and economic thinkers, besides being a good friend and an all-around fun guy. When he and his father Charles and the well-known European journalist Anatole Kaletsky decided to form Gavekal some 15 years ago, Louis moved to Hong Kong, as they felt that Asia and especially China would be a part of the world they would have to understand. Since then Gavekal has expanded its research offices all over the world. The Gavekal team’s various research arms...