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Economic Analysis

Big Banks Shift to Lower Gear

Outside the Box

July 30, 2014

For today’s Outside the Box, good friend Gary Shilling has sent along a very interesting analysis of the big banks. Gary knows a lot about what went down with the big banks during and after the Great Recession, and he tells the story well.

After the bailout of banks during the financial crisis, many wanted too-big-to-fail institutions to be broken up. Big banks resisted and pointed to their rebuilt capital, but regulators are responding with restraints that strip them of proprietary trading...

Anne Elk’s Theory On Brontosauruses

Things That Make You Go Hmmm...

July 28, 2014

Though they reunited this past month for a series of concerts at London’s O2 Arena, the cast of Monty Python last assembled onstage together at London’s Drury Lane Theatre a staggering 40 years ago.

As they took to the stage at the O2 in early July, the surviving members of perhaps the most famous comedy troupe in history (sadly, Graham Chapman died in 1989) boasted a combined age of 357.
 

Time to Put a New Economic Tool in the Box

Thoughts from the Frontline

July 26, 2014

[E]conomists are at this moment called upon to say how to extricate the free world from the serious threat of accelerating inflation which, it must be admitted, has been brought about by policies which the majority of economists recommended and even urged governments to pursue. We have indeed at the moment little cause for pride: as a profession we have made a mess of things.

It seems to me that this failure of the economists to guide policy more successfully is closely connected with their...

Geopolitics and Markets

Outside the Box

July 24, 2014

Growing geopolitical risk is on everyone’s mind right now, but in today’s Outside the Box, Michael Cembalest of J.P. Morgan Asset Management leads off with a helpful reminder: the only time since WWII that a violent conflict has had a medium-term negative effect on markets was in 1973, when the Israeli-Arab war led to a Saudi oil embargo against the US and a quadrupling of oil prices. And he backs up that assertion with an interesting table of facts labeled “War zone countries as a percentage...

GDP: A Brief But Affectionate History

Thoughts from the Frontline

July 20, 2014

“Measurement theory shows that strong assumptions are required for certain statistics to provide meaningful information about reality. Measurement theory encourages people to think about the meaning of their data. It encourages critical assessment of the assumptions behind the analysis.

Hoisington Investment Management – Quarterly Review and Outlook, Second Quarter 2014

Outside the Box

July 15, 2014

This week’s Outside the Box is from an old friend to regular readers. It’s time for our Quarterly Review & Outlook from Lacy Hunt of Hoisington Investment Management, who leads off this month with a helpful explanation of the relationship between the US GDP growth rate and 30-year treasury yields. That’s an important relationship, because long-term interest rates above nominal GDP growth (as they are now) tend to retard economic activity and vice versa.

The author adds that the average...

Poverty Matters for Capitalists

Outside the Box

July 9, 2014

Having taken Thomas Piketty to the cleaners a few weeks back (see “Gave & Gave … and Hay”), Charles Gave now redresses the balance with regard to the issue of economic inequality in today’s Outside the Box. He makes a forceful case that “poverty matters for capitalists”:

Every US recession that I can recall was preceded by a fall in long rates, and I doubt the next will be much different. As such, do not expect the next US downturn to arise from the Federal Reserve pushing rates higher, an...

Vision Quest

Things That Make You Go Hmmm...

July 7, 2014

It started out as something of a pilgrimage... but we’ll get to that a little later.

One of the best things about writing Things That Make You Go Hmmm... is the number of incredibly bright people all around the world that I get to interact with on a regular basis.

The world is full of smart, engaged, experienced people from all walks of life — all of whom have stories to tell and wisdom to impart.

Perhaps nowhere is this more evident than in the world of finance.
 

Central Bank Smackdown

Thoughts from the Frontline

July 5, 2014

Smackdown: smack·down, ˈsmakˌdoun/, noun, US informal
1.  a bitter contest or confrontation.
"the age-old man versus Nature smackdown"
2.  a decisive or humiliating defeat or setback.

The term “smackdown” was first used by professional wrestler Dwayne Johnson (AKA The Rock) in 1997. Ten years later its use had become so ubiquitous that Merriam-Webster felt compelled to add it to their lexicon. It may be Dwayne Johnson’s enduring contribution to Western civilization, notwithstanding and...

The Delusion of Perpetual Motion

Outside the Box

July 2, 2014

In the club where all stock market investors meet every morning when they wake up, the room occupied by those who “don’t understand what is going on” is not as crowded as you might expect. I admit I’m not lonesome – I have plenty of fellow “confusees” to talk with – but I am told they are having to add some more space for the growing crowd in the “it’s a bull market and those stupid old bears just don’t get it” section of the club.

This week’s Outside the Box is a selection from two essays...