Economic Analysis

Blodget on Market History

Outside the Box

October 7, 2015

I remember the first time I walked into Henry Blodget’s new startup, Business Insider, back in 2009. Twelve fresh-faced kids were crammed into a room about the size of my bedroom, pounding away on laptops, creating a new destination website. He took me over to a corner; we sat down in front of a few cameras; and he began shooting question after question at me, later turning the session into a series of interviews.

You walk into his office today and it’s still packed wall-to-wall with...

Recession Watch

Thoughts from the Frontline

October 4, 2015

“Growth is never by mere chance; it is the result of forces working together.”

– J.C. Penney

“Strength and growth come only through continuous effort and struggle.”

– Napoleon Hill

“We’re lost, but we’re making good time.”

Yogi Berra, 1925-2015, RIP (For a most moving and memory-laden tribute to Yogi, see The Lefsetz Letter.)

A Worrying Set Of Signals

Outside the Box

October 2, 2015

There is presently a bull market in complacency. There are very few alarm bells going off anywhere; and frankly, in reaction to my own personal complacency, I have my antenna up for whatever it is I might be missing that would indicate an approaching recession.

It was very easy to call the last two recessions well in advance because we had inverted yield curves. In the US at least, that phenomenon has a perfect track record of predicting recessions. The problem now is that, with the Federal...

Balloons in Search of Needles

Thoughts from the Frontline

September 27, 2015

I love waterfalls. I’ve seen some of the world’s best, and they always have an impact. The big ones leave me awestruck at nature’s power. It was about 20 years ago that I did a boat trip on the upper Zambezi, ending at Victoria Falls. Such a placid river, full of game and hippopotamuses (and the occasional croc); and then you begin to hear the roar of the falls from miles away. Unbelievably majestic. From there the Zambezi River turns into a whitewater rafting dream, offering numerous class 5...

Germany’s Immigration Challenge

Outside the Box

September 23, 2015

This immigration crisis in Europe is a big deal, and it’s a bigger deal for Germany than for any other European country. Germany is directly in the firing line, both geographically and in terms of how many of the migrants want to settle there. Nearly 40% of migrants choose Germany as their preferred final destination, while the only other nation that is chosen by more than 10% of migrants is Hungary, at 18%.

Daniel Stelter is a very wired German economist and business thinker. He wrote to me a...

Merkel Opens the Gates

Thoughts from the Frontline

September 19, 2015

“The European Project has very little economic and political capital left to defend it if anything goes wrong now. As Mr Juncker says, the bell tolls.”
– Ambrose Evans-Pritchard

Perhaps I should issue a storm warning for this letter. Maybe it’s because I had major gum surgery on my entire lower jaw this week and am in a bit of discomfort, but as I read the news coming through my inbox, it’s not helping my mood. This week’s letter will focus on the immigration crisis in Europe – after I muse on...

Global Imbalances and the Chinese Economy

Outside the Box

September 18, 2015

If we don’t understand both sides of China’s balance sheet, we understand neither
 – Michael Pettis

The most thought-provoking China analyst I know is Michael Pettis, author and economist, who is a professor at Peking University’s Guanghua School of Management as well as a rock music club owner and impresario. Conversations with Michael are always fascinating.

He has a fairly balanced take on China’s future, which is significantly different from most of what you read. That’s because he comes...

Needed at the Fed: An Inverse Volcker

Thoughts from the Frontline

September 12, 2015

“The world’s biggest problems are the world’s biggest business opportunities.”

– Peter Diamandis

One pill makes you larger
And one pill makes you small
And the ones that mother gives you
Don't do anything at all
Go ask Alice
When she's ten feet tall

When logic and proportion
Have fallen sloppy dead

And the White Knight is talking backwards
And the Red Queen's off with her head

Remember what the dormouse said
Feed your head
Feed your head

– “White Rabbit,” Jefferson Airplane, 1967 (The link...

Muddling Through Shanghai

Thoughts from the Frontline

September 5, 2015

“He who knows when he can fight and when he cannot, will be victorious.”

– Sun Tzu

A couple of weeks ago I was complaining about 47,000 China reports clogging my e-mail. The number now feels like it is well into six figures (perhaps a slight exaggeration). Maybe my memory is going, but there wasn’t nearly as much China talk on the way up. Funny how that works.

Weapons of Economic Misdirection

Thoughts from the Frontline

August 28, 2015

“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.

“In ‘pure’ science, we can form a better, more coherent, and objective picture of the world, based on the information measurement provides. The information allows us to create models of (parts of) the world and...