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Economic Analysis

Gavekal on Russia and Japan

Outside the Box

March 19, 2014

I look at dozens of sources a day on global macroeconomics, but one source I go to every day is my good friends at Gavekal. The Gavekal partnership – father Charles Gave, son Louis-Vincent Gave, and noted economist and journalist Anatole Kaletsky – spans three continents: Charles is based in Paris, Anatole is in London, Louis has set up shop in Hong Kong, and the firm also has an office in the US. And they have an extensive team of outstanding analysts.

Gavekal’s publishes global macro...

Crimea River

Things That Make You Go Hmmm...

March 17, 2014

(Marina Lewycka): Public clashes between Ukrainians and Russians in the main square in Sevastopol. Ukrainians protesting at Russian interference; Crimean Russians demanding the return of Sevastopol to Russia, and that parliament recognise Russian as the state language. Ukrainian deputies barred from the government building; a Russian "information centre" opening in Sevastopol. Calls from the Ukrainian ministry of defence for an end to the agreement dividing the Black Sea fleet between the...

Inequality and Opportunity

Thoughts from the Frontline

March 16, 2014

“Nothing is more dangerous than a dogmatic worldview – nothing more constraining, more blinding to innovation, more destructive of openness to novelty.”

– Stephen Jay Gould

My letters the last few weeks on income inequality (here and here) brought more response from readers than any topic I’ve written on in the history of this letter. And there was certainly no unanimity of viewpoints. Some of you strongly agree with me; some of you aggressively disagree and think I’m full of it; and...

Seth Klarman: Investors Downplaying Risk “Never Turns Out Well”

Outside the Box

March 12, 2014

Today’s Outside the Box is unusual in that it isn’t an original document but rather a summary of a client letter from one of the greatest investors of our generation, Seth Klarman, who is also one of the more reclusive – he rarely speaks in public or grants interviews. He is known for his very deep value investing style and willingness to pursue value where others get very nervous.

This last year he returned $4 billion cash to his clients (from a fund in the $30 billion range). Not...

The Problem with Keynesianism

Thoughts from the Frontline

March 9, 2014

“The belief that wealth subsists not in ideas, attitudes, moral codes, and mental disciplines but in identifiable and static things that can be seized and redistributed is the materialist superstition. It stultified the works of Marx and other prophets of violence and envy. It frustrates every socialist revolutionary who imagines that by seizing the so-called means of production he can capture the crucial capital of an economy. It is the undoing of nearly every conglomerateur who believes he...

Ukraine: Three Views

Outside the Box

March 3, 2014

All eyes are on Ukraine as the drama continues to unfold. Today, for an early Outside the Box, I’m going to offer three sources on Ukraine. The first is a note that I got from the head of emerging-market trading at one of the world’s largest hedge funds. This is what he sent out last week, ahead of any real action:

My view, Putin is stuck now, cannot easily de-escalate. Further escalation is a possibility, with Ukraine cracking along the obvious ethnic fault lines and the West reacting with...

Black Swans and Endogenous Uncertainty

Thoughts from the Frontline

March 1, 2014

John is in Florida and feeling a bit under the weather, so this week we’re bringing back one of his most popular letters, from December 2007. In the letter he discusses the work of Professor Graciela Chichilnisky of Columbia University, one of whose key insights is that the greater the number of connections within an economic network, the more the system is at risk. Given the current macroeconomic environment, it is important to remind ourselves of how complacent we were back in 2007 and how...

World Money Analyst Update on Europe

Outside the Box

February 27, 2014

For the last two weeks on Thursdays we have brought you special editions of Outside the Box featuring World Money Analyst Managing Editor Kevin Brekke’s interviews with WMA contributing editors. We heard from Ankur Shah on emerging markets and Alexei Medved on Russia, and this week we wrap up the series with a frank, hard-hitting interview with Dirk Steinhoff, who covers the European and Scandinavian markets for WMA.

Kevin and Dirk are both based in Switzerland, and so they lead off with a...

Buffett’s annual letter: What you can learn from my real estate investments

Outside the Box

February 26, 2014

It does not hurt to be reminded once in a while about what it means to be a “true investor,” and who better to remind us than Warren Buffett? Today’s Outside the Box comes to us from the pages of Fortune magazine (hat tip to my good friend Tom Romero of Capital Research Partners, who is a pretty fair investor in his own right).

Fortune seems to have had the inside scoop on Mr. Buffett’s pronouncements over the years. I still keep some old Fortune magazines with interviews of Mr. Buffett to...

The Worst Ten-Letter Word

Thoughts from the Frontline

February 23, 2014

“Inequality has emerged as a major issue in the US and beyond. A generation ago it could reasonably have been asserted that the overall growth rate of the economy was the main influence on the growth in middle-class incomes and progress in reducing poverty. This is no longer a plausible claim.

“The share of income going to the top 1 per cent of earners has increased sharply. A rising share of output is going to profits. Real wages are stagnant. Family incomes have not risen as fast as...