Economic Analysis

Commodities as an Asset Class

Outside the Box

September 18, 2006

A couple weeks ago in my "Thoughts from the Frontline" Friday E-Letter, I wrote about Mr. Market and potential bubbles (you can view the letter here). Well one particular asset class, commodities, has had me thinking as of late. Despite sound fundamentals initiating the recent boom in the commodities markets, much speculation has also been exerted as evidenced by the resulting volatility in the sector. Stephen Roach has recently weighed in with his take on the situation which I believe will...

A Kinder, Gentler Mr. Market?

Thoughts from the Frontline

September 15, 2006

The market, my various mentors have all told me, is designed to cause the most pain to the largest number of people. And while I am not in pain, the recent move up in the various market indices is certainly not in keeping with my thoughts that the economy is going to slow down and thus should exert downward pressure on the equity markets. Has the world transitioned to a kinder, gentler Mr. Market? One who views investors with compassion and encouragement? Has he truly turned over a new...

Magnifying the Trivial

Outside the Box

September 11, 2006

Today I am pleased to present to you a very thoughtful piece by John P. Hussman, Ph.D., President of Hussman Investment Trust. John manages the Hussman Strategic Total Return Fund - HSTRX and the Hussman Strategic Growth Fund - HSGFX, where his investment style is more that of a hedge fund than a traditional mutual fund because of his hedging tactics and absolute return philosophy. According to Morningstar, the Hussman Funds have been some of the better performing mutual funds over the past 5...

The Fat Lady Hasn’t Sung

Thoughts from the Frontline

September 8, 2006

"The opera ain't over 'til the fat lady sings." And speech after speech by members of the Federal Reserve over the past few weeks suggest that the fat lady is still waiting offstage, not sure of her cue. Today we look at a thoughtful speech given last night to a private gathering by Richard Fisher, President of the Federal Reserve Bank of Dallas. We then look at a few worrisome charts on global liquidity and inflation and some more data on housing.

But first, I want to welcome all the...

Iraq: The Policy Dilemma

Outside the Box

September 7, 2006

Today I am sending out a Special Edition of Outside the Box. My good friend George Friedman, the President of Stratfor.com, has posted a very insightful essay on the dilemma facing the U.S. on the situation in Iraq. Contrary to many of the conflicting assessments by politically motivated pundits, each with their own agendas, that are put forth as "analysis," Stratfor provides reality based in-depth and logical analysis. Again, if you are in the business of managing money (someone else's or your...

No Cuts, No Butts, No Coconuts

Outside the Box

September 4, 2006

The markets have been forced to digest a plethora of events over the past several years, ranging from continuous geopolitical turmoil to a new Fed chairman, from blowups like the Refco scandal to an inflated housing market, each of these occurrences has raised considerable coverage from the financial press yet one cannot lose sight of the longer term trends (and threats) that still loom. The most obvious, and potentially most significant, is the coming generational aging of the boomer...

Deja Vu All Over Again

Thoughts from the Frontline

September 1, 2006

I had occasion to be in my car this morning, listening to CNBC, when the host of the show (Bob Pisani, a very nice gentleman on the few occasions I have had the opportunity to meet him) was arguing with a modestly bearish guest. Yes, there are a lot of reasons for concern noted by bears, but the market is clearly disagreeing with their pessimistic views. Stock indices are hitting cycle highs and seem poised to go higher. He and many other optimists seem to be of the opinion that since...

The Biggest Slump in US Housing in the Last 40 Years

Outside the Box

August 28, 2006

Last week in my letter "Thoughts from the Frontline," I promised a more in-depth view into the housing market provided by the well respected Professor Nouriel Roubini. I also commented on how complexity theory plays into the markets with a culmination of individual events each contributing to a larger "finger of instability" that poses a recessionary threat. One such contributing variable is the U.S. housing market. This week's "Outside the Box" contains an excerpt from Mr. Roubini's blog....

Fingers of Instability

Thoughts from the Frontline

August 25, 2006

This week we revisit some ideas on how change occurs. We are in a transition in the world economy, and it sometimes helps to think about how these transitions take place. What is the mechanism for change? Can we see it coming soon enough to avoid the problems and take advantage of them?

But first, a few comments on the housing market. As we all know, this week the news on both new and existing home sales was ugly. And we should remember that the data is from last month, and anecdotal...

Painting By Numbers: An Ode To Quant

Outside the Box

August 21, 2006

What can baseball, wine pricing, medical diagnosis, university admissions and criminal recidivism teach us about the markets? My good friend James Montier thinks there is a lesson to be learned and explains it in his Global Equity Strategy newsletter.

James is the Director of Global Strategy at Dresdner Kleinwort Watterstein, a London and Frankfurt based investment bank. He is also a prolific writer and author of the book Behavioral Finance - Insights into Irrational Minds and Markets.

In his...