Economic Analysis

The Idea of Europe

Thoughts from the Frontline

June 24, 2005

This week we return to Europe, as what is happening there is one of the most important questions of the day. It is every bit as critical to our long-term world economic future as the valuation of the Chinese currency or US trade deficits or Fed policy.

Let me set the stage with this note. I am not happy about and take no pleasure in what is happening in Europe. For a variety of reasons, I view it with some concern. A united Europe is simply better for the world at large, even...

What’s Worrying The Chairman?

Outside the Box

June 20, 2005

This week's letter is by Richard Duncan who is based in Hong Kong and is one of the brightest financial analysts I know. Richard is the author of one of my favorite books called The Dollar Crisis: Causes, Consequences, Cures. A new paperback edition that is revised and updated is now available at Amazon for under $14.

Richard said this piece is really an updated version of one of the new chapters in The Dollar Crisis. It looks at the federal deficit, the dollar, Greenspan and offers another...

Public Pensions, Public Disasters

Thoughts from the Frontline

June 17, 2005

This week we will look with fresh eyes at an old problem: US pension funds, both public and private, are under-funded, and the situation is getting worse. And the US taxpayer is going to get to fund the difference. The recent slew of data on pension funds suggests that little is being done to correct the huge and mounting problems I have written about for years. Even the recent market upturns of the past few years have not been as big a help as it should have been. I wrote this over two...

Triple Waterfalls: excerpt from Basic Points

Outside the Box

June 13, 2005

This week we look at another interesting essay by Donald Coxe, the Global Portfolio Strategist, BMO Financial Group. He is also the Chairman and Chief Strategist of Harris Investment Management in Chicago, and Chairman of Jones Heward Investments in Toronto. Coxe writes a monthly piece called "Basic Points."

This section of the report looks at what Donald refers to as a Triple Waterfall. This is a similar concept that many readers have seen from me before based on the work of Michael Alexander,...

Whither Europe and the Euro?

Thoughts from the Frontline

June 10, 2005

What if the Malthusian doom and gloom crowd is wrong? What if the trend of lower population growth clearly evident in the developed world is echoed in the rest of the world? This week we look at a remarkable book by Ben Wattenberg called simply "Fewer." It is about "How the New Demography of the Population Will Shape Our Future." His thesis has implications for currency valuations, public pensions and the future of Europe, among many other things. The book has given me a great deal of...

Rethinking Bonds and Another Conundrum

Outside the Box

June 6, 2005

This week's letter is again by one of my favorites, Stephen Roach of Morgan Stanley. We will look at two pieces, one from May 31st and another from June 3rd. The first article lays out why Roach is moving from a bond bear to a bull or at least neutral stance. Low inflation, slowing china, and low relative rates in other parts of the world will help keep our long end rates down.

The second article examines the movement of the dollar. If the current account deficit is to narrow, the dollar must...

Can the Fed Find the Sweet Spot?

Thoughts from the Frontline

June 3, 2005

The questions of the day seemed to revolve around Fed policy, the US trade deficit and the dollar. We look at all of these questions and more in today's letter. Specifically, I want to try to lay out three scenarios involving future Fed policy actions and what each possibility might mean for the US and global economies.

The Fed is in an extraordinarily difficult position. Some very distinguished observers believe the Fed should stop their tightening cycle now. Others think that not...

France and Leading Indicators

Outside the Box

May 30, 2005

This week is we look at two short articles on different topics from some of my favorite writers. The first is by Anatole Kaltsky of GaveKal Research and looks at some of the recent political and economic problems in Europe and what must be done to help turn the EU around. Germany recently had state elections (big upsets), the French vote on the EU constitution was this weekend (expected to be a rejection). These and other issues will have interesting long term implications for Europe and the...

The Strange Tale of the Bare-Bottomed King

Outside the Box

May 23, 2005

This weeks article comes from one of my must read economic analysts, Bill Gross of Pimco. Bill sits on top of the largest pile of bonds in the world and is often referred to as the Bond King. His latest Investment Outlook is called "The Strange Tale of the Bare-Bottomed King." Pimco had a Secular Forum in May and this is Bill Gross's take on some of the issues discussed.

Bill sees our current prosperity built not on productivity and technology but on finance-based consumption fed from asset...

The Greenspan Conundrum

Thoughts from the Frontline

May 20, 2005

"There is little doubt that, with the breakup of the Soviet Union and the integration of China and India into the global trading market, more of the world's productive capacity is being tapped to satisfy global demands for goods and services. Concurrently, greater integration of financial markets has meant that a larger share of the world's pool of savings is being deployed in cross- border financing of investment. The favorable inflation performance across a broad range of countries...