Economic Analysis

Market Internals Go Negative

Outside the Box

July 30, 2007

Will the market rebound this week or continue last week's slide? Will the credit markets stop their turmoil? These are all questions that investors are confronted with by the financial press. In today's "Outside the Box," we will focus our attention on a well-thought out piece by John Hussman, Ph.D. John is the President of Hussman Investment Trust where he manages the Hussman Strategic Total Return Fund - HSTRX and the Hussman Strategic Growth Fund - HSGFX.

In his Weekly Market Comment, John...

The Subprime Virus

Thoughts from the Frontline

July 27, 2007

As predicted in this letter early this year, the credit markets have finally begun to tighten, as a major re-pricing of risk is underway as a direct result of the subprime markets. The subprime virus seems to be spreading, despite the view a few weeks ago that there would be no "contagion" in the rest of the credit markets. This week we look at the re-pricing of debt and take a rather positive view and explain how a bottom in the credit market is reached. As ugly as it looks on Friday...

Gaming the U.S. Elections

Outside the Box

July 26, 2007

This week in Outside the Box good friend George Friedman of Stratfor delves into that enigma that is Executive power and Presidential elections. George ventures to assess the current President in light of former Presidents, utilizing a methodical rubric of measure to analyze the capabilities of what in all perceptions is a lame duck President with respect to domestic influence and foreign perception. He also analyzed the presidential race. I found this a very interesting piece.

George's company...

Looking for Contagion in All the Wrong Places

Outside the Box

July 23, 2007

This Week in Outside the Box we Join Bill Gross of Pimco in his July 2007 Investment Outlook as he strives to address the implications of the Bear Stearns hedge fund debacle, the toxic waste that is Wall Streets' innovative derivative products and their respective valuation, rather, lack thereof.

If Dear reader you have not been party to the excess of the Wall Street you may have not heard of the two Bear Stearns hedge Funds focusing on the subprime market that were subsequently liquidated on...

Fun in the Subprime Summer

Thoughts from the Frontline

July 20, 2007

This week I am already in Maine and getting ready for a weekend of fishing with my son Trey, so I am going to take off a week from writing the letter. I spoke this morning to the Maine chapter of the Chartered Financial Analysts in Portland. The question of the day was about the subprime markets, private equity and the debt markets in general. And these are the right questions, as this is the part of our economic world with the most risk.

And that gives me a chance to send you the...

Quarterly Review and Outlook: Second Quarter 2007

Outside the Box

July 16, 2007

This week in Outside the Box, we take a closer look at the bond market and its underlying drivers. HMIC's Van Hoisington and Dr. Lacy Hunt anticipate lower inflationary pressures on account of faltering consumer spending and further deterioration in the housing market.

Hoisington Investment Management Company focuses on long-term investment strategies based on Economic Analysis. The firm is a registered investment advisor specializing in fixed income portfolios with over $3.5 billion under...

The Birth/Death Ratio

Thoughts from the Frontline

July 13, 2007

Is the economy slowing down or is it getting ready to go on a new tear? Judging by the run-up in the Dow, the answer is a major turnaround for the economy in the last half of the year, from the close-to-recession numbers of the first quarter. So, what has happened to my forecast of a slowdown or minor recession? This week we look at some hidden problems in the employment data, analyze retail sales and consumer spending, and speculate about the last half of the year. And we also look at...

China: The One-Child Policy Dilemma

Outside the Box

July 12, 2007

This week in a special Outside the Box my good friends at Stratfor addresses the current Chinese dilemma created by their One Child Policy, namely how to continue economic growth with a rapidly aging population coupled with a deteriorating labor force, mind you striving to attend to these issues simultaneously without creating significant rural unrest.

Stratfor predicts a less than somber outcome, anticipating Beijing' inability to address these dire concerns simultaneously, with the result...

Explaining the Consumer Price Index

Outside the Box

July 9, 2007

This week in Outside the Box we look at a Congressional Budget Office publication that dives us the details on how the consumer price index for all urban consumers (CPI-U) is created. This is, as the CBO posits, the best-known official measure of inflation.

The brief that follows will venture to explain the methods used to construct the CPI-U, and how and why the index's estimates of inflation might differ from a consumer's perceptions of price changes. Though I think this article may be...

Where is the Real Risk in the Subprime Debacle?

Thoughts from the Frontline

July 6, 2007

This week we continue to look at an alphabet soup of problems: RMBSs, CDOs, Alt-A, BBB and - a new acronym to put on your radar screen - the very useful CDS. When does an AAA rating not mean an offering is ready for prime time? What type of contagion are we seeing from the Bear Stearns blow-up? I survey my friends in the hedge funds space, trying to find some evidence of cracks in the foundation, and let you know what I hear. We will again look at a wide variety of items and see if we...