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Economic Analysis

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...

Kicks Just Keep Getting Harder to Find

Thoughts from the Frontline

May 20, 2005

"It seems like kicks just keep getting harder to find,
All your kicks ain't bringing you peace of mind,
Before you find out it's too late,
You'd better get straight," - The Monkees

Substitute the word "returns" for "kicks" in the classic Monkees hit and you get an updated boomer generation anthem. (Or maybe Peter, Paul and Mary singing "Where have all the returns gone? - a long time passing.") This week we look at issues involving pension funds, muse upon the size of the financial...

How Japan financed global reflation

Outside the Box

May 16, 2005

This week's letter is by Richard Duncan who is the author of one of my favorite books called The Dollar Crisis: Causes, Consequences, Cures. Richard is based in Hong Kong and is one of the more thoughtful financial analysts I know.

Many people have talked about Federal Reserve Governor Ben Bernanke's printing press speech in 2002, which created quite a storm with the media and financial writers. Richard notes that he repeated the theme of that speech while in Japan in 2003, but unlike us the...

The Problem With Indexes

Thoughts from the Frontline

May 13, 2005

This week we look at index funds, and specifically at the problems that the certain types of capitalization weighted index funds have. It is intuitively obvious that capitalization weighted indexes have a larger proportion of their assets in the larger stocks. But is this what a rational investor should actually want? I think the information we look at today will surprise many.

My good friend Rob Arnott has challenged the conventional thinking with an explosive new study just...

Peering into the Next Ten Years

Outside the Box

May 9, 2005

This week's letter is by Myles Zyblock, who is Chief Institutional Strategist & Director of Capital Markets Research at the Royal Bank of Canada. I have been reading Myles for a number of years, when he was first at another firm whose quality of work has dropped since he left.

Myles takes a look at what the next ten years might hold for investors in the equity markets. Using both PEs and an accounting based approach he concludes that investors will be very disappointed if they expect returns...

A Stable Disequilibrium

Thoughts from the Frontline

May 6, 2005

This week we look at a speech given by Paul McCulley (Managing Director at PIMCO funds) at my recent Accredited Investor Conference in La Jolla. In it he introduces to us the concept of a stable disequilibrium to describe the state of affairs in world monetary matters. It made a great deal of sense to me and I will try and give you the gist of his thought. For the past few weeks I've been thinking about stable disequilibrium's throughout history and throughout the world of today and...

Original Sin

Outside the Box

May 2, 2005

Last weekend I had my second annual Strategic Investment Conference in La Jolla, California. One theme that interested me was that several speakers, including Rob Arnott of Research Associates, Paul McCulley of PIMCO and Richard Russell of Dow Theory Letters, were all negative about Alan Greenspan.

One of my favorite economists, Stephen Roach, of Morgan Stanley gives us a similar opinion. Roach takes a look at the last 6-7 years and the effect that the U.S. Federal Reserve has had on interest...

Wildness Lies in Wait

Thoughts from the Frontline

April 29, 2005

This week we look at the "The Triumph of Irrational Expectations over Long Run Experience." It is a cautionary tale, but enjoyable in the telling, and one that investors almost invariably ignore to their own chagrin. Also, at the end of this letter, I tell you how to get a free coy of Andy Kessler's book, "How We got Here." This is a book you want to read and then give to your kids.

This past weekend, I along with my partners at Altegris Investments sponsored a conference for...

State of the Markets: A Minsky Review

Outside the Box

April 25, 2005

This week's letter is from my good friend Ed Easterling of Crestmont Research in Dallas. Ed helped co-author a couple of Chapters in my book "Bull's Eye Investing" and that inspired him to write his own book. Ed's recently published, a must read book in my opinion, is called "Unexpected Returns: Understanding Secular Stock Market Cycles."

This article uses some of the insightful research in the book to examine current market conditions and why Ed thinks the "Four Categories" are pointing to a...