Economic Analysis

A Critical Juncture

Thoughts from the Frontline

September 9, 2005

This week we once again look at Fed policy, the economy and some very interesting statistics and commentary from some very thoughtful commentators. We are coming to a critical juncture. Future Fed policy making decisions are rather murky at this point, and we examine why, and why it is important to you.

Also, last week, in response to some ad hoc comments in my weekly letter about why it took so long to get soldiers into New Orleans, I received a thoughtful, articulate response from...

The Endogenous Oil Shock

Outside the Box

September 5, 2005

One of my favorite economists, Stephen Roach, of Morgan Stanley gives us an insight into what the latest economic shock may mean for the economy. Economic shocks often lead to a fairly predictable slowdown and recovery, but Roach argues that the Fed induced asset bubbles of the last few years may cause this current shock to prick "America's asset economy."

I hope Roach is wrong and that the imbalances in the economy work themselves out slowly rather than popping a bubble, but this...

Time to Call an Audible

Thoughts from the Frontline

September 2, 2005

Nearly all eyes are on the terrible devastation caused by Katrina, and rightly so. I can do little to add to the amount of news you already doubtlessly have, but in today's letter we will look at some of the economic implications from this tragedy, as well as how they fit into the larger picture of what is already unfolding, and specifically Federal Reserve policy. We will look at a lot of individual items up close, and then see if we can then step back and see if we can make some sense...

Pick of the Week

Outside the Box

August 29, 2005

This week's letter comes to us from a group in London called Bedlam Asset Management. Last week my partners in London forwarded this article to me and said, "worth 5 minutes of your time." I agree. 5 minutes and more. Bedlam has a series of articles called Pick of the Week and this one from late July takes a look at the banking problems in China. Many of the world's largest banks seem to be rushing to China, just to be there and may be setting themselves up for problems in the...

The Fed Targets Your Home

Thoughts from the Frontline

August 26, 2005

What is the relationship between housing prices and stock market forecasting? What will happen if the housing market begins to falter? Exactly what did Greenspan say about housing at Jackson Hole? We explore these topics and a whole lot more and hopefully we can tie them all together by the end of this letter as we meditate on the potential risk of the recent housing boom.

Let's start with forecasting. Every few weeks I get a wonderful letter from good friend James Montier, who is the...

Omitted Variables

Outside the Box

August 22, 2005

This week's letter is from John P. Hussman, Ph.D., President of Hussman Investment Trust. His firm is one of the few that has employed hedging techniques, similar to the hedge fund world, in a mutual fund structure. John is also one of the really, really, really smart guys in the running money business. John manages the Hussman Strategic Total Return Fund - HSTRX and the Hussman Strategic Growth Fund - HSGFX.

Hussman's Weekly Market Commentary on August 22, 2005 takes a look at the...

What Will Cause the Next Recession?

Thoughts from the Frontline

August 19, 2005

It's a race to see what will be the cause, or maybe better put, what will be blamed for the next economic slowdown. Will it be oil and rising energy prices? What about a slowdown in the housing market? You can't count out the Fed raising interest rates as source of economic slowdown. If China slows down and thus has less money to invest in our bonds, will rates rise? There are so many potential culprits. We run through them and more as we try to peer into 2006.

One of my favorite...

The Consumer-Dependent Economy

Outside the Box

August 15, 2005

This week's letter comes to us from Dr. A. Gary Shilling, president of A. Gary Shilling & Co., Inc. Gary is a long time friend and one of my favorite economic analysts.

Gary takes a look at what he has termed the consumer-dependent economy. The consumer has increasingly become a larger factor in driving our economy with the help of debt and loose monetary policy. Savings, GDP, housing, debt, and bankruptcy trends are pieced together to create a bleak picture of the baby boom...

The Greenspan Uncertainty Principle

Thoughts from the Frontline

August 12, 2005

This week we revisit our old friend, the Yield Curve. We look at what it may or may not be telling us, how the Conference Board has changed how they look at the yield curve as part of their leading economic indicators, and muse upon what Greenspan is really doing. There's lot of very important and interesting ground to cover, not the least of which is my concern about Fed policy.

But first, let me invite you to meet me in New Orleans at the New Orleans Investment Conference October...

Juiced Data

Outside the Box

August 8, 2005

This week's letter comes to us from my friend Barry Ritholtz, Chief Market Strategist of the Maxim Group and a frequent guest on CNBC and Fox. I have been reading his commentary for several years and he now keeps a Blog called The Big Picture.

The following is a combination of two commentaries about government economic numbers. It is hard to rely on statistical numbers if the government periodically decides to change how they are calculated and Barry takes a look at several...