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Economic Analysis

Putting the World to Rights Again

Outside the Box

October 4, 2004

This week's letter is from Financial News Online. Located in London, they are one of the leading sources of information about Europe's investment banking, fund management and securities industries. Financial News ran a piece last week that was a series of letters over the summer between two of my all time favourite analysts, Bill Gross of Pimco and Stephen Roach of Morgan Stanley.

Gross and Roach exchanged letters over the summer expressing their outlook on many current economic issues...

Horse Racing and the CIA

Thoughts from the Frontline

October 1, 2004

This week we explore in depth an essay on how we think from that bastion of investment analysis, the US Central Intelligence Agency. We look at the rookie mistakes made even by pros. I describe one of my own more embarrassing rookie moments and how it highlights an investment principle that the best performing professionals always keep in mind. I finish with a note on what you can give me (and your friends) for my birthday. It should make for a lively letter.

One of the things I try to get...

Running Money

Thoughts from the Frontline

September 24, 2004

How might the economic world be turned upside down as we go from a post-industrial society to a world driven by intellectual property? What if manufacturing no longer was the driver for economic well-being because that is not where the profit is? What if the trade deficit was not as large as the numbers suggest? This week we examine a lot of interesting what ifs while we look for the connections between the steam engine and Napster. All these questions and more should provide us with a little...

The Zero Bound Dilemma

Thoughts from the Frontline

September 17, 2004

A battle plan, we are told, seldom survives contact with the enemy. Nonetheless, military leaders throughout the world wisely persist in making plans they know will be changed time and time again once the battle starts. Contingency plans are made for all sorts of events, whether likely or unlikely, on the off chance that when something goes wrong (and Murphy assures us it will) that there will be a plan to deal with the next crisis, even if it is to declare victory and go home. Armies train to...

Is Inflation Truly a Threat?

Outside the Box

September 13, 2004

Welcome to the inaugural edition of "Outside the Box." Each week, I read hundreds of articles, reports, books, newsletters, etc. Each week, I and my staff will bring you one essay which we think is worthy of your time. The only requirement is that the article should make us think, and perhaps challenge our assumptions. The subject matter will be quite varied and will come from many sources. There will be no requirement that I agree with the writer or the thinking, just that it offer thoughtful...

The Problem of French Landscapers

Thoughts from the Frontline

September 10, 2004

Today we look at the connections between French farming, China, poor economic forecasting, page 16, single derivative thinking and our investments. We wander and wonder far afield in order to get some insight into our own backyard.

Let's start in the south of France. I was visiting Bill Bonner, of Daily Reckoning fame, last weekend, deep in the heart of Southern French farming country. Riding on the train to his home in Ouzilly with Tiffani (my daughter and assistant), you could see the...

Single Derivative Investing

Thoughts from the Frontline

September 3, 2004

When can we once again return to the stock market with some long term confidence? What's up with bonds and global reflation? This week we continue to meditate on the risks of lazy investing and single derivative thinking, ranging far and wide in an effort to understand the world in which we find ourselves.

While you are reading this letter on Saturday, in theory I will be setting up the grill for a little weekend Texas-style barbecue with good friend Bill Bonner in his chateau (that is the...

The Rewards of Lazy Investing

Thoughts from the Frontline

August 27, 2004

Is being lazy the secret key to riches? Can you grow your portfolio 2,000 percent with just one decisions? Did I spend 432 pages and 200 footnotes [in Bull's Eye Investing] trying to give readers the tools they need to be thoughtful, successful investors when just one page with no troublesome research would open up to them the secret of the ages? With all my study, how could I miss such wisdom?

Today we explore the problem with "single derivative" thinking. It is in my experience perhaps the...

Why Investors Fail

Thoughts from the Frontline

August 20, 2004

This week we look at how to make you a top 20% investor, think about some of the mistakes we all make and much more. I am writing today in Florida and will finish up in Texas tonight before taking off for Philadelphia. Because of the time constraint on my usual research, I am going to borrow a few pages from Bull's Eye Investing and some letters written last year and add a few thoughts. I think this letter contains some very important points that are worth repeating. If you would like more on...

$450 Billion Pension Fund Shortfall

Thoughts from the Frontline

August 13, 2004

This week we start out with the weather and end up buried in the footnotes of the Pension Benefits Guaranty Corporation as we wonder about expected future returns from the stock market. It is a wide-ranging foray, and I hope an interesting one, as we look at what some see as an impending crisis (which is not all that big, as world ending crises go) and stumble upon the real object where our concern should be focused - our retirement portfolios.

Getting an "A" in College

But first, I...