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Economic Analysis

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...

The More Things Change

Thoughts from the Frontline

April 22, 2005

This is the text of a speech given at the Accelerating Change 2004 conference at Stanford University. The conference organizers asked me to look out over the next 3-4 decades and offer my thoughts as to what the future may look like. A somewhat daunting task, and one guaranteed to failure, as the future always seems to surprise, I nevertheless tried to peer into that dark glass.

La plus ca change, la plus c'est la meme choses.
The more things change, the more things stay the same.

...

Economic Reforms Sacrificed For Political Gains

Outside the Box

April 18, 2005

This week we will turn once again to a group headquartered in Hong Kong with offices in Stockholm and New York called GaveKal Research Limited. Louis- Vincent Gave's GaveKal Ad Hoc Comments for Friday, April 8, 2005 looks at the political and economic climate in Europe and what that might mean for the Euro and European government bonds.

The European Union, now with a few years behind it, is looking to make some changes and as we have seen throughout history, what is good politically is not...

Forecast: The Next Ten Years

Thoughts from the Frontline

April 16, 2005

This week we look at how politics and geopolitical events can affect our investments. We look at a decade-long forecast from one of my favorite information services: Stratfor.com. I change my view on the euro, talk about a possible Chinese recession and look at uncomfortable analogies between 1900 and today. There's a lot of ground to cover so we will jump right in.

I have had the relative value of currencies on my mind every day for the past two weeks. I have been in London, where the...

Don’t Discount Discounted Dividends

Outside the Box

April 11, 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 March 21, 2004 takes a look at the importance of...

Unexpected Returns

Thoughts from the Frontline

April 8, 2005

Writing on the train to Yorkshire from London, I am surrounded by a gorgeous English countryside on a beautiful spring day. Life has its moments. I like the trains in Europe. Quite a civilized way to travel. Yet every time I pull out my wallet, I am reminded of reality. The ebb and flow of the dollar has made this a most expensive country for someone from the states. Nearly everything is the same price, just in pounds instead of dollars. And a pound that is worth more than two of my...

An Asset Allocation Strategy For The Intelligent Investor

Outside the Box

April 4, 2005

This week's report is about some research finding from a group in Bellevue, Washington called Evergreen Capital Management, LLC. They have built a proprietary model that is used to predict when mutual fund styles (large-mid-small capitalization, value-growth) are being overbought or oversold. They believe that their model is quite good at predicting returns relative to the overall market over the subsequent two years.

This report does an excellent job of weaving together many of the themes from...