Economic Analysis

Lost in America?

Outside the Box

December 4, 2006

I am pleased to present to you a thoughtful piece by good friend and business partner Jon Sundt in today's "Outside the Box." Jon is the President of Altegris Investments and a very insightful thinker.

In his article "Lost in America? Asset Allocation and the Old Brain," Jon takes a look at some of the psychological challenges we face in investing. He further goes on to discuss why asset allocation is such an important component to any investor's strategy amidst of an increasingly global and...

The Recession of 2007

Thoughts from the Frontline

December 1, 2006

One of my favorite cartoons of all time is that of a very scrawny mouse caught out in an open field with a rather large hawk swooping down on it. There is no place to run, no place to hide. All the mouse can do is face the hawk and give him the bird, so to speak. The caption runs something like, "In the face of total disaster the only appropriate response is utter defiance."

And while the economic data is not a total disaster, it has not been good this week. Yet the response of...

Alpha/Beta Anemia

Outside the Box

November 27, 2006

After a great holiday weekend, I hope that everybody is enjoying the recurring challenge of finding new ways to creatively eat turkey leftovers. For today's "Outside the Box," we turn our attention towards an interesting piece by Bill Gross on the changing investment landscape over the next decade. In his article "Alpha/Beta Anemia," Bill discusses his outlook for several asset classes and explains their implications on risk premiums in the marketplace.

Bill is a Managing Director at PIMCO...

It’s All About Your Time Frame

Thoughts from the Frontline

November 24, 2006

It's a slow Thanksgiving Friday, and I decided I would rather be writing to you than shopping in the malls. In fact, I would pay good money not to go to the malls today. Which my kids think I am because they pointed out on Thanksgiving the amazing values I am missing, particularly on items they think should be on my Christmas shopping list. And I agree, I am surprised by the level of discounting, and believe those prices will be there in a few weeks when I actually get around to...

Beyond The Horizon: Economics & EPS

Outside the Box

November 20, 2006

I am excited to present to you today a very interesting piece by my good friend and local Dallas resident, Ed Easterling. Ed has performed an in-depth study on how several key fundamentals have performed over time and how they are likely to perform over the next several years. His analysis shows how EPS and corporate profit margins have correlated to the business cycle dating all the way back to 1950. I find his study to be very insightful and dead on in the midst of the current market climate....

The Coming Collapse in Housing

Thoughts from the Frontline

November 17, 2006

This week I am in New Orleans at the annual New Orleans Investment Conference and quite frankly with so many good friends that I have given myself permission to not write a letter this week. But you will be getting an even better writer than me for this week's letter.

I arranged for good friend Gary Shilling to condense his 40 page letter on the housing market for you. While this letter will print long (for those of you who print the letter out), it is mostly charts, which Gary excels...

Inflation, Bond Yields, And The Market

Outside the Box

November 13, 2006

Today's "Outside the Box" will be a combination of 2 different writings. The 1st is an email that I received from Research Affiliates Chairman Rob Arnott in response to my letter last Friday, "Honey, I Created a Bubble." The 2nd is the latest article by the well-known fund manager, John Hussman. Upon reading both commentaries, I was struck by the similarity between the two. It behooves us to pay attention when two very intelligent gentlemen that both actively (and successfully!) manage billions...

Honey, I Created A Bubble

Thoughts from the Frontline

November 10, 2006

We have been told for months that the next interest rate move by the Federal Reserve is dependent upon what the data tells us prior to each meeting. If the data tells us that inflation is too high and/or the economy too strong, the Fed will continue in its pause mode or maybe even hike rates. If inflation comes down and the economy begins to soften, the next interest rate moves will be down.

But that begs the questions, "How reliable is the data?" and "How does one interpret the...

Back to Iraq

Outside the Box

November 9, 2006

The past couple of days have been filled with anticipation over the outcome of which party will emerge victorious during this year's elections. Adding to the flurry of activity, Defense Secretary Donald Rumsfield unexpectedly announced his resignation raising further questions about the future of American policy. Both the parties and individuals newly appointed to government positions will have an impact on both fiscal policy for the markets (dividend and taxes) and on our foreign involvement...

Near a Bottom in Housing?

Outside the Box

November 6, 2006

I touched briefly on the subject of housing in my Friday letter, "Thoughts from the Frontline" (you can view it here). Data from across the country points to a number of trends including declines in both new construction and existing home sales. Market "experts" are calling for both sets of outcomes with some saying that we have been through the brunt of the contraction and with others saying that further declines await us yet.

This week's letter is from Paul Kasriel of The Northern Trust...