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Economic Analysis

Pictures of a mania? - US Housing

Outside the Box

July 4, 2005

Once again we look at one of my favorite analysts and behavioral finance thinker, James Montier of Dresdner Kleinwort Wasserstein in London. James wrote a fascinating book several years ago called "Behavioural Finance: A User's Guide" and puts out ongoing research like the one we will enjoy today. Long time readers will recognize the name because I have discussed many of his ideas in my weekly letter "Thoughts From the Frontline," my book "Bull's Eye Investing" and in "Outside the...

Thoughts on the Housing Bubble

Thoughts from the Frontline

July 1, 2005

Looking at a recent magazine covers one is left with the impression that the whole world is concerned about US real estate prices. This is borne out by the fact that if you go to Google and type in sex you get 78,000,000 hits. If you type in real estate you get 110,000,000 hits, which makes housing about 40% more interesting than sex. Is there a greater sign of a bubble? But if you type in housing bubble you get "only" 1,120,000, so there is not much worrying going on. While the above...

Outlook for Rates and the Curve

Outside the Box

June 27, 2005

This week's commentary comes from Douglas Greenig of RBS Greenwich Capital in Greenwich, CT. I have been reading his material over the years and always find it solid and thought-provoking.

In this piece, we get one more look at Greenspan's "Conundrum." Douglas looks at some of Greenspan's arguments for the strange behavior of the bond market. He then offers up his own theory of why long rates have stayed low and why they are likely to remain there. Many market watchers, like Bill...

The Idea of Europe

Thoughts from the Frontline

June 24, 2005

This week we return to Europe, as what is happening there is one of the most important questions of the day. It is every bit as critical to our long-term world economic future as the valuation of the Chinese currency or US trade deficits or Fed policy.

Let me set the stage with this note. I am not happy about and take no pleasure in what is happening in Europe. For a variety of reasons, I view it with some concern. A united Europe is simply better for the world at large, even...

What’s Worrying The Chairman?

Outside the Box

June 20, 2005

This week's letter is by Richard Duncan who is based in Hong Kong and is one of the brightest financial analysts I know. Richard is the author of one of my favorite books called The Dollar Crisis: Causes, Consequences, Cures. A new paperback edition that is revised and updated is now available at Amazon for under $14.

Richard said this piece is really an updated version of one of the new chapters in The Dollar Crisis. It looks at the federal deficit, the dollar, Greenspan and offers another...

Public Pensions, Public Disasters

Thoughts from the Frontline

June 17, 2005

This week we will look with fresh eyes at an old problem: US pension funds, both public and private, are under-funded, and the situation is getting worse. And the US taxpayer is going to get to fund the difference. The recent slew of data on pension funds suggests that little is being done to correct the huge and mounting problems I have written about for years. Even the recent market upturns of the past few years have not been as big a help as it should have been. I wrote this over two...

Triple Waterfalls: excerpt from Basic Points

Outside the Box

June 13, 2005

This week we look at another interesting essay by Donald Coxe, the Global Portfolio Strategist, BMO Financial Group. He is also the Chairman and Chief Strategist of Harris Investment Management in Chicago, and Chairman of Jones Heward Investments in Toronto. Coxe writes a monthly piece called "Basic Points."

This section of the report looks at what Donald refers to as a Triple Waterfall. This is a similar concept that many readers have seen from me before based on the work of Michael Alexander,...

Whither Europe and the Euro?

Thoughts from the Frontline

June 10, 2005

What if the Malthusian doom and gloom crowd is wrong? What if the trend of lower population growth clearly evident in the developed world is echoed in the rest of the world? This week we look at a remarkable book by Ben Wattenberg called simply "Fewer." It is about "How the New Demography of the Population Will Shape Our Future." His thesis has implications for currency valuations, public pensions and the future of Europe, among many other things. The book has given me a great deal of...

Rethinking Bonds and Another Conundrum

Outside the Box

June 6, 2005

This week's letter is again by one of my favorites, Stephen Roach of Morgan Stanley. We will look at two pieces, one from May 31st and another from June 3rd. The first article lays out why Roach is moving from a bond bear to a bull or at least neutral stance. Low inflation, slowing china, and low relative rates in other parts of the world will help keep our long end rates down.

The second article examines the movement of the dollar. If the current account deficit is to narrow, the dollar must...

Can the Fed Find the Sweet Spot?

Thoughts from the Frontline

June 3, 2005

The questions of the day seemed to revolve around Fed policy, the US trade deficit and the dollar. We look at all of these questions and more in today's letter. Specifically, I want to try to lay out three scenarios involving future Fed policy actions and what each possibility might mean for the US and global economies.

The Fed is in an extraordinarily difficult position. Some very distinguished observers believe the Fed should stop their tightening cycle now. Others think that not...