Economic Analysis

China and the Hedge Fund Dragon

Thoughts from the Frontline

March 9, 2007

This week we look at the possible latest entry into the hedge fund world, The People's Republic of China; review the cockroach principle of subprime mortgages; and investigate the possibility of whether we need more derivatives and not less than the $283 trillion or so we now have. It's a lot to cover, but it should all be interesting.

But before we get into the meat of the letter, I want to announce a brand new web site. For the last six months, we have been in the process of creating...

What is True Diversification?

Outside the Box

March 5, 2007

This week we take a look at one of the more common problems I see as I counsel investors, a lack of diversification. Much of the time that stems from not having a philosophy of investing and defaulting to simple selections that over time can create problems when those selections run into a bit of volatility.

Good friend and successful money manager Gary Marks gives us some thoughts on diversification. Gary has written a book called Rocking Wall Street that is the first in what I hope is a...

The End Of Complacency?

Thoughts from the Frontline

March 2, 2007

This week we look at the recent upspike in volatility, see if we can connect some dots with the recent slew of earnings downgrades and the problems in the subprime mortgage world, and follow the money as risk is being taken off the table. I don't "buy" the China problem, but there may be an Asian connection. Let's try and keep it simple as we try and see what's behind curtain #3 labeled "Which direction is the stock market headed?"

But first, if you have not signed up for my Strategic...

China’s Engineered Drop

Outside the Box

March 1, 2007

With Tuesday's market correction being the single biggest decline in the U.S. markets since 9/11, all eyes are focused on figuring out what exactly happened as well as what is going to happen next. This week's Special Edition of Outside the Box will feature a unique perspective on the recent events as Stratfor President George Friedman explains what took place in China and how this was an "engineered drop."

Stratfor is an intelligence company that provides in-depth research and analysis on...

Life after Debt - Russia’s New Millennium

Outside the Box

February 26, 2007

I got a lot of response from my recent letter on South Africa. Today we turn to another emerging market country. Since the late 90's, what country's equity market has performed the best? At first thought, many might say China or India due to the robust economic growth that has taken place. Still others might weigh in with countries such as Brazil or Dubai because of their booming commodities and tourism sectors, respectively. The answer is Russia with it boasting a 37 fold increase since 1998!

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The 51.9% Recession

Thoughts from the Frontline

February 23, 2007

What are the odds of a recession? According to a recent Fed study, they may be 51.9%. Close enough to 50-50 for government work. We analyze this study, look at a few graphs which show a major disconnect between the housing market and the US manufacturing and services sectors, and then close with some comments on yet another proposed rule change. But let's start with a few housekeeping items.

The latter half of this letter will be written primarily to my colleagues in the financial...

‘Capital Ideas’ Or ‘CRAP’?

Outside the Box

February 19, 2007

Introduction Today I am pleased to present to you an exceptionally interesting article for this week's Outside the Box. But before I do, let me say that it is roughly double in length as normal, so please read it at your leisure. Before I give my 2 cents on it, I would like to both acknowledge and thank Kathryn Welling for her permission to provide you with this. Kathryn is a partner of Welling@Weeden, a service provider of independent, timely and incisive news, research and analysis, to...

Gold, Housing and the Yield Curve

Thoughts from the Frontline

February 16, 2007

I have often written about the high probability of a recession following an inverted yield curve (where short-term rates are higher than long-term rates), based upon research which suggests the yield curve is our most reliable indicator of future recessions. I am often asked whether a yield curve causes a recession. The (very) short answer is no. But then what is the mechanism that makes it so reliable? Is it different this time? How can we believe that the economy has a few bumps in its...

Russia’s Great-Power Strategy

Outside the Box

February 15, 2007

Today's special edition Outside the Box discusses the long-term strategy that Russian President Vladimir Putin is setting in place. Stratfor President George Friedman has written an intriguing article on what he sees as some motives, opportunities and scenarios that the Russian leadership faces in a complex set of maneuvers involving the United States and the Middle East.

For those of you unfamiliar with Stratfor, it is the closest thing to a "private CIA" as the organization provides in-depth...

Destitute At 80: Retiring In Secular Cycles

Outside the Box

February 12, 2007

Does the concept of retirement sound scary? If it does don't feel that you're alone. A lot of issues and concerns come along with the subject, the most familiar of which is financial freedom. Even after you have saved a substantial nest egg, it can be difficult to plan out your withdrawal strategy when presented with several unknown variables such as life expectancy and rate of return.

Today's Outside the Box is by my good friend and the always fascinating analyst, Ed Easterling. Ed has written...