Economic Analysis

The US Mortgage Market - Overexposed and Overrated

Thoughts from the Frontline

May 25, 2007

This week we look at the US mortgage market to see what fallout there is from the subprime mortgage woes. It is both less of a problem and/or more of a problem, depending on your perspective, as I predicted it would be last year. Score one for your analyst, which said score is needed as the stock market continues to rise in spite of my concerns in the face of a slowing economy.

This will be part of a speech I give next Thursday in Edinburgh, Scotland at the Credit Development Academy....

U.S. - China Relations

Outside the Box

May 24, 2007

As the forth largest economy in the world, the rapid growth of Communist China' military, and economic prominence has both perplexed and intrigued the United States. Stratfor analyst Rodger Baker addresses the two primary economic concerns troubling Washington and Wall Street alike: the Chinese-U.S. trade imbalance, and the floatation of the renminbi, currently pegged at 7.8 Yuan to the dollar, though allowed to fluctuate 2-3%.

Washington has identified the currency dilemma as the primary...

How We Learned to Stop Worrying (so much) and Love "Da Bomb"

Outside the Box

May 21, 2007

Humans, by nature, tend to let things worry them a bit more than they ought to. Whether it's a job situation, relationship issue or investment decision, we all tend to blow the small things out of proportion and lose sight of the bigger picture at hand. In this week's Outside the Box, PIMCO Managing Director Bill Gross does an excellent job at explaining why we need to worry less and grab a hold of some of the larger trends behind today's markets.

In his article "How We Learned to Stop Worrying...

Are We There Yet?

Thoughts from the Frontline

May 18, 2007

Summer driving season is almost upon us. I remember more than a few long road trips with young kids, who would eventually get bored and tired and lulled into sleep, and with a stop for gas would wake up and ask, "Are we there yet?" or "Where are we?" They would be impatient to get "there" (ok, so was Dad), and the journey was something to be endured rather than enjoyed for its own sake. Today, traveling with the older kids (6 of them 18-30, with just one still at 13) is a lot different,...

An Optimistic Route to a Poor Market Outlook

Outside the Box

May 14, 2007

Value is a big and well-known strategy within the investment world. Many analysts and investors alike rely heavily on the P/E ratio as a metric to determine the value of a stock, indices or other form of security. But just as with any other investment metric, the data can be skewed if not viewed within the proper context. This week's Outside the Box is by John Hussman where he discusses the importance of analyzing P/E ratios under the backdrop of the earnings cycle. John shares his view...

A Most Disruptive Technology

Thoughts from the Frontline

May 11, 2007

"What we call here a Black Swan (and capitalize it) is an event with the following three attributes.

"First, it is an outlier , as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable."

- Nicholas Nassim Taleb


Serbia’s Choice

Outside the Box

May 10, 2007

This week's Special Edition of Outside the Box is written by Peter Zeihan and highlights the looming indecisiveness of Serbia's political parties. Going back over the past decade, Kosovo and Serbia used to be a couple of hotspots. While there is not any immediate turn of events, Serbia has been in a state of de facto policy that is beginning to build to a sort of tipping point for the country's leadership.

These Special Edition reports are provided courtesy of George Friedman and the rest of...

So What Should We Worry About?

Outside the Box

May 7, 2007

Today's Outside the Box is a very interesting piece written by Louis-Vincent Gave and the team at GaveKal entitled "Part 2: So What Should We Worry About?" His article is a follow up to an earlier one that he wrote on why he, and the rest of the GaveKal team, had been bullish on the markets a couple of months ago. This letter is to answer the question "what could go wrong" with their previous outlook in light of the recent market climate.

For those of you unfamiliar with GaveKal, the firm was...

Stuck in the Middle With You

Thoughts from the Frontline

May 4, 2007

Clowns to the left of me,
Jokers to the right, here I am
Stuck in the middle with you!
- Stealers Wheel, 1974

The recent data on the economy is stronger than was expected. Does this mean that the slowdown we have seen for the past few quarters is behind us? Other data suggests the economy is weakening (witness the very slow 1.3% GDP growth last quarter). This week we look at the seeming disconnect in the data, briefly examine where the real stock market booms are happening, and re-visit...

Household Wealth and the US Savings Rate

Outside the Box

April 30, 2007

This week's Outside the Box is comprised of 2 smaller articles that I believe will, collectively, provide you with some interesting information to digest. The 1st article will be a follow up piece to last week's Outside the Box where I featured a commentary by Morgan Stanley's Chief Economist Stephen Roach titled "The Missing Link to Global Rebalancing." Kathleen Camilli, the President of Camilli Economics, has weighed in on some of Roach's views by providing a quasi-rebuttal of her own. While...