Economic Analysis

Bubble, Bubble, Everywhere a Bubble

Thoughts from the Frontline

September 13, 2002

There has been more important and interesting economic analysis that has come across my desk in the last few weeks than at any time I can remember. I have spent a lot of time pondering the meaning of several very different items, and trying to see how the dots connect. I think it will give us some clues as to what our investment posture should be. I think you will find this letter to be much different from the usual economic analysis.

First, I have masochistically thought long and hard about...

All God’s Children Got Themes

Thoughts from the Frontline

September 6, 2002

September is the month set into my personal rhythms, and that of my generation, as a time to reflect upon the past and look to the future. The first week of school was always a time for review and to get a sense of what we would be looking forward to in the new school year. Even though school has been in session for several weeks, to those of us who went to school in the 50's and 60's, it does not feel right until after Labor Day.

With that cycle in mind, it seems that we should briefly...

The Housing Bubble Blues

Thoughts from the Frontline

August 30, 2002

Housing, deflation, bonds, and the dollar are all inextricably linked, if you connect the dots between numerous studies which have come out in the past few weeks. We'll do that and more as we explore the implications of even a small housing bubble and what it will mean to you.

I frequently get email from readers asking whether they should buy or sell a house in a particular area. The short answer is, "I don't know." Today I am going to give you the tools which will help you answer this...

Puzzle Me This, Mr. Market

Thoughts from the Frontline

August 23, 2002

I confess. I like jig-saw puzzles. My bride indulges this quaint past time by buying me a new puzzle from time to time. This last month, I must have done something bad, however, as she purchased a particularly fiendish puzzle, where too many pieces look the same. It is proving quite the challenge.

I bring this personal anecdote up, because the recent economic news is in somewhat the same vein. Trying to develop useful themes from the recent spate of very interesting statistics is quite...

If It Quacks Like Japan

Thoughts from the Frontline

August 16, 2002

Today we examine several fundamental and criticaly questions, to see if they give us come clues as to the direction of the economy and the stock markets:

"Why do we have no inflation since the Fed has been growing the money supply at very high levels for a very long time?"; the ever popular, "Is the Fed pushing on a string?" and "Is the United States headed down the same path as Japan?"

Under the ‘Macro-Scope’

Thoughts from the Frontline

August 9, 2002

This week I have asked Greg Weldon, whom I frequently refer to, to give us a few examples of how seemingly different economic trends actually fit together, like pieces of a puzzle. If you can figure out how the puzzle pieces fit, you can develop ideas to profit from the picture they create. Greg is very good at seeing economic relationships and finding ways to make money from theme.

Every day, Greg gets up at 3 am and starts to work, so that by the time I come in, I usually have my first...

What Expensing Options Will Do

Thoughts from the Frontline

August 1, 2002

What would real profits be for NASDAQ companies if options were expensed? What would the stock price be for the biggest companies in America if investors started to price them based upon correct earnings figures? I give you the numbers in today's E-letter, plus we look at why the dollar is rallying, the economy and more. It should all make for interesting reading.

The X Factor

Thoughts from the Frontline

July 25, 2002

Today we look at why oil prices are likely heading down, how brilliant economists come to the wrong conclusions and of course a few comments on the recent market action. Let's jump right in.

More Lies, Damned Lies and Statistics

Since I criticized the trade policies of President Bush last week, maybe I can work up enough nerve to critique a recent article by one of the more well-known economists in the country, Arthur Laffer, of Laffer Curve fame.

Et Tu, Dell?

Thoughts from the Frontline

July 19, 2002

For the past two weeks, I have presented a host of evidence that Price to Earnings (P/E) ratios would have trouble improving, even as actual profits and earnings grow in a modestly recovering economy. Changes in accounting standards, corporate governance and public perception will so change the rules as to how we measure profits, that public corporations will be fighting a strong head wind to show improved P/E ratios. Since this is a primary measure of the value of a stock, this "new profits...

Analyze This: Analysts Are Useless

Thoughts from the Frontline

July 12, 2002

The end of this week's e-letter will be Part Two of "Why P/E Ratios Will Not Rise As They Normally Do After a Recession." The whole piece will be a chapter in my new book, Absolute Returns. Of course, I will have to think of a snappier chapter title. But snappy or not, it is important you understand the dynamics that are working to hold down P/E ratios today, and why this means the long term secular bear market now in session will remain so for several years to come.