Economic Analysis

What Could Go Wrong?

Thoughts from the Frontline

December 31, 2016

“Experience is simply the name we give our mistakes.”
– Oscar Wilde

“Mistakes are the usual bridge between inexperience and wisdom.”
– Phyllis Theroux

“Economists are often asked to predict what the economy is going to do. But economic predictions require predicting what politicians are going to do – and nothing is more unpredictable.”
– Thomas Sowell

Dalio on Trump

Outside the Box

December 21, 2016

I have never had the pleasure of meeting Ray Dalio, although I have talked with many people who work with him, and I make it a point to read everything he writes that I can get my hand on. (His outfit, Bridgewater Associates, is notoriously guarded about letting their writings out. I know for a fact that many folks at Bridgewater read my letter – which is admittedly free and certainly doesn’t come with the gravitas of running $150 billion – but in the spirit of the Christmas season I wonder if...

As the Fed Turns

Thoughts from the Frontline

December 19, 2016

“Monetary policy has less room to maneuver when interest rates are close to zero.”

– Ben Bernanke

“Many Americans rely on interest income from their savings to help cover their cost of living.”

– John Delaney

Italy’s Day of Reckoning Is Coming

Outside the Box

December 14, 2016

Italy has a new government, and Matteo Renzi is not in charge of it. The former prime minister kept his word and resigned following his constitutional reform plan’s crushing defeat at the polls. Is all now well in that beautiful land?

Not exactly, though we did see a glimmer of hope this week. Unicredit, Italy’s largest bank, announced job cuts and asset sales that may buy it some time. This does not, however, mean the crisis is over. At best, it means the beginning of the crisis is over. We...

The Trump Rally Will Morph

Thoughts from the Frontline

December 11, 2016

“Price is what you pay. Value is what you get.”

– Warren Buffett

“There is no safe store of value.”

 – Alan Greenspan

“In the short-run, the market is a voting machine – reflecting a voter-registration test that requires only money, not intelligence or emotional stability – but in the long-run, the market is a weighing machine.”

– Attributed to Benjamin Graham by Warren Buffett in a 1993 Berkshire Hathaway letter...

Putting the Boot into Italy

Outside the Box

December 7, 2016

When Charles Gave, paterfamilias of Gavekal, chooses to express displeasure over an economic trend, an asset class, or what have you, he does not exactly mince words. If you happen to be in the room when he does so, he can sound like the Voice of God Himself, declaring from on high. And with his longish flowing white hair, he actually looks like central casting setting over to play the part.

Today Charles is exercised about Italy. He first reminds us that when Italy adopted the euro in 1999,...

A Big Swirling Italian Mess

Thoughts from the Frontline

December 2, 2016

“Move to Italy. They know about living in debt: They don’t care.”

– John Lydon

“Italians were eating with a knife and fork when the French were still eating each other.”

– Mario Batali

Do Larger Federal Budget Deficits Stimulate Spending? Depends on Where the Funding Comes From

Outside the Box

November 30, 2016

In the true spirit of stepping outside the box, today’s OTB is a counterintuitive argument against the concept that fiscal deficits and/or infrastructure spending constitute effective economic stimulus. It comes from Paul Kasriel, who was one of my favorite reads when he was at Northern Trust, and I am glad he continues to write in “retirement.” He always has a way of looking at things from different angles than everybody else does.

Paul is a self-confessed reformed Keynesian. He likens his...

What Should Trump Do?—Your Questions Answered

Thoughts from the Frontline

November 27, 2016

This will be a shorter letter, in keeping with the need for holiday fun and relaxation. However, last week’s letter with my thoughts on what Trump should do generated more responses than any other letter had in the last 17 years. As you might suspect, with a topic so controversial, not everyone agreed with me. But there were many good questions and comments and some thoughtful disagreements, so I want to address a few of those. And I will specifically go into why I seemingly deviate from core...

Federal Reserve Meeting Minutes: Stronger than Oak

Outside the Box

November 23, 2016

Today, for your pre-Thanksgiving delectation, I have for you an Outside the Box with deep roots in my West Texas homeland. It comes from fellow Texan Danielle DiMartino Booth, who has graced these pages more than once this year. You’ll recall that she was a key advisor on monetary policy to Dallas Fed President Richard Fisher until his retirement last year, whereupon Danielle struck out on her own (and landed here). She has a book coming out early next year, called Fed Up: An Insider’s Take on...