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Outside the Box, October 2007

Quarterly Review and Outlook - Third Quarter 2007

October 29, 2007

This week in Outside the Box, Van Hoisington and Dr. Lacy Hunt of Hoisington Management undertake an assiduous analysis of the economy, specifically quantifying the underlying impact of the real estate market on GDP growth through the follow-on adverse effects on consumer spending.

As outlined in previous publications, the housing debacle has not by any stretch of the imagination reached bottom, having an estimated $800 billion of adjustable rate mortgages reset between October 2007, and...

A Subprime Outlook for the Global Economy

October 22, 2007

Stephen Roach is one of my favorite analysts. However, since he moved to Asia to take up new responsibilities, he has not written as much. Thus I was delighted to receive what will be today's Outside the Box last week. Roach argues that the US is getting ready for a subprime economy and the world, and in particular Asia, will also slow as a result. This is a particularly sobering essay, but one that should be read.

Stephen S. Roach is Chairman of Morgan Stanley Asia, serving as the...

Wagging the Fat Tail

October 15, 2007

This week in Outside the Box, good friend and London business partner Niels C. Jensen further expands upon the fat tail dilemma I recently discussed in my "Black Swan" e-letter and why many of the risk metrics we use while in theory are useful, in application are woefully misleading. Niels does an excellent job of making the topic understandable and enjoyable to read.

Academic work in the past sixty years from the likes of James Tobin, William F. Sharpe, Eugene Fama, Black, Scholes, Merton,...

The Geopolitical Foundations of Blackwater

October 11, 2007

This week in the Special Outside the Box, good friend George Friedman addresses the lax governance and control of Blackwater, a private security firm recently embroiled in the accusation of firing upon Iraqi civilians without provocation. George shows us that private security contractors' working beside the military is not a recent mode of operation but rather one that has long been employed by the US military.

Furthermore, that private security firms serve a necessary role in US military...

A Trip Back in Time to Profit from the Unfolding Crisis Today

October 8, 2007

I get more questions about gold than other single topic. The fascination for the "barbarous relic" among my readers is clear. This week in Outside the Box we take a look at the gold market, its growth-to-date, and potential future investment opportunity. Doug Casey and David Galland of Casey Research provide an intriguing analysis of the gold market today.

I have known Doug and David a very long time. They take their research on gold stocks very seriously, and have been quite successful over...

What Do They Know?

October 1, 2007

We are in a world far different than the one I learned about in economic text books. As I have written, the shadow banking system of hedge funds and CDOs, CLOs, PIPES, etc. have created a new financing economic reality far different than the traditional banking system was just 20 years ago. Does the Fed have the tools in its toolkit to deal with the new reality?

This week, Bill Gross of Pimco fame looks at the problem in a manner that is truly Outside the Box. Bill Gross has been called "the...