Outside the Box

Quarterly Review and Outlook: Second Quarter 2006

John Mauldin

July 24, 2006

This week's letter is once again from two of my favorite economists, Van Hoisington and Dr. Lacy Hunt of Hoisington Investment Management Company in Austin, Texas. They specialize in management of fixed income portfolios for large institutional clients by setting long-term investment strategies based on economic analysis. They have been one of the most successful bond managers in the country. (I have no affiliation with them.) I eagerly read all of their writing and analysis, and find it to be some of the most thought provoking anywhere.

Their second quarter 2006 Quarterly Review and Outlook looks at the current economic situation in the US after a 1st half sell-off, inversion of the yield curve and a recession threatening. With the markets "teeter tottering" between excitement and fear, Hoisington's article proves to be both insightful and timely, which is why I picked it for this week's "Outside the Box."

John Mauldin, Editor
Outside the Box

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Quarterly Review and Outlook: Second Quarter 2006

From Hoisington Investment Management Company

First Half Sell-off

Treasury yields rose across the board in the first six months of 2006. Two, five, ten and thirty year Treasuries posted results of 0.7%, -2.0%, -3.9%, and -7.6% respectively. The Federal funds rate, adjusted higher four times in 25 basis point increments during the first half of the year, was the proximate cause for the sell-off. It is our…

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