Breakfast with Dave
July 27, 2009
This week I offer something unusual for outside the Box, in that I agree on almost all points with my friend David Rosenberg, except he tells it so much better than your humble analyst. David was the former Chief Economist at the former Merrill Lynch (ah, Mother Merrill, we barely knew ye.) and is now Chief Economist at Gluskin Sheff + Associates Inc., which is one of Canada's pre-eminent wealth management firms. Founded in 1984, they manage $4.4 billion. (For those who wonder, David left NYS to return home to Toronto. Much shorter commute time.) David looks at the recent stock market run-up, why he likes corporate bonds better than stocks, what is lagging with the consumer and a lot more. It is a very pithy read.
Have a good week, I am off to a beach in a few days, but there will be an e-letter this Friday. You are in good hands.
Your looking forward to reading with drinks with little umbrellas analyst,
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 December 2008. These resets Hoisington indicates are the home buyers who bought at the top of the 2006 housing market, many of whom paid zero down and received mortgage rates of 0%. A somber fact: estimated current market value of homes is $21.0 Trillion; historically having one dollar change in wealth equate to a five-cent change in consumer spending ? would result in $210 billion reduction in consumer spending, given a 20% decline in home prices, or a wealth loss of $4.2 trillion. Others think this estimate conservative, Dr. Robert Shiller of Yale University has calculated that home prices would have to decline by 50% to be at par with cost of rental housing.
Hoisington Investment Management Company focuses on long-term investment strategies based on Economic Analysis. The firm is a registered investment advisor specializing in fixed income portfolios with over $3.5 billion under management for large institutional clients. Van R. Hoisington is the President and Chief Investment Officer and has produced an outstanding fifteen-year performance record. Dr. Lacy Hunt, an internationally known economist, joined the firm in 1996 adding depth and expertise with his in-depth research and analysis.
Quarterly Review and Outlook - Third Quarter 2006
October 9, 2006
This week's "Outside the Box" is by my friends and the always out of the box thinkers at Hoisington Investment Management. In their 3rd quarter market commentary, Van Hoisington and Dr. Lacy Hunt weigh in on a myriad of topics ranging from the data affecting interest rates to housing to the outlook for the dollar. They go on to discuss a correlation between the yield curve and the Leading Economic Index (LEI) that has produced a very accurate track record of predicting recessionary environments.
Based in Austin, Texas, Hoisington Investment Management Company is led 2 economists, Van Hoisington and Dr. Lacy Hunt. They specialize in management of fixed income portfolios for large institutional clients by setting long-term investment strategies based on economic analysis.
While the markets seem stuck in the waters of uncertainty, it is more important than ever to continually focus on prudent principles and independent thought to yield intelligent investments.
Secrets
December 5, 2005
Whether short term rates are high today is one of the louder debates among economists. And why are long rates so low? Will an inverted yield curve mean what it has for the past 40 years, i.e., a slowdown and/or a recession?
This week's letter is a recent essay by Bill Gross, the Managing Director of Pimco, also known as the Bond King. Gross sits on top of the largest pile of bonds in the world. He thinks short term rates are high and nearing a peak for this cycle and that the economy will begin to slow down next year. He includes the main points, sent to their investment committee, which Pimco is looking at when viewing the bond market.
Will he be correct in his assessment of rates? When someone as large as Pimco offers their view of the market, we should keep an eye on them and that is why this was picked for Outside the Box.
The Strange Tale of the Bare-Bottomed King
May 23, 2005
This weeks article comes from one of my must read economic analysts, Bill Gross of Pimco. Bill sits on top of the largest pile of bonds in the world and is often referred to as the Bond King. His latest Investment Outlook is called "The Strange Tale of the Bare-Bottomed King." Pimco had a Secular Forum in May and this is Bill Gross's take on some of the issues discussed.
Bill sees our current prosperity built not on productivity and technology but on finance-based consumption fed from asset appreciation based on the [Fed's] Pump. He worries about increased market liquidity, leverage and systematic risk. While he does not predict when and how the imbalances will change, he clearly believes it must (as do I). Let's hope it is an orderly and not a precipitous event.
I have talked a lot about Bretton Woods 2 recently and that is why this was picked for Outside the Box.
Of Bonds & Zombies
March 21, 2005
This week's research comes once again from the GaveKal Ad Hoc Comment publication, however this piece was done by Anatole Kaletsky, a different analyst than the previous reports we have highlighted. This group is located in Hong Kong and I always find their comments on Asia very insightful.
The report takes a look at some of the structural players in the U.S. bond market and why their actions may be causing the longer term bond rates to stay low. The largest catalyst surprisingly is Japanese private purchasers of US bonds. The reasons are not the subject of work I have read elsewhere and they will continue to buy until conditions improve in Japan's investment markets. This is a different look at the issue than you see from most economists and why I chose it for this week's Outside the Box.