China and the Arabian Peninsula as Market Stabilizers
December 13, 2007
This week in a Special Outside the Box good friend George Friedman of Stratfor, in an unconventional piece, addresses the conundrum that equates low interest rates with market illiquidity, postulating on what may be the underlying cause of such an event. George seems to specialize in Outside the Box thinking, and this piece is no exception.
Stratfor continues to provide insightful and pertinent research on economic and geopolitical events and their respective ramifications. Stratfor continues to generously provide significant savings to readers of Outside the Box, for further information please click here. For those like me who seek objective analysis of world affairs, Stratfor is a daily necessity.
Do Not Forget About Changes in Velocity
September 24, 2007
This week in Outside the Box, Louis-Vincent Gave, Charles Gave, Anatole Kaletsky, and company of GaveKal Research delve into the underlying misconceptions that presumes money velocity is and will remain constant, in the equation that says MV = PQ (Money*Velocity = Prices*Quantity) when M is increased. GaveKal Research strive to show that in application this relationship does not hold, and that investors ought to look to velocity to rebound to gauge market recovery or further deterioration. This is an important concept and holds major implications for the inflation debate.
GaveKal venture on to address the Banking crisis in England, how Mervin King & Co. at the BoE responded to the Northern Rock debacle, and why the appropriate response was hindered by political malaise than by BoE incompetence, though mind you there was some to speak of. Furthermore, the Fed 50bps reduction is taken to light on account of the uncertainty of whether such (and potentially further) reductions will prevent the economy from falling into recession.
GaveKal further discusses how the dollar breaching record lows, will affect the inflationary pressures in China, and how the dollar is affecting the oil markets, which happen to be denominated in dollars. I have attached below graphs of the Euro/Dollar conversion rate, and the current (WTI) cost of oil.
Finally, my publisher is running an advertisement for my friends at International Living. I normally don't think abut the ads, but this one is interesting in that it is two years for the normal one year price for a publication that I enjoy. If you travel or think about living somewhere else, this is a good place for information, or to just dream. Enjoy your week.
China: The One-Child Policy Dilemma
July 12, 2007
This week in a special Outside the Box my good friends at Stratfor addresses the current Chinese dilemma created by their One Child Policy, namely how to continue economic growth with a rapidly aging population coupled with a deteriorating labor force, mind you striving to attend to these issues simultaneously without creating significant rural unrest.
Stratfor predicts a less than somber outcome, anticipating Beijing' inability to address these dire concerns simultaneously, with the result being bureaucratic malaise and rural unrest.
Stratfor, run by geo-political maven George Friedman, provides some insightful and comprehensive research on geopolitical events and global affairs, and is my favorite source for keeping up with what is happening in the world, and what the events actually mean. He continues to be generous by offering my readers a discount to his normal subscription rates which can be obtained by clicking here.
Knights of the Round Table: Mapping out the Markets
July 2, 2007
This week in a very special Outside the Box we have an investment outlook tour de force. My friend and South African business partner Dr. Prieur du Plessis gathered a group of some of the more interesting investment managers in the industry, along with your humble analyst, and let us have the opportunity to opine on what is driving various markets and their respective implications.
We begin with the U.S. economy, addressing the underlying implications of the real estate market, interest rates, liquidity, and the ever precipitously depreciating dollar, procuring an assessment of these collective market drivers and their respective effects on the U.S. economy, the stock market, bond market, and commodities market.
Thereafter, we incorporate macroeconomic drivers that will impact our respective outlooks be they the influence of the Asian Tiger economies, Yen Carry Trade, and the ample liquidity derived from vast foreign currency reserves on account of currency manipulation, and the respective consumption patterns of the developing countries on the global economy.
We conclude with an assessment of the risks to domestic and global economies from the market drivers and offer advice we have humbly been forcefully taught throughout the years by the always hard task-master, the market.
A New Step in the Ethanol Revolution?
June 7, 2007
This week in a Special Outside the Box we look at the discussion of alternative energy sources, specifically, ethanol derived from corn or sugarcane. The Stratfor piece discusses the economic implications of ethanol usage; geopolitical ramifications in terms of how current oil producers will be affected, comparable cost advantages between corn and sugarcane processing, and the advantages and disadvantages of ethanol production and consumption.
OPEC has expressed concern over capital allocated to alternative energy research, suggesting, implicitly threatening, that oil producers may be driven to lessen investment in vital infrastructure leading to supply constraints in the future and higher oil prices. If the assertions emanating from Brazilian government-funded researchers are confirmed to be true, the viability and time frame in which ethanol usage becomes economically feasible has made great strides, and shortened, respectively.
This Stratfor piece is an objective, thought provoking assessment of technology that will have drastic implications on our global economic and geopolitical landscape. Stratfor continues to provide insightful and pertinent research on economic and geopolitical events and their respective ramifications. Stratfor continues to provide significant savings to readers of Outside the Box, for further information please click here.
I hope you find this article enlightening and thought provoking as we continue to address the implications of alternative energy resources.
U.S. - China Relations
May 24, 2007
As the forth largest economy in the world, the rapid growth of Communist China' military, and economic prominence has both perplexed and intrigued the United States. Stratfor analyst Rodger Baker addresses the two primary economic concerns troubling Washington and Wall Street alike: the Chinese-U.S. trade imbalance, and the floatation of the renminbi, currently pegged at 7.8 Yuan to the dollar, though allowed to fluctuate 2-3%.
Washington has identified the currency dilemma as the primary obstacle to improved U.S.- Chinese relations, concluding that the removal of the currency peg will not only permit U.S. exports to be more competitive but also shrink the current trade imbalance.
This Stratfor piece is an insightful, objective assessment of our current underlying disputes and their respective political and economic origins, providing suggestive solutions that will permit a more intimate, beneficial, enlightened relationship with China.
George's company Stratfor provides some insightful and comprehensive research on geopolitical events and global affairs. He continues to be generous by offering my readers a discount to his normal subscription rates which can be obtained by clicking here.
I hope you find this article as insightful and enlightening as I have, providing a deeper look into a global relationship pertinent to our prominence and prosperity in the future.
So What Should We Worry About?
May 7, 2007
Today's Outside the Box is a very interesting piece written by Louis-Vincent Gave and the team at GaveKal entitled "Part 2: So What Should We Worry About?" His article is a follow up to an earlier one that he wrote on why he, and the rest of the GaveKal team, had been bullish on the markets a couple of months ago. This letter is to answer the question "what could go wrong" with their previous outlook in light of the recent market climate.
For those of you unfamiliar with GaveKal, the firm was started in the late 1990s in London by Charles Gave, Louis-Vincent Gave and Anatole Kaletsky. GaveKal is a research firm, focusing on macro economics and tactical asset allocation for institutional clients around the world. Louis-Vincent is the CEO of GaveKal where he contributes frequently to the research and was the main author of their books Our Brave New World and The End is Not Nigh.
Let me make a quick remark regarding the latter of his 2 books. The End is Not Nigh has just recently been released and I highly recommend it as a good read. It is a great example of a book that presents a positive view of not just the markets but of the developing world as well. You can purchase the book directly from their website (www.gavekal.com) or through Amazon.
I trust that you will enjoy this week's Outside the Box from the always thought-provoking Louis-Vincent Gave.
MACRO-MARKETS: Gold Trading Boot Camp
March 26, 2007
I probably get as many questions about gold as I do any subject. The fascination with the yellow metal permeates all levels of investors, and opinions can be quite strong. But few are more informed than those of good friend and trader extraordinaire, Greg Weldon.
Greg has written a new book called "Gold Trading Boot Camp, how to Master the Basics and Become a Successful Commodities Investor." I highly recommend it for those wanting to get a grasp of how a successful trader's mind works. Greg is one of the best and maybe the most prolific commentators on market trends. Up well before dawn each day, he is a machine. Each day he produces 15-20 pages of in-depth commentary on a huge variety of topics, both fundamental and technical, that informs some of the top trading desks in the world.
I asked him to give us some idea of what his book is about and then give us a top down view of the market for gold as it stands today. For those of you who follow gold, or are merely curious, I think you will find this fascinating.
You can get the book at Amazon.com. It is very readable. Greg has an effortless, unique style that is fun, fast-paced and easy to comprehend with not a lot of technical jargon to make it hard for the beginner yet enough insights that the professionals will be taking lots of notes.
Get the book and enjoy this week's Outside the Box.
China’s Engineered Drop
March 1, 2007
With Tuesday's market correction being the single biggest decline in the U.S. markets since 9/11, all eyes are focused on figuring out what exactly happened as well as what is going to happen next. This week's Special Edition of Outside the Box will feature a unique perspective on the recent events as Stratfor President George Friedman explains what took place in China and how this was an "engineered drop."
Stratfor is an intelligence company that provides in-depth research and analysis on global affairs and geopolitical events. George has been kind enough to present my readers with a couple of free articles each month in addition to a 50% discount to his service, which you can get by clicking the following link:
https://www.stratfor.com/offers/061130-50OFFa/?ref=061130-50OFFa
I trust that you will find George's insights on the market correction to be an "outside of the box" explanation.
China’s Concerns in 2007: Fears of a Perfect Storm
February 1, 2007
Today's special edition Outside the Box covers the looming political concerns of China in the new year. Leading China expert at Stratfor, Rodger Baker, has written an excellent analysis on the issues faced by the current and future leadership of the country, as well as the potential reactions of the United States.
Stratfor is the closest thing to a "private CIA" as the organization provides in-depth analysis on geopolitical events spanning the globe. As always, George has decided to give my readers a special 50% discount off his normal subscription rate. You can receive the offer by clicking here. Whether you are an emerging markets fund manager or just a person curious about global affairs, Stratfor provides news and analysis that I'm sure you will find to be valuable.
I trust that you will find Rodger's report to be a comprehensive view on some important geopolitical concerns.
Global Transitions
December 11, 2006
With a new year just weeks away, investors are weighing expectations and asking questions about what lies ahead. Each year presents its own set of opportunities and challenges, especially in are ever-increasing global economy. Today's "Outside the Box" features a letter by Stephen Roach on the impending transitions of this interconnected marketplace.
Stephen S. Roach is Managing Director and Chief Economist of Morgan Stanley, and is widely recognized as one of Wall Street's most influential economists. His published research has covered a broad range of topics, with recent emphasis on globalization, the emergence of China, productivity, and the capital market implications of global imbalances. In his letter "Global Transitions," Roach analyzes the sources of past growth amidst the backdrop of a global economy and highlights the forthcoming changes on where to expect it from next. In addition, he addresses the growing "consensus" of the soft-landing scenario for U.S. housing.
On a side note, Roach mentions a companion piece by his normally bullish colleague, Richard Berner. In "It's a 'Growth Recession,' Not a Lasting Downturn," Richard not only forecasts lower growth but also lower profits. To view the article, click here and then scroll down.
I hope these articles help to form your investment outlook from a global viewpoint...enjoy. For what it's worth, I will be on CNBC at 7:45 this Tuesday morning talking about hedge funds.
The Enduring Allure of China
October 26, 2006
Today we cast our eyes on China, and specifically the mass migration of theoretically smart western capital into Chinese banks. This is another of a new series of special editions of "Outside the Box" that will feature the work of my good friends at Stratfor and released every other Thursday.
You can subscribe to Stratfor's Daily services at a 50% discount. I have arranged for those subscribing today to get their new 25 page quarterly predictions and analysis report, where they analyze each region of the world, highlighting specific countries where there are potential problems. It is a must read for me. I think you will find it quite useful.
https://www.stratfor.com/offers/060906-50OFF/?ref=061026-50OFF-a
The Invisible Hand’s Impressive Work
August 7, 2006
Tomorrow the Fed will be announcing whether they will continue to raise rates or not and many investors seem to think that a pause is a highly probably outcome. Controlling inflation has been the reason for prior rate hikes and I believe it to remain the key variable. With this in mind, I thought that it would be a good idea to share with you the new GaveKal piece by Louis-Vincent Gave.
As my long term readers know, GaveKal produces some thought-provoking and highly intelligent research on the markets from a global perspective. Louis writes about how profit margins, income disparity and global economics are shaping the current inflationary environment. But he does not stop there, Louis further describes how these market forces are all affected by none other than Adam Smith's old "Invisible Hand."
I found this article to be exceptionally interesting, and, given the fact that the Fed is meeting tomorrow, a timely read as well. I think you will find it to be an "Outside of the Box" point of view.
Why Imbalances Matter
May 22, 2006
Two weeks ago in my "Thoughts from the Frontline" E-letter I wrote about trade imbalances. I quoted a significant portion of a speech by Anatole Kaletsky from GaveKal. It was part of a debate he had with Stephen Roach. Last week's "Outside of the Box" contained some very insightful and timely remarks on the current market conditions by the well known economist Stephen Roach.
The team at GaveKal sent me Roach's side of the debate which addresses Anatole's point of view on the subject of trade imbalances. While I do not want to look like an "All Stephen Roach, All the Time" letter the speech was so good I felt that we should use it this week. I trust that you will find this week's Outside the Box to be a "grand finale" on some of our most recent topics.
China Visit Report
March 13, 2006
We once again turn our focus on China. Simon Hunt has been visiting China for many years and offers us his latest insight from a recent visit. Many analysts forecast the recent past into the future and the outlook on china is no different, but Simon says this is incorrect and China is about to go through a major change. As he sees it, China is changing its focus from growth at any price to one that might be a bit more rationalized.
This is a very important point and why this was picked for this week's Outside the Box. I suggest you put your thinking caps on as we take advantage of Simon's insider knowledge.
Yield Curve Conundrum
February 13, 2006
Every month I read the outstanding commentary by Bill Gross, Paul McCulley and others at PIMCO. This month they have comments by Chris P. Dialynas, Managing Director, Portfolio Manager and Senior Member of PIMCO's Investment Strategy Group.
Dialynas offers his views on the flat yield curve, the new Bernanke era and the theory of a global glut of savings. He sees a global economy awash in liquidity due to the increased risk of investment and the Chinese currency being pegged to the US Dollar. This has caused inflation to show up in some places and the imbalances in the world give Bernanke an extraordinary challenge and that is why it was picked for this week's Outside the Box.
China Economic Service - November Report
December 12, 2005
This week we look at China. Simon Hunt is one of the smartest China hands I know of. He has been visiting the Middle Kingdom for many years and has numerous contacts throughout government and industry. If you read the official releases, it looks like things in China will stay on the same path as recent years. Simon has been saying privately and now publicly that there are some very significant changes happening in China that will affect a number of markets over the years, as China changes its focus from growth at any price to one that might be a bit more rationalized. This is a very important point. I suggest you put your thinking caps on as we take advantage of Simon's insider knowledge.
Pick of the Week
August 29, 2005
This week's letter comes to us from a group in London called Bedlam Asset Management. Last week my partners in London forwarded this article to me and said, "worth 5 minutes of your time." I agree. 5 minutes and more. Bedlam has a series of articles called Pick of the Week and this one from late July takes a look at the banking problems in China. Many of the world's largest banks seem to be rushing to China, just to be there and may be setting themselves up for problems in the future. China might have a lot of opportunity but the risk can be quite large as well. Bedlam gives us a different slant on China.
China Misconceptions
October 25, 2004
"Where," asked Jack Nicholson's character about Batman, "does he get all those wonderful toys?" Many readers wonder about where I get so many great articles. I get them sent to me by a "network" or readers and friends who look for the studies that truly shed light upon our current world. This week's letter was forwarded to me from a friend in England, but the article comes from another corner of the world. This week's Outside the Box is a thought-provoking piece on China from a group headquartered in Hong Kong called GaveKal Research Limited. Louis Vincent Gave's GaveKal Ad Hoc Comments for Thursday, October 21, 2004 focused on what he sees as 5 major misconceptions about China. You should make sure and read the first one about China and oil. It is not the standard view you see in the papers and on TV.
I would like to thank GaveKal for giving me permission to share their comments with my readers. Let's take an "Outside the Box" look at China.