Financial Markets, Politics, and the New Reality
August 16, 2012
If you've been following my newsletter, you're familiar by now with my friend George Friedman and the geopolitical analysis company he founded, Stratfor. And if you've read any of George's work, you know that his entire methodology is based on the premise that the actions of leaders and nations are predictable. George starts with the constraints – what can they not do, assuming they're rational actors – and moves forward from there. It's this methodology that allowed him to – in all seriousness and probably with an impressive amount of accuracy – write a book titled The Next 100 Years.
I've always encouraged my readers to keep up with George's work at Stratfor. His expertise is not in investing, but the understanding of global politics he provides is essential for any global investor. That said, this week George set his sights on the world of investing with a rather harsh accusation: that investors today lack both imagination and an understanding of political economy.
It's always uncomfortable, to say the least, when good thinkers turn a critical eye on your own profession. I don't necessarily agree with George's conclusions, but I respect him enough to give his ideas some careful consideration and share them with my readers. After all, my basic premise with Outside the Box is that there is little to gain by reading only the work of those with whom we agree.
If George's piece makes you think, I recommend you check out Stratfor. They offer a substantial discount on subscriptions to OTB readers, plus a complimentary copy of the aforementioned book, The Next 100 Years, for new subscribers. <<Click here to access the offer.>>
Your not so unimaginative analyst,
The Election, the Presidency, and Foreign Policy
August 2, 2012
The closer we get to the presidential election, the more we are bombarded with facts, opinions, predictions, and the like from both ends of the political spectrum.
One thing I like about this analysis from my friend and geopolitical expert George Friedman is that he starts off with an obvious yet understated fact: you can't believe what presidential candidates say. Not because they are pathological liars, but because they must make promises that, once elected, they cannot keep, given the reality of the office.
Whether or not you buy the idea that presidents have much less power than we think, George's assessment of each candidate in terms of foreign policy is as unbiased and dispassionate as they come – definitely worth some considered thought.
If you like this piece, I suggest you check out George's company, Stratfor. They publish geopolitical analysis, and a subscription to their website and email alerts is one of the best ways to stay smart about what's going on in the world and how it might affect your investment portfolio. <<Click here to access a special discount on a 1-year subscription>>, plus get a complimentary copy of George's bestselling book, The Next Decade.
Your thinking the presidency still matters analyst,
Stratfor Third Quarter Forecast
July 19, 2012
There are plenty of forecasts out there, but today I send you one you can trust. Stratfor, a geopolitical analysis company, has one of the most rigorous methodologies out there, and their forecasts provide excellent insight into the outcome of world events in the coming quarter.
Europe, Syria, and China are the big three to watch the next three to six months. But if you are looking for a much longer forecast, Stratfor's founder – and my friend – George Friedman has boldly written one for the entire century. Stratfor is offering a complimentary copy of George's bestseller, The Next 100 Years, to <<OTB readers who subscribe here>>. I highly recommend a subscription to their daily, forward-looking analysis of geopolitics – and the book.
Your near- and long-term analyst,
A Random Walk Through My Inbox
July 3, 2012
Even while here in Tuscany I go on reading my email, albeit at a pace that is somewhat less maniacal than usual. I can't help myself; I find it fascinating to "surf" my emails and other sources. I get several hundred emails a day and about 40-50 that get more than a cursory notice. (I always try to read emails sent to me personally!) Today, for your Outside the Box, I am going to do something rather different. Rather than posting one or two essays, I am going to cut and paste snippets that I have found interesting in the past 24 hours.
There's no theme at all, but this will give you a sense of what I am giving at least passing thought to. While we may have been focused on Europe in my recent writings, I do try to remain aware of the broader world and markets. I still actually read research on the equity markets, and read analysis of various alternative investments and their markets. I have a number of friends who gather information, and when they send me something, even if it's somewhat lengthy, I really do try to read it. And there are so many links to follow and searches to perform. This retreat to Tuscany has made me realize that I need to focus a little less on the immediate and urgent, as fascinating as it is in today's world, and more on the deeper, importantideas.
I am going to force myself to stop at five pages, so I don't know yet how many sources there will be. My Chinese translators are anxiously awaiting this note, even though I am somewhat ahead of my US editor's day here.
I will also go deeper into what I learned this week from the lengthy and stimulating conversations here in Trequanda, and share a few impressions of Italy. The villa is getting somewhat quieter and more relaxed, as there are only a few couples (Rob Arnott and his family, among others) for the next few days; and I have promised Tiffani I will actually leave the villa this week and explore during the day, rather than just making the evening forays to dinner; so there will be even more downtime, which I am finding I need more than I thought I did. And while my partners have all told me to actually take some time off, I am sure they will be glad to see me back in the saddle, which will happen on Monday. Speaking of which, I did go to Siena yesterday to watch that horse race (Il Palio) around the town square. It has been run for over 600 years, and there is an enormous amount of ceremony and pageantry associated with it. Google it.
This morning we saw Newt Gingrich and his wife Callista off. He has been here the last week, along with Neil Howe and David Tice, who brought their daughters (daughters seem to be the general theme this season). Steven Diggle dropped by on a few occasions. Steven ran what ended up being the largest hedge fund in Asia, turning what started out as a few hundred million into more than a few billion, although he modestly says that he simply had a few very good years during the recent crisis, while everyone else lost half (or more). He closed his fund at 'the top' and now runs his own family office. But his range of knowledge and insight is quite broad. He was of particular use in explaining the nuances of Italian football during the Eurocup games.
The conversations ran far into the wee hours most nights and were picked up the following mornings. I actually find such times more relaxing and invigorating than simply 'checking out.' And having a variety of views on numerous topics and subjects from people with widely varying backgrounds has been a real delight. The only downside from the past ten days is that my must-read book list was expanded by about 30 volumes. Listening to Newt and Neil expound on Roman history, a topic about which I realized I have no more than cursory knowledge, has inspired me to try to delve from time to time into the history classics.
So with that, let's jump into my inbox and explore some more or less random notes from today's reading. Again, the only criterion is that it arrived within the last 24 hours – and I promise to stop at around five pages. My comments are italicized or [in brackets].
Your living on Italian country time analyst,
STRATFOR’s 2011 Annual Forecast
January 20, 2011
As you know, I'm an avid researcher when it comes to my own annual forecast, which you saw a couple of weeks ago. One of my favorite resources is STRATFOR, a global intelligence company founded by my friend George Friedman. Their focus is geopolitics, which means they cover political, economic and military developments all around the world. They have an annual forecast of their own, and George has been gracious enough to allow me to share it with you. As long-time OTB readers may know, STRATFOR's annual forecast can be very provocative.
Here are some examples of this year's themes:
- The U.S. is unlikely to withdraw from Iraq as promised in 2011.
- The U.S. economy will grow.
- In Europe, more countries will need bailouts. (A couple of names might surprise you.)
- Russian-German relations will strengthen.
- Japan will rot, but it will rot in seclusion.
Some of you may have seen STRATFOR's forecast if you took advantage of the deal I sent a couple weeks ago. For those that haven't, George's book, The Next Decade, comes out next week, so there's still time to <<buy it here for $16>>, and get a free three-month subscription to STRATFOR. For those of you already enjoying a subscription and wondering about your book: they start shipping next Tuesday. So finish up whatever you're reading now and get ready for a great read.
Geopolitical Journey, Part VI: Ukraine
December 2, 2010
This week’s article comes from my friend George Friedman, founder of the intelligence company STRATFOR. In this stop on his trip through the Black Sea Basin, he explores Ukraine, a borderland that separates Europe and Russia.
Imagine your nation torn between two completely unique languages, cultures, political systems - between East and West. I've always considered Texas a borderland, so I relate to a home that stands between two different worlds. With a geopolitical eye, the article methodically analyzes the history, current events and catalysts for options Ukrainians have about their nation now. Yet George also lends a personal touch as his family hails from this tumultuous region. This is a longer, but very pleasurable read. You’ll get your dose of geopolitics while enjoying George’s mosaic writing style.
I encourage you to join STRATFOR's << free email list here>> to follow him through the rest of his trip.
Geopolitical Journey, Part I: The Traveler
November 11, 2010
My friend and fishing buddy George Friedman travels as much as I do. Yet even when we visit the same place, it's like we're in two different countries. I see a river and think about fishing. George sees a river and explains a geographical reality that's shaped that nation's history. I read the menu at a gourmet restaurant and draw conclusions about my appetite; George observes what kind of shoes the children wear and draws conclusions about the country's future. No joke.
George has developed a way to wield a geopolitical eye in worldly travels - and learn from it. He's currently traveling through key, but less-mentioned, countries of Eastern Europe, on a quest to understand how they see the Russian resurgence and what that means for America's options. He's using his travels to write a series for STRATFOR, a global intelligence company he founded. I've included the first piece of the series below.
This is not your regular travel log. It'll teach you how to travel differently, if you're interested. And it explores these countries in a way you won't see in any newspaper or even history book. I recommend << signing up for STRATFOR's free reports here >> so that you can follow the rest of the series.
U.S. Midterm Elections, Obama and Iran
October 28, 2010
With midterm elections quickly approaching, the media is full of sordid details about candidates and good old-fashioned mudslinging. Few take a giant step back, and consequentially the high road, to recognize the big picture. As my friend George states in the piece below - whether we see overwhelming Republican victory or surprising Democratic saves next week, the end result is the same. Democrats will no longer hold a decisive majority, and any Republican majority will still face the presidential veto. Domestic politics are about to change.
In the article, George - founder and CEO of STRATFOR, a global intelligence company - explores what President Obama's options are if he hopes to secure a second term. It's not a prediction of what Obama will do, but the options George presents are very, very interesting, and would have repercussions well beyond U.S. borders and 2012 elections.
Give it a read, and then sign up to get more reports like this one from George. It's a free slice of STRATFOR's subscription content, and you'll enjoy the refreshingly unique perspective.
Your hoping to see the Commissioner's Trophy in Texas Analyst,
China and the Future of Rare Earth Elements - Outside the Box Special
October 28, 2010
With midterm elections quickly approaching, the media is full of sordid details about candidates and good old-fashioned mudslinging. Few take a giant step back, and consequentially the high road, to recognize the big picture. As my friend George states in the piece below - whether we see overwhelming Republican victory or surprising Democratic saves next week, the end result is the same. Democrats will no longer hold a decisive majority, and any Republican majority will still face the presidential veto. Domestic politics are about to change.
In the article, George - founder and CEO of STRATFOR, a global intelligence company - explores what President Obama's options are if he hopes to secure a second term. It's not a prediction of what Obama will do, but the options George presents are very, very interesting, and would have repercussions well beyond U.S. borders and 2012 elections.
Give it a read, and then sign up to get more reports like this one from George. It's a free slice of STRATFOR's subscription content, and you'll enjoy the refreshingly unique perspective.
Your hoping to see the Commissioner's Trophy in Texas Analyst,
China and the Future of Rare Earth Elements
October 15, 2010
My internet went out today, and after chewing out my service provider for a good half-hour, I got to thinking about how we accomplished work in the good old days, before the age of information, when a mouse was just a furry varmint chased by cats. My thoughts snowballed, as they often do, and I began considering technology - the hard reality that makes the soft, virtual world possible. What is a laptop made of?
In a miracle I can't begin to understand, my connection to the world wide web was resurrected. Upon making my routine visit to STRATFOR.com to check out their latest geopolitical analysis, I stumbled upon this article on China's reported manipulation of the market of rare earth elements--used in the production of everything from petroleum to laptops to hybrid cars to radar--and how that will affect everything from importing nations to industries to consumers in the next 2-5 years.
The technology boom could have been predicted decades ago by next to no one. The few individuals who had that kind of foresight are doing very well for themselves now, I'm sure. That brings me back to STRATFOR - a company that specializes in forecasting. I'm sending you the piece I referenced above, but you can also join their free mailing list here, or become a premium member to access their just-published Q4 forecast.
On a lighter note, did you catch the Rangers game Tuesday night?
Your gloating in the thrill of victory (while it lasts) analyst,
Pakistan and the U.S. Exit From Afghanistan
October 1, 2010
In the wake of the newly appointed heir to the North Korean dictatorship position, I've been thinking about the 'cult of personality'. Traditional reporting will often focus on the personality of leaders or, in the case of democracy, the details of leaders' interactions. While it's interesting to think about, some would call it one-sided, even topical. When I've got investments on the line, those are two words I don't want to describe my research.
The decisions of a single personality seem unreliable. But when you look deeper, you can see that most nations and even leaders with personality are forced to make decisions in a reliably logical fashion. What may seem like a broad spectrum of choices when examined carefully are actually just one or two logical ones. The personality of the leader is of much less consequence than the nation's geopolitics.
For a full understanding of this analytical approach, which is very much applicable in the finance world, get to know STRATFOR, a global intelligence company founded by my friend George Friedman. Read George's report below on U.S. options in Afghanistan, and << click here to sign up for their free weekly intelligence reports>>.
Looking to 2012: China’s Next Generation of Leaders
September 16, 2010
The Chinese have a bit of a challenge on their hands. One could reason that as the world's most populous country, China would also have the highest number of individuals living in poverty. However, I was shocked to learn that the number is over 600 million. Talk about a mess. If you do any sort of business, or just have a general interest in the Far East, I recommend you get a heads up on the leadership changes we'll see in the next year.
Today I'm including an article and a video from STRATFOR, a global intelligence company. I watched the video first - it's an overview of China's new leadership and what that means for the next generation. If you want more analysis (which I definitely did), read the article below too. You'll learn about the deep structural reforms that may be required to prevent China's economy from overheating, as well as the rising influence of the military and how the new leaders will address the flaws in China's economic model.
Be sure to check out the graphic of the leadership hierarchy, which you'll find in the article. It's just the sort of information STRATFOR provides that you won't find that anywhere else.
So, <<click here to watch the video>> , and then scroll down to sign up to receive STRATFOR's free intelligence reports.
U.S. Drawdown From Iraq Leaves Void
September 2, 2010
The U.S. withdrawal date has come and gone. What will post-withdrawal Iraq look like? Can the Iraqi security forces fill the void? How will Iran exploit the diminished U.S. presence? To understand the answers to these questions you need a perspective the is to the point and contains no bias. In today's Outside the Box I'm including a insightful video from the analysts at STRATFOR, a global intelligence company.
This region matters, and STRATFOR keeps you informed. <<Click here to watch the video>> and sign up for their free intelligence reports.
China’s GDP and Questions of Strength
August 18, 2010
Today I'd like us to think about sustainability. The Mayfly is a species of insect that goes from egg to death sometimes in as little as 30 minutes, and never more than a day. Take note, because as investors we have to be wary of the same rapid fluxes in economies. I'm of course speaking of the hype surrounding the Chinese economy lately. Everyone is talking about China this week, and rightfully so, as its GDP is nearing Japan's and could become the second largest in the world. But is it sustainable? Or a boom-and-bust similar to the Mayfly?
I'm sending you an interview with a STRATFOR analyst who, unlike the hype, says China's economy is weak and unsustainable. Find out what indicators he's looking at by <<watching this video>>. While you're at it, sign up to receive their free weekly intelligence reports. You'll enjoy the unique & global perspective.
Dispatch: China Factors in U.S.-South Korean Relations
July 22, 2010
The key to being a great chess player is to think ahead. True grandmasters think ahead not by just one or two steps, but a full game. The key to winning is determining the most likely moves of your opponent, among what seem at first glance to be hundreds of possibilities. The same can be said of finance. Knowing what to expect from key world players is critical to investing.
STRATFOR is an intelligence agency available to the public. If you want to know what to expect from different nations and leaders around the world, you read these guys. Founder George Friedman has developed a methodology for predictive intelligence that gives his readers a clear understanding of what to expect. While at first glance there seem to be dozens of options for nations and leaders, once you evaluate each option logically, it becomes easier to predict their actions. Today I'm including a video analysis, one of STRATFOR's many daily reports, that provides insight on what's next for the players in the Far East and their relationships to the United States. Click here to watch the video, and don't forget to sign up for their free weekly email reports and special offers.
Europe: The State of the Banking System
July 8, 2010
We're bombarded with information from the minute we wake up until the second we fall asleep. I was watching a news network last night for 45 minutes and the exact stories started coming back around. Nothing new to report, but the same topics on repeat, with the rare nominal development.
When I need something different (and relevant to me), I go to STRATFOR.com. They provide deep insight and explanation of events the networks can't begin to tackle. Today I'm including an extensive article on the banking situation in Europe. Enjoy, and sign up for their free email list to receive weekly reports and special offers.
U.S.: The Afghanistan Strategy After McChrystal
June 24, 2010
While the U.S. was celebrating its World Cup victory over Algeria, another struggle was playing out in Washington that also grabbed the world's attention. In that instance, the loser was Gen. Stanley McChrystal, who was forced by the president to resign his command of U.S. forces in Afghanistan.
Since STRATFOR is more of an expert on geopolitics than the World Cup, I'm including an article from them on the current Gen. McChrystal shake-up. It's an example of the kind of behind-the-scenes intelligence reporting that makes them famous. Give it a read and visit their site to learn more and sign up to receive their free weekly reports.
Flotillas and the Wars of Public Opinion
June 3, 2010
This week, we've seen a barrage of news and opinion pieces on Israel's attack on the Turkish aid flotilla headed for the Gaza strip. In the midst of myriad media discussions concerning the moral and strategic angles, my friend George Friedman from STRATFOR brings up an interesting point: "[The Israelis] seem to think that the issue is whose logic is correct. But the issue actually is, whose logic will be heard?"
George puts the entire situation into the perspective of a war of public perception, which gives us a much more accurate idea of what may come of all of this. Give his article a read, and then join STRATFOR's free email list to receive more intelligence of this sort--they will keep you in the know like no one else can.
Germany, Greece and Exiting the Eurozone
May 20, 2010
The cause célèbre these days is the potential reconstitution of the eurozone: ie, Germany leaving it, or Greece getting kicked out. To look a little deeper, today I'm sending you STRATFOR's take on these two scenarios. STRATFOR explores the geography of the continent and the historical context of the EU to understand what a German exit or a Greek expulsion might mean for the rest of the region.
After you read the article, sign up here to receive more STRATFOR global intelligence reports like this one.
The Global Crisis of Legitimacy
May 6, 2010
From my friend George Friedman, founder & CEO of STRATFOR, here's my newest favorite quote concerning economic recessions: "Like forest fires, they are painful when they occur, yet without them, the forest could not survive. They impose discipline, punishing the reckless, rewarding the cautious." The thin line of where risky becomes reckless is something I'd like to focus us on today. No matter the risk-level of your portfolio, if you are reading this you are probably smart enough to know that when you play with fire you may get burned. You have to know how to look for smoke, or signs of a potential catastrophe, so you know not to grab the doorknob with both hands.
I'm including George's discussion of the contributing facets of a recession, its inevitability and the idea of risk. As if the title won't intrigue you to begin with, take my advice and give "The Global Crisis of Legitimacy" a read. STRATFOR uses its signature analytic approach to decipher today's issues, applying historical context ranging from Adam Smith to the Lehman Brothers. Also, join their mailing list to receive two weekly intelligence pieces, and find that fire before your next investment opportunity comes along.