Back and recovering from my Strategic Investment Conference this weekend (where I decided to give myself permission not to write my usual letter, but I promise I will be back at it this next Friday!) I have spent some time pondering what we learned. It was a fabulous conference. Lacy Hunt, Dr. Gary Shilling, David Rosenberg, Niall Ferguson, Paul McCulley, George Friedman, former Fed Senior Economist Jason Cummins (who is now Chief Economist for Brevan Howard, the largest European hedge fund, and who was quite impressive), Jon Sundt of Altegris, and your humble analyst were all in top form. I must admit with a little pride that I think this is the finest speaker lineup for ANY investment conference anywhere. We were given a lot to think about.
Let me give you a few key points as an intro to this week's Outside the Box. First, there is a bubble building and it is in sovereign debt. It threatens to be a worse bubble than subprime or the credit crisis. Second, at one panel where we were asked what is our main worry, Paul McCulley said "Europe," which triggered an intense discussion, both in the panel and later that night over dinner. I agreed, of course, as I have written that very thing.
Both Paul and Niall think the consequences of a euro breakup could be severe, not only for Europe but for the world. I agree. That is why I have focused so much space in my writing and in Outside the Box on the European and especially the Greek situation. Everyone is hopeful that a major breakup can be avoided, but the problems the Mediterranean countries face are serious. I got the sense that most everyone expects the euro to fall further over the coming years.
In my opinion, there is little hope that Greece can resolve its fiscal crisis in a way that is less than draconian. I see almost no way out without a default of some kind. There will be band-aids and other measures to postpone the day of reckoning, but not to avoid it. They have just gone too far down a road of bad decisions.
Today we look at two short essays on Greece, one from Stratfor (George Friedman was in rare form this weekend) and the other from my friends Eric Sprott and David Franklin of Sprott Asset Management. Sprott gives us some details on a brewing Greek banking crisis and then closes with some thoughts on sovereign debt. He throws this little bon mot at us:
" ... [the US Government Accounting Office] goes on to state, however, that using reasonable assumptions, 'roughly 93 cents of every dollar of federal revenue will be spent on the major entitlement programs and net interest costs by 2020.'"
That is an example of the economic truism that if something can't happen, then it won't. Long before we get to 2020, massive change will be forced upon the US. The question is, do we do it willingly or do we become Greece?
And before I turn you over to the capable hands of Stratfor and Sprott, I have to end with what I think was the best one-liner of the conference (and there were so many). Paul McCulley noted that the debt crisis (the shadow banking system, subprime mortgages, SIVs, etc.) was the equivalent of an under-age drinking party with the rating agencies handing out fake IDs.
Have a good week. (And a special thanks to Lee Stein and David Malcolm for being so generous with their homes and wine cellars, respectively.)
Your feeling like I was drinking information through a fire hose analyst,
Today I'm sending you a piece on Ecuador's recent move to change the terms of its contracts with oil investors to keep more of the returns in the state. As we watch the world's energy market, political details like this are essential to know. The article explores the geopolitical implications of the move and the how key investors are likely to react.
This is nothing short of the real world with real consequences on the amount the meter reads to fill up your gasoline tank, your investments abroad and the overall worth of those dollar bills in your wallet right now. You don't get this kind of information on your typical media news networks. The truth is, this event is one you may not have heard about - not only do you have to keep your ears to the ground, you've got to know where to look.
For all things under the radar and overly important, my source is STRATFOR. They provide in-depth intelligence for those that need to know. Read their article, and join their email list to get weekly reports and special discounts on memberships.
The United States' southern neighbors have always held a special interest for explorers. In particular Sir Walter Raleigh and his ill-fated quest for El Dorado comes to mind (I'm sure we can all relate). Modern day explorers, also known as investors, are still looking for the best place to stake their resources in search of riches. Thankfully, we have considerably more information at our disposal than a treasure map. But how do we know when X marks the spot, or if it's just another faulty lead?
Intelligence, not just mass-produced information, is the key. For my global intelligence, I turn to the experts at STRATFOR. In this edition of "Outside the Box", I've included a STRATFOR analysis on the situation in Mexico. It evaluates the drug wars in terms of the U.S. and Mexican economies. Give it a read and sign up for their free reports. You'll soon understand the value in intelligence, not just news.
With the establishment of the euro in the 1990s, speculation was abundant on how things would play out. In the last fews months we've seen that cheap credit for the Club Med countries came at a price, and now it's time to look at who will come out on top after the current economic crisis. There is a term for this type of global analysis: geopolitical intelligence. STRATFOR, a global intelligence company, uses geography, open source data, HUMINT, and a deep understanding of global affairs to produce analysis with a geopolitical perspective.
Today I'm including their take on Germany's changing role in the EU. But it is only a small sample of all they provide, so I encourage you to sign up for their free mailing list or become a member for greater access to features including Quarterly and Annual Forecasts that will put you ahead of the game.
World economies I get: currency, trading, deficits, surpluses... World politics is another story. I follow what happens: summits, policy changes, elections: but what does it mean for energy markets, potential threats, actual relations between countries? These situations define our future - financial and otherwise.
Today I'm sending you a piece from STRATFOR on the relationship between Iran and Brazil - and what it means for energy, trade, U.S. sanctions, and this rising power in the South. STRATFOR is my go-to source for all things geopolitical. The great thing about it is that it's not just available to government agencies, Fortune 500 corporations and financial advisers such as myself. Rather, you too can access their content. Sign up here for STRATFOR's free weekly intelligence reports. I highly recommend it for investors at any level.
There is no lack of discussion about where we are right now - in terms of jobs, real estate, global economy, etc. Few get it right, and even fewer actually understand where we're headed. Once you find an information source that correctly predicts what's coming up, you hold on to it. For me, it's STRATFOR. It's not often that you find a news source with such a solid methodology.
Today I'm including a piece from STRATFOR on the Afghan war. It strikes me as one of their best pieces recently, and I encourage you to pay close attention to the candor of their analysis style. We all need to know what to expect from this conflict area, and though we might think we have a decent idea, there's always something at play behind the scenes. Read the article, then click here to sign up for more free intelligence reports from STRATFOR.
Sometimes when I read a newspaper article, it strikes me as a "He said, she said" game. If I'm going to make an informed decision, I need analysis - not opinions from two sides, each with their own motive. You can find quotes from "experts" anywhere, but they usually don't offer much insight, except into the agenda of the person quoted. For deeper insight, I turn to my friend George Friedman at STRATFOR. STRATFOR publishes intelligence, not news. No journalists, no politicians - just analysts.
I'm sending you a peek at the type of intelligence they provide for decision-makers like you and me. Enjoy the read, notice the difference and visit their site to sign up to get your own free articles.
China has long been a mystery to foreign investors. Deeply involved in trade and commerce since the ancient days of the Silk Road, China has continued to maintain the appearance of closed economic borders and, even past these hardened gates, undeniable risk. Like any investor, you've probably been tempted to look at the prospects, and you've probably been met with a barricade of warnings about corruption and internal strife that quickly bounces you away. In the case of this sleeping dragon, knowing isn't half the battle, the battle is in knowing.
I want to share with you my source for what is really going on globally - I get it from my friends at STRATFOR. They've got a unique way of measuring past events and analyzing geopolitical foundations to project the future. It's not investment advice - it's the geopolitical information you need to understand a region before you evaluate any investment opportunities.
This week I'm including an article with STRATFOR's take on recent developments in Chinese banking restructuring. Give it a read and sign up for their free intelligence reports here.
To continue with a week of global forecasts, today I'm sending you STRATFOR's assessment of the year ahead for Russia. As I said earlier, we need to think of the world at large and how global events will affect us. Russia represents a huge piece of that puzzle.
Where do business and geopolitical boundaries meet? As we've seen with the recent coverage of terrorism suspect David Headley, Mumbai is one node – but the possibility for others is extensive. As investors, we take risks every day, and sometimes it's not just our bank accounts but our safety.
Today I'm including a video from my friends at the Counterterrorism and Security division of STRATFOR, a global intelligence company whose content I highly recommend. In this video, we learn the dangers of international business. Deception, when done right, is hard to spot, so we've got to stay aware of some broader trends. Click here to view "Islamist Militants and the American Connection," and be sure to sign up for their other free intelligence reports and special offers on memberships.
The hottest headline this week is President Obama's war in Afghanistan. After his speech Tuesday night, critics, pundits and beltway know-it-alls have been giving their two cents across the airways, printing presses and online. On issues such as this, I eliminate the noise and go straight to my favorite source of intelligence. In the article I'm sending, my friend, and STRATFOR CEO, George Friedman spells out the key to winning this war - and it's not a troop surge. U.S. forces and a U.S.-trained Afghan army will need solid intelligence to quash the Taliban.
We all need solid intelligence - from fighting wars to buying a house to creating an investment portfolio. Knowing what happened yesterday is useful, and you can get that information at any newsstand. Understanding what may happen tomorrow - whether it's a Taliban attack or a market crash - is priceless... and harder to find. Click here to sign up to receive STRATFOR's free weekly intelligence reports - and discover the benefits of understanding the global system of tomorrow.
The closed-door meeting is a prime indicator of unpredictability. It's one of the most difficult elements for even the most savvy investors to encounter and plan for - or against. Usually we know the preemptive measures we need to take in order to protect our assets, and even make a few dollars in auspicious instances. But what about the information we can't access?
Luckily, we have options. Today I'm including an excellent video from my friends at STRATFOR, a global intelligence company. They shed light on a closed-door meeting between the Obama administration and 3 top Israeli officials. When speculation is rampant, there's only one source I trust for reliable insight, and that's STRATFOR. I encourage you to watch this video. Also, sign up to get their two free weekly intelligence reports for more door-opening insights on critical issues.
Earlier this week, I sent out a piece that talked about the dangers of ignoring the big picture - even for the "bottom up" investor. Every once in a while, we all have to step away from the Dow Jones Industrial Average, housing prices and other indicators to look at what's going to influence these factors in the long term.
Today I give you a video about Russia and how a plan to fix the economy might throw off the political balance of power. I regard Moscow's situation as a valuable lesson for our country - also in the throes of an economic crisis - and for investors affected by global markets. Click here to watch this great video by my friends at STRATFOR, a global intelligence company. You can also sign up to get free weekly intelligence from them, so you don't have to depend on my occasional mail-out.
Today I offer you an insightful look at China's real estate market - a "burgeoning bubble" that deserves a close eye as the possibility for breaking increases. Remember the chaos in Japan after their own housing dreamscape got violently yanked back to earth? As investors, we have to recognize opportunities - and know what to avoid. With a global economic crisis - and now surging housing prices in China - investors in any global market need to keep watch on political and economic developments around the world.
Today's analysis comes courtesy my friends at STRATFOR, a global intelligence company. They provide unique and on-the-money analysis and forecasts on all things global, essential for any alternative investment strategy. They've got a free newsletter as well, for which I encourage you to sign up by clicking here - so you're not limited to my caprice.
Recently I had a discussion with a colleague about university athletes. I was previously unaware that NCAA colleges set up guidance programs that develop the well-roundedness of student athletes. 'Life coaches' ensure that these individuals balance their rigorous athletic commitments with personal and academic accomplishments. I'm not judging your ability to run a mile or catch a football, but well-roundedness is an element to being successful - whatever your area may be.
To be a solid investor, it's important to consider a variety of markets, and you must be well-informed in a myriad of sectors. This is where having the best information comes in, and one of the better places for intelligence is STRATFOR. They offer a straightforward recipe of news about global affairs - causes, outcomes and what to expect next based on a rational, time-tested methodology.
I'm including a STRATFOR report that discusses the possibility of gasoline import sanctions against Iran. It's an absolute must-read for anyone interested in energy, foreign relations, Russia, the Middle East, etc. I'd encourage you to sign up for their free weekly reports here, so you aren't limited to what I send you on occasion. Begin (or continue) your journey to well-roundedness... Now, get to the line and practice your free throws.
You may not think that what happens in Kabul affects the sale of GM's Opel division -- but it's recognizing the connection between seemingly unrelated global events that puts you ahead of the game in investing. This week I'm sending you a video by my friends at STRATFOR. It links cars, jobs, German elections, and the situation in Afghanistan in a way that's truly insightful and informative.
Click here to watch this enlightening video. I've probably never mentioned it, but STRATFOR's founder George Friedman also has a free weekly intelligence report. I strongly suggest you sign up to receive it -- It's just the kind of unique global insight every 'outside the box' investor needs. Click here to get a mind-blowing Friedman analysis each week in your inbox. You'll enjoy it as much as I do.
With the current financial crisis, we have to be even more astute in locating worthy investment opportunities. I've written lately about choices we're facing as a country – but we have choices as individuals as well: choices that demand solid insight to make well-informed decisions and recognize opportunities at a time when they're not as plentiful as they used to be. It's not enough to know what's happening on Capitol Hill or Wall Street, we must expand our investigations to a global perspective.
I'm including an article by my friends STRATFOR, a global intelligence company, about a proposed law in Brazil to regulate the country's massive deep-sea oil reserves, which could make it a major oil exporter. It's just one example of the kind of event you need to be aware of if you're at all interested in global energy and investment. I recommend that you browse through the rest of STRATFOR's material, and check out their special offer for my readers. They provide just the kind of exclusive global insight you need.
As many of have heard, I had the pleasure of partaking in a weekend of fishing and intellectual jousting with some of today's most brilliant minds. We spoke of war, politics, and of course, the economy. Their interconnection seems somehow much clearer sitting on a Maine lake fishing for bass. This week I offer you an article that's key to understanding the U.S. role in Iraq. Futurologist and fellow aspiring fisherman George Friedman at STRATFOR lays out piece by piece U.S. options in the region. If your interests have anything to do with global energy markets -- and whose don't? -- it's enormously important that you grasp the relationships between various sectors in and around Iraq, and the possibilities moving forward.
Staying aware of geopolitical imperatives around the globe is crucial to any comprehensive investment portfolio. I encourage you to check out STRATFOR's Web site for whatever informs your investment area. Plus, my readers get a special membership rate.
This week I'd like to address the topic of currency. Flip through any business journal and speculation runs deep, though the ups and downs are far from predictable. A year ago everyone who thought they had half a brain and a pile of money comparable to Uncle Scrooge was threatening to transform all of their wealth into the seemingly unstoppable Yuan. Travel agents were pushing dirt-cheap excursions taking advantage of the near-worthless Icelandic krona to suburbanites with inquiries about sunny beaches and palm trees. And this year, if you're looking for a destination that won't hurt your pocket book, one might suggest Central Europe for that romantic second honeymoon.
In the long run though, currency speculation is a serious business that takes patience and an overall understanding of a nation, country or union. IMF reports and debt calculators are a good indicator, but they can be flawed and don't take into account the grand scheme of things. I've said it before and I'll say it again, the bigger picture is the one you want, and nothing prepares you for this kind of commitment than the intelligence you get from my friend George Friedman at STRATFOR. I'm sending you a piece that considers the recession in Central Europe, country by country. I encourage you to read and consider it in your portfolios. Click here to check out STRATFOR as well, as my readers get a special offer.
I've mentioned a couple of schools of thought before: those who look at the big picture and those who pore over the details. Often, the major product is the result of its minor pieces. If you use good meat, good buns, and good vegetables- you're going to turn out a pretty good hamburger. The same goes for cars, businesses and portfolios.
One industry in which this methodology really doesn't seem to work is information. Mainstream sources of information almost always fail to connect the world's events. They do a great job telling you that former Iranian president Rafsanjani addressed his supporters, that anti-Ahmadinejad protestors outside chanted "Death to Russia", and that Israel sent a submarine through the Suez Canal. But they don't show how the incidents fit together in the geopolitical landscape, nor what they mean for the relationships between global powers. They give you the meat, the buns and the vegetables, but there's no hamburger.
This week I'm sending you an article AND a video on the Iran situation, from my friend George Friedman and his team of intelligence analysts at STRATFOR. Click here to watch "Rethinking Iran" and read the article below (They complement each other nicely). George connects the pieces and draws conclusions – so you can make better-informed decisions regarding investments, assets and travels around the world.