Orders and Production: No Time for Complacency
August 7, 2012
We have been assaulted with economic news of all sorts, from every corner of the globe, while trying to watch the Olympics and while we would rather be enjoying summer and decompressing (at least in the Northern hemisphere).
But the data keeps coming. My friend John Silvia, the Chief Economist of Wells Fargo, has been with me in Maine this past weekend. And as we caught fish and shared our thoughts, we also both managed to get out our respective writing done. His note this morning is a particularly interesting analysis of US data, which has him wondering about his call for tepid growth but no recession
“A run of weaker-than-expected economic data in recent weeks has engendered the usual speculation of whether or not the economy is poised to slip back into recession. In this piece, we describe the critical role of industrial production in the current cycle and discuss how deterioration here could signal trouble for the broader economy. We also analyze what has happened in past cycles when these components have simultaneously slipped into contraction territory.”
My son Trey and I have been going to these Maine summer events for six years. The last time the conversation was as, let’s say, “concerned,” was in August of 2008. This year the concern about Europe has been evident. My main thesis is that the US should not fall into recession unless it is pushed. And Europe could be the catalyst, if they do not control their problems. Much of the continent is in recession, and Greece, Portugal, and Spain are in what can only be called depressions.
The longer the Europeans vacillate about what to do, and continue to offer up nothing more than hope and endless summits, the worse it will get. They cannot avoid a very costly decision. Either breakup or a full fiscal union is going to be massively expensive. The only thing that can be more costly is to avoid doing either. If they don’t act decisively, they will most certainly drag the US and global economy into recession as well.
The last month has been perhaps the most intellectually stimulating of my life. I write this on a plane home. (The economy may be tepid, but the planes I have been on in the US have been oversold for the last few months. Which means the free upgrades are getting harder to come by.) I am looking forward to digesting what I have been confronted with. Some of it has been enormously positive, and some of it disturbing. The true surprises really have been to the upside. The past month has reinforced my very-long-time (admittedly almost extreme) positive outlook, though we face an immediate future that we may best characterize as not so bullish. And if I were a citizen in most any European country, my prospects would seem dark indeed.
But that is a topic for later letters. For now, let’s look at what John Silvia and his most solid team have to offer us.
Your mind on overload analyst,
Hoisington Quarterly Review and Outlook
July 24, 2012
The relationship between high total public debt and interest rates is controversial (to some); and in today’s Outside the Box Van Hoisington and Dr. Lacy Hunt of Hoisington Investment Management tackle the subject head-on, in their “Quarterly Review and Outlook” for Q2 2012. They bring important new evidence to the debate, citing three academic studies (including an April 2012 paper coauthored by Rogoff and Reinhart) and an historical retrospective that focuses on the debt-disequilibrium panic years of 1873 and 1929 in the US and 1989 in Japan. In their view, the onus of responsibility for the “Panic of 2008” falls on the sometimes-slumping shoulders of the Federal Reserve, for making money and credit too easily available, and then “[failing] to use regulatory powers to check the unsound lending and the concomitant buildup of non-productive debt.”
It gets worse: “The average low in interest rates in these cases occurred almost fourteen years after their respective panic years with an average of 2% … Amazingly, twenty years after each of these panic years, long-term yields were still very depressed, with the average yield of just 2.5%. Thus, all these episodes, including Japan’s, produced highly similar and long lasting interest rate patterns… The relevant point to take from this analysis is that U.S. economic conditions beginning in 2008 were caused by the same conditions that existed in these above mentioned panic years. Therefore, history suggests that over-indebtedness and its resultant slowing of economic activity supports the proposition that a prolonged move to very depressed levels of long-term government yields is probable.”
It is a constant pleasure to be able to bring work of this quality to the attention of my readers, and I thank Lacy and Van for their help in doing that. Hoisington Investment Management Company (www.hoisingtonmgt.com) is a registered investment advisor specializing in fixed-income portfolios for large institutional clients. Located in Austin, Texas, the firm has over $4 billion under management, composed of corporate and public funds, foundations, endowments, Taft-Hartley funds, and insurance companies.
I am in Newport at the Department of Defense Net Assessment Office gathering of a small group of fascinating and forward-thinking individuals working on developing alternative scenarios as to how the future will unfold. It is quite multidisciplinary. This is a very eclectic group and not what one would normally picture as military (witness that I am here). There is a group of officers from various branches, tasked with thinking about the future, as well as experts from a variety of fields. At some point, when the time is appropriate, I hope to be able to share some of what I am learning, as I am simply fascinated with the discussions and debates. Long days, though, so I will hit the send button and get on to bed. These guys believe in early mornings. As those who know me know, I really don’t like to experience what 6 AM feels like. I am more of a late-night guy. But these meetings get the juices flowing, so it is worth it.
Your seeing a much larger puzzle analyst,
Flirtin’ with Disaster
June 19, 2012
This week I offer a main course, a veritable piece de resistance, for Outside the Box readers, from my friend Rich Yamarone. Rich is Chief Economist for Bloomberg and one really sharp talent. He helps write Bloomberg Brief: Economics, a daily notebook that comes out every business morning with an all-encompassing view of what's happening and will happen.
I have been on stage with him several times recently and have spent even more time with him over dinners. He keeps reminding me to pay attention to the slow-motion slowdown and eventual (he says) recession that is coming right here to the US. He thinks ten-year bond rates could scare 0.5% (not a typo!) if/when both Europe and China have a simultaneous crisis and the US is seen as a real – and perhaps the last – safe haven (to which I would add: besides gold). Certainly 1% on the ten-year and 2% on the 30-year will be on offer in such a scenario.
I asked him to give us a brief tour, based on some of the graphs in his latest presentation, and it arrived today. If you like, you can subscribe to their regular research by going to bloombergbriefs.com/economics.
But we can't ignore Europe entirely, so for an appetizer I offer this small note from Rob Arnott, founder of Research Affiliates (you may know them as the Fundamental Index guys) and manager of the extremely popular (for good reason) All-Asset Fund at PIMCO. Rob will be with me in about a week in Italy, and I look forward to great evenings over Italian food with friends and family.
Here, Rob looks into the future (something he does with great success in his funds) and walks us backward in time. But I will let him tell his story and then we'll get on to the main course. Quoting:
"On another topic, one of my favorite games as an asset manager is to look past current travails and ask what *must* happen in the years ahead. Then we can turn attention to working backwards, identifying the intervening "path of least resistance." Sometimes, this is *way* more powerful than looking at the near-term decision tree and working forwards.
"The EZ travails lend themselves elegantly to this treatment. What will happen in the months ahead? No one really knows. What will happen in the years ahead? Nations addicted to debt-financed consumption will have to balance their books. All of Europe (and the US and Japan) will be spending no more (or very little more) than their tax receipts, a few years hence. Why? Because – as with any family – debt-financed consumption is ultimately unsustainable.
"Likewise, some years hence, entitlements will need to be on a pay-as-we-go basis, give or take a little wiggle room, in order to not crowd out all other forms of spending. Debt service will need to be part of the nations' spending, crowding out other forms of spending; a 'primary surplus' will be irrelevant.
"When will this transition take place? It's impossible for the status quo to continue more than a few years, though Japan shows that debt-financed government spending can persist far longer than most observers might suppose. And it's impossible for status quo to persist after the capital markets begin looking these few years ahead, which telescopes this transition into the coming handful of years. The more a nation relies on foreign investors to fund its spending, the faster this cliff arrives.
"So, working backwards from these inevitabilities ...
· "Since government spending roughly equals tax receipts, less interest payments, collecting more in taxes is a very dubious path by which to arrive at balance.
· "This leaves us with spending cuts. Entitlement spending roughly equals tax receipts attached to the entitlements. So the same logic applies: entitlement spending will be cut. Age of eligibility, means testing, and rationing are the paths of least resistance; but this will require an evisceration of the public sector and empowering of the private sector, which will in turn require a stark liberalization of regulatory and employment law.
· "*Or* there will be a collapse of GDP, as public spending drops without allowing the private sector to pick up the slack. Increasing global pressure for financial transparency, to facilitate tax collection, will become the norm.
"As we move back closer to the present, the near-term implications are less clear.
· "Nothing in this end-point *requires* that countries leave the EZ. Greece can simply slash public-worker salaries or head count to be fully covered by tax receipts. Likewise, Spain, Italy, Portugal, France (!).
· "If any country does exit, its banking sector must rebuild from scratch. The domino effect here is obvious: countries exiting en masse becomes a possibility. Italy and France are not assured to remain in the EZ in this circumstance. So, it's implausible that one, and only one, country exits.
· "All of this means that EZ exits may prove to be too messy to be allowed to happen, in which case defaulting countries will simply default, then cut spending to balance their budgets ... and then move on, with sharply diminished public sectors and GDP."
And back with John. It all sounds so simple when he explains it. But we will lurch from crisis to crisis in Europe, and then Japan will enter the picture in a big way. Hopefully we in the US can learn a lesson and deal proactively with our very similar problems, about which I will write this week.
And now I have to go to my next meeting, although it will be a pleasant one over a low-cholesterol dinner. Have a great week. The next time you hear from me I will be in Madrid on my way to Italy. So adios and ciao for now.
Your ready for a little downtime and conversation analyst,
The Clash of Generations
May 15, 2012
There are plenty of books about the entitlement disaster in our future, but few come with the backing of an academic press. The Clash of Generations is an exception. Written by economist Larry Kotlikoff, one of the creators of generational accounting, and my good friend of long standing, Scott Burns, Clash shows what current policies have already done to young people, tells stories about how both parties have allowed it to happen, and offers actual policy solutions – for banking, taxes, healthcare, and Social Security.
But it's way more than a "policy book." It also tells us what we can do to protect ourselves if the politicians fail.
Nobel Laureate George Akerlof writes that the book "is so well written that Scott Burns and Laurence Kotlikoff should be considered the Stieg Larssons of economics." For today's Outside the Box, I asked Scott to give us some excerpts from the book, with an emphasis on policy matters rather than personal investing. This is a book you will want to read, and I hope our policy makers read it as well, to get a clue about the impending crisis, should they fail to take action. Will you like all of their solutions? I can guarantee you won't, as they will gore a lot of sacred oxen; but then any real set of solutions will. We have gone far past the point where there were easy solutions.
You can get the book at http://www.amazon.com/clash. And while you're at it, you should get a copy of my new book, The Little Book of Bull's Eye Investing. It is getting a lot of great reviews, and I am pleased with the response so far.
I am in Stamford, Connecticut tonight, where I will speak tomorrow morning at a private conference for Pitney-Bowes. They have brought in a rather solid line-up of speakers, trying to get a peek into the future so they set an effective business strategy. I am looking forward to listening and learning as much as I can.
Right now I am off to dinner with the other speakers, so it should be a fun evening with lots of interesting conversation, which I really enjoy. Wednesday and Thursday I am in NYC, with a lot of media appearances and interviews and a few meetings and speeches worked in here and there. It will be a very busy schedule, especially since I am trying to keep up with my reading and work on my own next book. Have a great week!
Your wondering how we solve the entitlement crisis analyst,
Hoisington First-Quarter Review and Outlook
April 17, 2012
Lacy Hunt kicks things off with a bang in Hoisington's Quarterly Review and Outlook, this week's Outside the Box:
"The standard of living of the average American continues to fall."
The reason, in a word: debt. Lacy explains what happens:
"Efforts by fiscal and monetary authorities to sustain growth by further debt accumulation may produce some short-term benefit. Sadly, these interludes fade quickly as the debt becomes more destabilizing. The net result of increased indebtedness then becomes the opposite of what policymakers intend when they promote economic growth by either borrowing funds for increased government expenditures or encourage consumers to borrow with artificial and temporary incentives."
In other words, you can't get to real, sustained growth of an economy by growing debt after a certain point –one that, sadly, we have already reached.
It gets worse, because, since 2009, private debt-to-GDP has fallen while government debt-to-GDP has surged. And, as Lacy notes, "United States government spending carries a zero expenditure multiplier, as do operating expenditures of state and local governments. Thus, each dollar spent by the federal government creates no sustainable income, yet the interest payment incurred with each borrowed dollar creates a subtraction from future revenue streams of the private sector."
That is, unproductive government debt is killing us. So what gives? It's simple: we either make some big, tough collective decisions, and make them soon; or we come to the "bang point" documented by Reinhart and Rogoff, where the bond market no longer believes the US will pay its bills. Europe and Japan will get there before we do, but the writing is on the wall: we must get our national-deficit act together.
I am doing a road show for Bloomberg in San Francisco, with 8 meetings today and a few more tomorrow. Bloomberg is marketing a very high-end new service called Mauldin Research Trades. My partners Gary Habib and Peter Mauthe have assembled an all-star team of technical trading analysts (who between them have written about 20 books on technical trading), who give us "conviction" trades each and every week. We publish the letter on Sunday evening. I am very pleased with the results so far. If you are interested, contact your Bloomberg Tradebook representative or drop me a note and we will get them in touch with you.
Tonight is dinner with real estate maven John Burns, where I am sure I will pick up a few new insights (I always do with John). Then I'm off to north of Denver for a day, then back home before I fly down to Austin over the weekend to be with Lacy Hunt at his long-delayed wedding reception where the iconic Texas band Asleep at the Wheel will be playing. Lots of friends there at a must-not-miss evening.
And Join me next Tuesday morning in Philadelphia at The 30th Annual Monetary & Trade Conference: Demographics, Politics, and Economic Growth, sponsored by the Global Interdependence Center (click on program title to register). It will be very informative.
Have a great week! I see some great food and conversation in my life in the next few hours.
Your worried about ever more debt analyst,
Weeks When Decades Happen
March 20, 2012
My friends at GaveKal are uniquely positioned to help us think about where we have been in the past decade and where we are going in the next one. Their perch in Hong Kong lets them keep their fingers on China's pulse, but they also have profound roots in Europe – the Gave family is French – as well as a thorough grasp of the US economy and culture. (Louis Gave, the author of today's Outside the Box, is a Duke grad.)
We can all second Louis when he notes "the discomfort and uncertainty we find in most meetings with clients" – we're treading on uncertain turf here and moving into unexplored territory. We sense that the potential, in the next few years, for both creation and destruction (so yes, creative destruction) is greater than at any time in our lives – and greater perhaps than at any time in the history of the human race.
How do we get our heads around something that big and dynamic? Where do we find the confidence that our next steps will take us forward rather than back? How do we allocate and husband our resources, wisely and profitably? In the following piece, Louis Gave takes an approach that is genuinely helpful: he looks back to the crucial year of 2001 and identifies three big events that largely determined global economic and investment trends in the '00s.
And then he does something that is rather scary but very necessary. He says, don't look now, gang, but those trends have stalled; and so we had better come to grips with the great trends that are now forming (lest we be like the British guns of Singapore at the outbreak of WWII: facing the wrong way).
And then – GaveKal to the rescue! – he tells us what those trends are. So, without stealing any of Louis's thunder, I will deliver you into his capable hands. But first, this note –
I did get my iPad 3 on time. No line, in stock at the local Apple store. I decided to try when I got a few emails from analyst types who actually go to stores to check on lines and inventory instead of just looking at numbers. Lines were down, for whatever reason. And inexplicably to me, there is absolutely no visual difference between the iPad 3 and the 2. None. And there is nothing on the box to reassure you that you actually got the 3, if you don't get the 4G. Now, the 4G speed is cool, and I can see the increased processor speed, and the display is in fact nicer. Not sure, unless you are an early adopter or hooked on speed (as I am) that the need will be there to buy up. And if you don't get the 4G? There is no difference in connection speed. And Apple stock is priced for perfection. Just saying…
Finally, I rarely ever provide a link that is simply for fun, but my friend Cliff Draughn of Excelsia sent me the funniest 5-minute clip I have seen in years. I laughed out loud for some time. Do not listen unless you are where you can laugh. This may be something of an inside investment-world joke, but I think most people will appreciate it. http://www.xtranormal.com/watch/12032078/a-day-in-the-life-of-a-financial-advisor. I think even Suze will get a kick out of this!
Have a great week. I am finishing this up in the airport, and am off in a few minutes to Stockholm and Paris. I intend to take some time and see the Vasa, a 68-gun warship built in 1628 and pulled up from the bay in 1987, where it had been perfectly preserved. Stunning history and something I have long wanted to see. (en.wikipedia.org/wiki/Vasa_(ship)) Plus a lot more of Stockholm and a few spots in Paris before the GIC conference. And I am also going to spend some time with people who went through the banking/sovereign crisis in Sweden in the '90s and see what I can learn. And now let's turn you over to Louis.
Your up on my board, surfing the inevitable analyst,
Face the Music
February 14, 2012
No one does it like Kate Welling – we're talking financial-world interviews here, "interrogatory journalism," as Kate would put it – and her interview of Dr. Lacy Hunt, which you're about to read, is in my opinion one of the best she's ever done, and the best I've seen with Lacy.
Kate's interviews, which she publishes in welling@weeden, normally get seen only by the institutional investors and other market pros who are her clients; but she has kindly allowed me to share this one, in which Lacy tackles the same fundamental challenge I've been writing about these past few years: How do we deal with the economic crisis we've brought upon ourselves through the buildup of too much debt? How do we get out of the hole we've been digging, when the tried-but-not-so-true Keynesian (and Bernankean) methods just get us in deeper? How do we work through the end game of the Debt Supercycle, when there are seemingly no good or easy choices left, and find our way forward into an era of renewed growth and hope?
Lacy doesn't give us The Answer, but what he does give us that is really helpful is a deep historical understanding of economic forces and the key players who have tried to manage them, guys like Irving Fisher, who completely missed the call of the Great Depression, but learned a thing or two from it. Bottom line: "... if Fisher is correct, and if we try to solve our current problems by getting deeper in debt, then what Fisher is saying is the additional indebtedness doesn't make us stronger, doesn't increase our options. It makes us weaker, reduces our options."
My answer to everything tonight, as my brain, which is still in Cape Town, tries to catch up with my body in Dallas: take in a Mavs game!
Your giving microeconomic forces their due analyst,
American Gridlock, Part 2
February 7, 2012
Today we dive into Part 2 of Woody Brock’s notes from his new book, American Gridlock (www.amazon.com/gridlock). He looks at what we can do in the future to prevent another crisis like we had in 2008, why we need to change, how we bargain with China (will be very controversial, in China at least!), what capitalism really is, and then he addresses the thorny issue of what it means to distribute wealth fairly. What can be said to those concerned with the top 1% of the population owning a grossly disproportionate share of the nation’s wealth?
You can learn more about Woody and his economic services at www.SEDinc.com, as well as see some of his previous essays. You can also follow him on Twitter and Facebook (Twitter: @HwoodyBrock; Facebook: American Gridlock [http://tinyurl.com/7ch7vld]) . (Note: Woody is attempting a social media strategy to help deliver his message, and I am just curious as to how many people will follow him on Twitter.)
I had a long dinner with Woody last week and was on a panel with him the next evening. He is one of the more fascinating minds and interesting people I have met in my travels, and he tells the best historical stories (where else can you learn about who went down on the Titanic and why, and the foundations that were set up in their names that changed the US?).
I am off to South Africa tomorrow night and back Saturday, spending three of the next four nights in airplanes, experiencing the glamour side of travel. Not sure when or where I will write the letter for this week, but it will get done. And thanks to those of you who sent kind words and thoughts regarding my daughter Melissa, who I mentioned in last week’s letter. You are very kind, and it is appreciated. Have a great week!
Your getting 60 hours to read and write offline analyst,
Hoisington Quarterly Review and Outlook
January 17, 2012
The "Quarterly Review and Outlook" from Hoisington Investment Management is one of the most significant pieces that crosses my desk – I try and drop everything else as soon as possible. This quarter's is no exception. The authors, Dr. Lacy Hunt and Van Hoisington, get right down to brass tacks with their opening sentence: "As the U.S. economy enters 2012, the gross government debt-to-GDP ratio stands near 100%." They cite an influential 2010 historical study of high-debt-level economies around the world, by Professors Kenneth Rogoff and Carmen Reinhart, that concluded that when a country's gross government debt rises above 90% of GDP, "median growth rates fall by one percent, and average growth falls considerably more."
And that, Hunt and Hoisington note, is exactly what is happening to us: "After suffering the most serious recession since the 1930s, the U.S. has recorded an economic growth rate of only 2.4%. Subtracting 1% from this meager expansion suggests that the economy should expand no faster than 1.4% in real terms on a trend basis going forward, which is virtually identical with the economy's expansion in the past twelve months."
Bottom line, say the authors: expect recession in 2012, here and in most of the world.
On a personal note, let me say that I consider Lacy Hunt one of the premier economists in the world today. It is my great privilege to call him up (even on his cell phone at night!) and ask questions and get to play the role of student, sometimes for hours, as Lacy takes me through the history, writing, and research in the economic world. It can sometimes be a tad intimidating, as he has seemingly read everything and remembers what he read and how it fits. I do take notes.
Hoisington Investment Management Company (www.hoisingtonmgt.com) is a registered investment advisor specializing in fixed-income portfolios for large institutional clients. Located in Austin, Texas, the firm has over $4 billion under management, composed of corporate and public funds, foundations, endowments, Taft-Hartley funds, and insurance companies.
Your thrilled to be in Singapore at last analyst,
It’s All Greek To Me
November 8, 2011
Long-time readers will be familiar with Michael Lewitt, one of my favorite thinkers and analysts. He has gone off on his own to write his letter, and I am encouraging him to write even more. I call Michael a thinker because he really does. He reads a lot of thought-provoking tomes and then thinks about them. And then writes, making his readers think. The world needs more Michael Lewitts.
Today, he roams the world, commenting as he goes, starting of course with Europe. I have permission to use the first half of this most recent letter as today’s Outside the Box, leaving off the investment recommendations that he shares with his subscribers. If you are interested you can subscribe at www.thecreditstrategist.com.
I am back from the Kilkenomics Economics Festival in Ireland, where there was a lot of attendee angst about their banks. They are not happy about taking on private debt with public money, and the mood in Ireland is to tell the ECB to take their debt and (insert your favorite personal expletive). Clearly, the rest of Europe wants the Irish to pay.
I told them to be patient. When the rest of European banks are upside down sometime next year and France, Spain, et al. have to pay, the mood among voters everywhere will be quite different. I said they could probably default on their bank debt at that point and no one would notice, amidst the massive debts that are going to implode on the Continent. My remarks excited a measure of schadenfreude-tinged laughter from the crowd.
Michael Lewitt agrees. Noting this interview with Oliver Sarkozy, the half-brother of France’s Nicholas Sarkozy, he says:
“Institutional funding has a three-year average life, so European banks need to generate more than $800 billion each month to fund maturing institutional borrowings. This is, in Mr. Sarkozy’s words, unsustainable. And the markets are saying so. The CDS market for European banks is back at or above the peak levels seen during the 2008 financial crisis. While Mr. Sarkozy does not come out and say it, TCS will – the likely future for European banks is Dexia SA, which was nationalized by France and Belgium when it ran aground a couple of weeks ago.”
I will write more about what I learned in Kilkenny later this week, but Europe is getting ever closer to imploding, one way or another. There is no end of problems for the markets to focus on. I can only hope that we in the US will observe the increasingly sad state of affairs in Europe and become sufficiently motivated to fix our own problems. If we do not, we will end up in an even worse condition, which will then be worse for the entire world. I remain somewhat optimistic that we will fix what ails us, as not doing so is just too horrible to contemplate.
On that bright note, have a great week. I am off to Atlanta tomorrow and then DC this Sunday, and then home for a few months (more or less).
Your seeing too much to worry about analyst,
Hoisington Quarterly Review and Outlook
October 18, 2011
Dr. Lacy Hunt and Van Hoisington of Hoisington Investment Management write a “Quarterly Review and Outlook” that is a must-read for me. This quarter they focus on US monetary policy, noting that “After peaking at 1.69 in the second quarter of 2010, M2 velocity declined for four consecutive quarters, and we estimate that a major contraction in velocity to 1.59 is likely for the third quarter.” (I mentioned the importance of the velocity of money in judging inflation vs. deflation prospects in this week’s e-letter, too.)
They say, “If our analysis of a new contraction in GDP is correct, the U.S. economy should be viewed as operating in the midst of a long-term slump, regardless of terminology.”
They borrow a riff from Harvard economic historian Niall Ferguson, who has asserted that the world is experiencing a “slight depression”; and mention that this conclusion has been backed up by Gluskin Sheff’s notable economist, David Rosenberg, who reminds us that “Depressions are basically long recessions lasting three to seven years.”
Hoisington Investment Management Company (www.hoisingtonmgt.com) is a registered investment advisor specializing in fixed-income portfolios for large institutional clients. Located in Austin, Texas, the firm has over $4 billion under management, composed of corporate and public funds, foundations, endowments, Taft-Hartley funds, and insurance companies.
Your kicking up my heels in the Big Apple analyst,
Greatest Moral Hazard, Says Paul McCulley, Is Austerity Here And Now
October 4, 2011
The last Thoughts from the Frontline featured an interview of me by Kate Welling. I promised another interview she did with my friend Paul McCulley, who (warning) is a consummate Keynesian. For him (paraphrasing closely), prescribing austerity for the US is like putting an anexoric patient on a diet. While Paul and I are very good friends, we do not agree on what to do about the current morass. But this is Outside the Box, and the point is to have views that I don’t agree with. And Paul is nothing if not an articulate proponent of the neo-Keynesian view. The original publication of his interview in Kate’s letter drew some very pointed comments. Right up the OTB’s alley.
Kate Welling is simply the best at doing
interviews and teasing out controversy, but her work is hard to for the average
person to access, as it is now just for institutional clients. I have convinced
her to break out of her shell and offer it to the retail world. She is working
on the “details,” such as price, etc., but in the meantime you can go to welling.weedenco.com
And in the interview, Paul talks about what his new “gig” will be after PIMCO. He is working with David Kotok to launch the Global Interdependence Center Global Society of Fellows, a most worthy group and effort, which I heartily applaud. The GIC encourages the expansion of global dialogue and free trade in order to improve cooperation and understanding among nation states, with the goal of reducing international conflicts and improving worldwide living standards. You can learn more at www.interdependence.org.
Tonight I am in Geneva and was hosted by Lord Alex Bridport, founder of one of the largest bond brokerage firms in Europe (if not the largest). I will report back Friday. It is an interesting time to be in the markets. OK, one tidbit. He confirmed that banks (and not just in Europe) are really as bad as they look. And with that note, have a good week!
Your going to be 62 in a few hours analyst,
Breakfast with Dave
August 8, 2011
The question we will ask ourselves in 20 years is, “Where were you when they downgraded the US and the Fed?” This week’s Outside the Box is from David Rosenberg. He has made his letter public and graciously given me permission (at 34,000 feet ) to send it to you.
I thought about writing an immediate response to this weekend’s events but decided to wait and meditate on what has transpired. Clearly, we are at the beginning of the Endgame. And that saddens me. The events of the weekend were hotly discussed at the Shadow Fed meeting in Maine. My youngest son, Trey, was paying attention this year. Last night he said, “Dad, it is good for you that you are right with your book, but I don’t think it’s good for the rest of us.” Out of the mouths of babes.
The takeaway here is that this is just the beginning. We are in for a very bumpy ride. And the flight attendant is telling me to turn off the computer, so I will hit the send button.
Your sad that he called this analyst,
Hoisington Fourth-Quarter Report
January 17, 2011
Long-time readers of Outside the Box are familiar with the names Dr. Lacy Hunt and Van Hoisington. They are a regular feature here, as quite frankly, anything that Lacy writes or says I pay serious attention to. This is their regular quarterly report, where they outline seven things that are likely to retard US growth. An easy read, but take the time to think this through.
Hoisington Investment Management Company (www.hoisingtonmgt.com) is a registered investment advisor specializing in fixed-income portfolios for large institutional clients. Located in Austin, Texas, the firm has over $4 billion under management, composed of corporate and public funds, foundations, endowments, Taft-Hartley funds, and insurance companies.
And now let's jump right into the essay.
Your loving wi-fi on the plane analyst,