I mentioned in last Saturday's letter a report by Louis Gave of GaveKal fame on whether inflation may be waning and its importance. Louis gave me permission to use it as this week's Outside the Box. It is typical of the thoughtful analytical work they do.
Louis and his partners and associates at GaveKal write some of the more thought-provoking material I read. They really challenge my position on numerous matters, causing me to look at many items from a different view. That of course, makes this particular piece good for Outside the Box. Whether you agree or disagree, you need to know why you hold a position. If you can't articulate the "against," how can you be sure you truly understand the "for"?
I think given the current debate on inflation, this week's Outside the Box is a must read. While it may look longer, there are a lot of very important graphs here. And thanks to Doug Harrison for helping with the tricky technical aspects of getting this letter out today. It was a lot more than a simple cut and paste, and way beyond my pay grade.
And congratulations to Louis and his wife Kelly who by this time may have a new child. She was due any minute on Friday. I trust you are enjoying your summer. I will be on Larry Kudlow's show tomorrow evening and then having dinner with he and Louis' father Charles (and Tiffani of course). And expect an announcement about a new survey in the next few days.
John Mauldin, Editor
Outside the Box
The End of the Inflation Scare?
While most economists and strategists spend time worrying about growth, changes in inflation are usually a much greater driver of financial markets than changes in economic activity. This is because:
1- A surge in inflation usually increases volatility of economic growth--which in turn reduces P/Es and the willingness of the private sector to take risks.
2- As highlighted in The Myth…