Economic Analysis

Contradictions: The Fed vs. the Bond Market

Thoughts from the Frontline

October 17, 2003

Two weeks ago we examined the changes in our lives. Last week we looked at imbalances in the economy. This week the theme that I see in my daily reading is the large number of major contradictions apparent in the markets. There are so many contradictions we will not get to them all, but let's start, as it will make for some interesting and controversial analysis.

The Great Balancing Act

Thoughts from the Frontline

October 10, 2003

Last week we looked at change, and this week we turn our attention to balance, or more precisely, the dangers and opportunities of imbalance. Stock markets, currencies, confidence and government will be our target today for what should be an interesting and thoughtful letter.

I have been "saving" this topic for several months, waiting for the arrival of Bill Bonner's new book, Financial Reckoning Day . It has launched at #4 on the Wall Street Journal Best-seller list as well as #8 on the...

The Nature of Change

Thoughts from the Frontline

October 3, 2003

"My interest is in the future, because I am going to spend the rest of my life there."
-- Charles F. Kettering

How well we deal with change is at the heart of the investment enterprise. I make a departure from our normal writing fare to think about the longer term future and some of the changes we will encounter. I speculate about the future of the investment business and what you will be faced with in a few years.

Take Me Out to the Stockgame

Thoughts from the Frontline

September 26, 2003

Exactly what are investors thinking? How can I be right about being in something called a secular bear market if stocks just keep going up? Isn't it time for me to throw in the towel, admit I was wrong and declare a new bull has begun? I answer these questions and more as we ponder the meaning of several important, if somewhat obscure, academic studies.

We begin with the question posed to me by Butch, an astute businessman and reader, as we watched the Texas Rangers from the balcony office...

A Considerable Predicament

Thoughts from the Frontline

September 19, 2003

This week we re-visit Federal Reserve policy, and how their current policy may be setting up a very real problem with interest rates. Is the dollar getting ready to make its next move down? We do live in interesting times.

Yesterday I had long telephone conversations with both Jim Bianco and Greg Weldon, talking about Federal Reserve policy, interest rates and the dollar. There was an apparent disagreement on some concepts between them. Last night I did some meditating on those discussions,...

The Weather Equalization Act

Thoughts from the Frontline

September 12, 2003

This week we deal with tariff proposals and other absurdities, the Chinese and the huge rise in their holdings of US debt by foreign governments, plus one of the more profound pieces on the events in New York, presciently written more than 50 years ago. At the end, I ask my non-US readers a question about investment laws and practices in their country.

Market Timers or Market Cheaters?

Thoughts from the Frontline

September 5, 2003

Given the wide disparity of views about the economy, it is little wonder that the reaction to Greenspan's latest speech has been all over the board. That is compounded by the fact that bond price expectations are totally disconnected from Fed expectations. Are the bond market critics just a bunch of whiners (give me back my risk free trade!) or is there substance to their major beef? Who's really in charge here? Can the Fed trump the market? Predictably, I answer the latter question with both...

Greenspan’s Uncertainty Principle

Thoughts from the Frontline

August 29, 2003

This week we are going to examine in some detail Alan Greenspan's speech given today in Jackson Hole, Wyoming. I was working on an entirely different letter when this speech hit my inbox. I think it is so important that I am going to start over in the middle of a letter, which I cannot remember ever doing.

For better or worse, Alan Greenspan is one of the most important men in the world. His views matter and are taken quite seriously by the market. This is one of Greenspan's more...

Manufacturing the Data

Thoughts from the Frontline

August 22, 2003

How can I talk about a mere Muddle Through Economy when manufacturing is rising, the Phillie Fed Index skyrockets, housing and new home construction is on fire, economists are predicting a healthy 3.5%+ GDP next quarter, unemployment claims dropped, the stimulus from tax cuts and mortgage refinancing is just now kicking in, business confidence indicators are rising, The Index of Leading Economic Indicators has risen for the 4th straight month, the dollar is rising and the stock market is...

Stupid Economist Tricks

Thoughts from the Frontline

August 15, 2003

This week we further explore the variation in economic forecasts and then finish with Part Three of "How the World Really Works" from my friend, Art Cashin. Many thanks to him for allowing me to use his work so that I could get a little R&R this summer. Next week it is back to the heat of Texas and full weekly letters.

I can't say enough nice things about Nova Scotia, but I will write some more about it later. This will not be the last summer I spend considerable time there. Yet, alas, I did...