Economic Analysis

Valuation Madness

Thoughts from the Frontline

November 8, 2002

This week we will look at a fascinating debate between two well-known investment analysts, I show you how to spot a stock market cheerleader, and ponder the significance (if any) of what the surprising GOP win of the Senate portends for our investments.

I am on the road as I begin to write this week's letter, speaking at the National Endowments and Foundations Symposium on the prospects for the economy and the markets for the coming year. Interestingly, when I spoke at this conference last...

Greenspan: Fight Deflation Now

Thoughts from the Frontline

November 1, 2002

Today we examine the deluge of month end data, which continues to confirm we are in the Muddle Through Economy. I politely respond to George Gilder (even after he called me a Keynesian and an economist) and look at the very long term implications of tax policy. There is a lot of very interesting ground to cover, so let's get started.

As long time readers know, I am in the process of writing a book called Absolute Returns . The basic premise is that we are in a long term secular bear market...

Glass Ceiling Investing

Thoughts from the Frontline

October 25, 2002

Earlier this year I wrote that the deduction of option expenses and proper accounting for pension liabilities would become an issue, and that it was highly likely that when new accounting standards are adopted that these would be addressed. If so, then it would be a large drag upon future corporate earnings. These new accounting standards are going to create a glass ceiling, if you will, over the stock market.

The Grandfather of Bear Markets

Thoughts from the Frontline

October 18, 2002

Today we return to our assigned task of trying to find some patterns in the data to help us determine the direction of the economy and the markets. There are lots of bread crumbs on this trail, so let's see what conclusions they lead us to.

First, the evidence mounts that we are still in what I call the Muddle Through Economy - a slow growth, no-new-jobs type of recovery that seems to be alternately teasing us with potential for growth and frustrating us with weakness. Weakness is winning.

Why Investors Fail

Thoughts from the Frontline

October 11, 2002

Exactly what use is past performance? How can you spot a trend before it starts, and determine when it will stop? And when will the next big bear market rally start? This week we examine why so many investors fail, and why a few succeed over and over again. While I am sure that none of my regular readers make these mistakes, this will be a useful column to send to your friends who have not been as successful as you. Oh, yes, and I tell you how to know when the next big rally starts. Let's...

History versus the Fed

Thoughts from the Frontline

October 4, 2002

Today we are going to try and help you understand the strange action in the stock and bond markets. We are going to look into the future, and see if we can get a feel for what's around the curve in the road. Is it smooth driving, or are there some rocks in the road we need to avoid?

Last week I asked, "What if they gave a Dollar Devaluation Party and no one came?" After a quick review, I am going to follow up on the implications of this theme, as I believe this is going to have a big impact...

Knocking at Deflation’s Door

Thoughts from the Frontline

September 27, 2002

Today we are going to examine a war going on in the central banks of the world. The central banks of the world continue to do what is necessary to make their respective nation's products attractive to the American consumer, doing the best they can to make their currencies cheap. There are increasing calls for the US to let the dollar fall as a weapon in the war against deflation. Both can't happen at the same time. You don't want to let your investments get caught in the crossfire. There will...

The Sweet Buy and Buy

Thoughts from the Frontline

September 20, 2002

This week we are going to depart from the usual format of surveying the economic landscape for investment insights, and ask ourselves:

"What type of returns should you expect from the stock market for the next 5, 10, or 20 years?"

Over the long-term the Ibbotson study, used by stock market cheerleaders everywhere, says we should expect to make real returns of 6-7%. This statistic is used by brokers and fund managers who urge investors to buy and hold. Maybe more to the sales point, it...

Bubble, Bubble, Everywhere a Bubble

Thoughts from the Frontline

September 13, 2002

There has been more important and interesting economic analysis that has come across my desk in the last few weeks than at any time I can remember. I have spent a lot of time pondering the meaning of several very different items, and trying to see how the dots connect. I think it will give us some clues as to what our investment posture should be. I think you will find this letter to be much different from the usual economic analysis.

First, I have masochistically thought long and hard about...

All God’s Children Got Themes

Thoughts from the Frontline

September 6, 2002

September is the month set into my personal rhythms, and that of my generation, as a time to reflect upon the past and look to the future. The first week of school was always a time for review and to get a sense of what we would be looking forward to in the new school year. Even though school has been in session for several weeks, to those of us who went to school in the 50's and 60's, it does not feel right until after Labor Day.

With that cycle in mind, it seems that we should briefly...