Thoughts From the Frontline, July 2006

The Return of Stagflation

July 28, 2006

The GDP data released Friday suggests the economy seems to be slowing. So naturally the stock market surges forward in a very strong move, convinced the bull market is back. After all, how can the Fed raise rates in a slowing economy? And if the Fed is not raising rates, then it follows, does it not, that the stock market will rise? Or so the logic of a 119-point rise, tantalizingly close to a new high for the Dow, seems to suggest. A review of the data says that may not be case,...

Goldilocks or Micawber?

July 21, 2006

This week I write from Grand Lake Stream in Maine. It has been a long time since I have taken a week off from writing, but I think this is the week to do it. But that means, gentle reader, that you get an upgrade in quality, as my friends (thanks, Louis!) at GaveKal have graciously permitted me to use one of their most recent newsletters, where they talk about the recent inflation numbers, survey the markets in Japan and discuss Chinese growth and taxes. It is an interesting letter, and...

The Possibility of a Recession

July 14, 2006

The economy seems to be slowing. Will this be a mid-cycle slowdown as it has been the last two decades or will it evolve into a recession? In either event, does it presage a bear market in equities? Or is this just another oversold buying opportunity, a gift courtesy of panic selling because of the Israeli-Lebanon situation? If you follow the markets with any sense of history, we do in fact live in interesting times.

But before we jump into our main topics, let's turn our eyes to...

The End of Medicine

July 7, 2006

This week we look at a very intriguing new book by good friend Andy Kessler called The End of Medicine , subtitled "How Silicon Valley (and Naked Mice) Will Reboot Your Doctor." As long-time readers know, Andy ran a high-tech hedge fund which went from $100 million to a $1 billion and got out more or less at the top with his client's money (and his) intact. Since then he has written a series of very fun books on the inside world of investing, all of which are on my recommended list.