Outside the Box, September 2008


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Haste Makes Waste

September 29, 2008

The purpose of Outside the Box is to present views which cause us to think through our basic assumptions. This week our old friend Michael Lewitt of Hegemony Capital Management gives us a view as to why the bailout bill going down may not be as bad as I think it might. There is much we agree on, however. And part of our agreement is that a deeper recession is in our future. Let me be clear. Muddle Through is now at risk.

I have talked with my publisher, and for the next few weeks of The...

Observations on a Crisis

September 22, 2008

This week we look at a very solid piece of analysis on the world economy from my friends and London business partners Niels Jensen and Jan Wilhelmsen of Absolute Return Partners (www.arpllp.com). I find it is quite useful to read the considered opinions of those from outside the US and particularly from people who have developed keen insight from years in the trenches. Niels and Jan are certainly in that category. The world economy is clearly out of balance and they point out where some of the...

The Russian Resurgence and the New-Old Front

September 18, 2008

It's been a hell of a few weeks, so let's start with a little much-needed levity. Two friends, a Trader and an Investor, walk up to the roulette wheel in a casino. They watch a guy hogging the table hit on his first spin. Then his second. Third, boom. Four in a row! The guy has an enormous stack of chips which he lets ride again on a fifth spin. 00. He's wiped out and skulks off to the bar.

The two friends are excited because now it's their turn. The Trader says he's going to follow exactly the...

The Fall of Lehman and The Terrible Lessons of Bear Stearns

September 15, 2008

The weekend has brought us events that can only be described in large, over-the-top terms. The Fed agreeing to take equity on its balance sheet? How bad can things really be? Clearly much worse than most people thought last Friday. Moral Hazard has been re-introduced as Lehman is allowed to go down. I will admit to being surprised. I thought Paulson and Bernanke would put it in the too big too fail category. I think they did the right thing by refusing taxpayer money for a bailout, but it is...

This Crisis Is Not Over

September 8, 2008

What a momentous weekend. I was pounding the table about the need to move quickly on Fannie and Freddie in my last few letters, and especially this last letter. And then they did it. There are a lot of details that have yet to come out, and it is likely to be far more expensive the Savings and Loan crisis was for the US taxpayer, but it did get done. Hopefully, we can get some real regulation for part of our costs, as well as get rid of the implicit guarantees by US taxpayers so that something...

Solzhenitsyn and the Struggle for Russia’s Soul

September 4, 2008

As we search for "the" driver of financial markets, we look at all kinds of things. We pore over government statistics, company financial statements, and analyst research, trying to find that one nugget that will give us a glimpse of the future. Today, though, we're going to turn to literature. Because it's in Solzhenitsyn's vision of Mother Russia that we find an almost chillingly accurate roadmap of how Russia is likely to reemerge onto the global stage. When President Bush famously looked...