Outside the Box, May 2014


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“When Does the Story Break?”

May 28, 2014

The behavior of markets (and of entire societies) depends on what everyone knows that everyone knows. Make sense? It didn’t to me, either, until Ben Hunt walked me through an example or two of the Common Knowledge Game in the piece you’re about to read.

Ben says the question he is asked most is “When?” When will this market break? When – to use Ben’s term – will the “Narrative of Central Bank Omnipotence” fail? He doesn’t so much answer the question as explain why he can’t answer it. But he...

Gave & Gave … and Hay

May 21, 2014

My good friend David Hay, Chief Investment Officer at Evergreen Capital Management in Bellevue, WA, has saved me the trouble of writing an introduction to the two pieces you’re about to read, which are by Charles and Louis Gave, a father-son duo who are no strangers to the readers of Outside the Box and my Over My Shoulder. For the first time in many years, due to other commitments, neither father nor son was able to speak at our just-concluded Strategic Investment Conference (though their...

EM Carry Trade Looks Vulnerable

May 14, 2014

Last year, post-taper tantrum, the story was all collapsing BRIC walls and emerging-market doom. This year the so-called “fragile five” – Brazil, India, Indonesia, Turkey, and South Africa – the countries that were most vulnerable last year, are looking downright robust. Since their January lows, the Turkish lira has climbed 13%, the Brazilian real 10%, the South African rand 8%, and the Indonesian rupiah and Indian rupee 6% each. In the last two months, the MSCI Emerging Markets Index is up...

Don’t Ignore the Anecdotes

May 7, 2014

Whenever I'm in New York I make a point of calling a number of my economist and investor friends and arranging a “dinner with interesting people.” Thankfully, Rich Yamarone is almost always at the table, because his insights into what's happening in the real economy, beyond Wall Street, are unrivaled.

Rich is Chief Economist at Bloomberg and the creator of Bloomberg's Orange Book, a compilation of key insights from CEOs, taken from quarterly earnings calls.  He is also part of the team of 7...

Is There a Biotech Bubble?

May 5, 2014

I’m bringing you a special Outside the Box today to address a very specific question that is on many investor’s minds: is there a bubble in biotech? To answer that question, Patrick Cox, editor of Mauldin Economics’ Transformational Technology Alert, teases apart the data on stock performance in the biotech space and then goes beyond the data to show us how the unique characteristics of the sector bear on the question of bubble or no bubble.

The answer isn’t a simple yes or no, but...