August 2008 - John Mauldin's Outside the Box

John Mauldin reads hundreds of articles, reports, books, newsletters, etc. and each week he brings one essay from another analyst that should stimulate your thinking. John will not agree with all the essays, and some will make us uncomfortable, but the varied subject matter will offer thoughtful analysis that will challenge our minds to think Outside The Box.

John Mauldin's Outside the Box

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  • Dead Men Walking

    Last Friday's letter was about the fact that it is not just Freddie and Fannie. There are other problems. The Weekend Edition and today's Wall Street Journal are filled with stories about the problems with Freddie and Fannie. The assumption in so many quarters is that they will soon need government assistance. The only questions seem to be when and in what form? Can this wait until a new president is in place? Congress is leaving town soon. Can it wait until the lame duck session? As I have been writing for well over a year, the cr4edit crisis is going to be deeper and take longer to correct than the main stream media and economists think. Losses at banks are going to be much larger, and they are going to bleed for a long time. That means we are going to see more banks failing. Bennet Sedacca, who I quoted in last week's letter, sent out a new letter this morning, providing a list of stocks he thinks may also be in trouble, his "Dead Men Walking" list. He also notes several banks that will be the beneficiaries of the crisis as they gobble up weak competitors....
  • The Real World Order

    Today I'm passing along a piece from George Friedman, Chief Intelligence Officer at Stratfor. He makes the absolutely compelling argument that issues of war and peace follow these same guidelines. There are ebbs and flows, but war between countries is an inevitable part of history, and it's driven by simple geography. The recent war between Russia and Georgia was precisely such a "reversion to the mean," double-entendre fully intended. Navigating financial markets requires an understanding of the geopolitical issues - the war & peace - that drive them. What does this war mean for Russian gas supplies to Europe? What does this war mean for the future of the BTC pipeline? Does this war make Iranian inclusion in global markets more or less likely? Is Russia just "vertically integrating" its control of energy flows with less-than-subtle tools?...
  • The Elusive Bottom

    In this weekend's Thoughts from the Frontlines, I quoted from part of a very thoughtful, right-on-target analysis by David A. Rosenberg entitled "The Elusive Bottom." Over the weekend, I decided that you should read the whole piece, as Rosenberg makes some very solid points about how the markets and the economy may play out over the next few years. He has a non-consensus viewpoint, but that is what I like for Outside the Box. In fact, I think this is one of the more thought-provoking pieces I have used in OTB for some time. Rosenberg is the North American Economist for Merrill Lynch. They were gracious to give me permission to send this letter out on such a short notice, and I believe you will well served to take the time to think through his analysis. And rather than try and give you a quick summary, let's just jump right in....
  • A Value Investor Looks At China

    China is all the rage for the next few weeks as the Olympics are going on. Many are calling this China's time to showcase itself to the world. I have a lot of friends and analysts who are big China bulls, believing that the next few years will see continued high growth in China, although less than the above 10% of the past few years. In Outside the Box, we like to look at some contrarian analysis from time to time. Value Investor Vitaliy Katsenelson gives us some reasons why the outlook for China might not be so bright. This has implications for lots of markets that are driven by Asian demand....
  • Mediterranean Flyover: Telegraphing an Israeli Punch?

    Kudos to my friend George Friedman and his crew at Stratfor. If you didn't see the article in this week's Barron's about Stratfor's analysis of the geopolitical risk premium built into oil prices, you missed a really good piece of work. You've probably heard Napoleon's quote that 'Amateurs discuss strategy, and professionals discuss logistics.' If you want a perfect example of how that quote plays out for the markets, take a look at Stratfor's article below. It's precisely the kind of sober, fundamental research that makes Stratfor my invaluable source for geopolitical intelligence. No matter where you're looking at putting your money today, the impact of energy prices simply can't be overstated. The commodities trade, US and foreign equities, debt and interest rates, everything is being driven by energy prices right now. Whether you're trying to factor energy as a direct input into the price and consumption of manufactured goods or dealing with monetary policy's impact on the dollar and debt markets, you're implicitly making an energy trade....
  • Survival of the Unfittest

    It is indeed a very interesting time in which to live, especially watching the financial markets. The disconnect among authorities, regulators, companies and investors is almost too much to comprehend. There are no precedents for the turmoil we are in. This week we read an essay by a name familiar to readers of Outside Box, Michael Lewitt of Hegemony Capital Management (www.hegcap.com). As usual he offers us some very cogent comments on the continuing efforts by those in authority to bail out the system, along with insights on the deal by Merrill and the woes at GM. It is a very interesting letter, so I will stand aside and let Michael jump in....