November 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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  • The Paradox of Deleveraging Will Be Broken

    We are clearly not having as much fun taking off leverage as we had putting it on, or at least the vast majority are not. This week in Outside the Box we look at some very thought-provoking insights from my good friend Paul McCulley, who helps us think about how we got here and what will be the end point. From the letter: 'But what ailed Lehman was but a manifestation of what ailed, and ails the global financial intermediary system: the presumption that grossly levered positions in illiquid assets can always be funded, because those doing the funding will always assume the borrower is a going concern.' You need to read this when you have the time to think. The quotes from Keynes are important....
  • On G-20 and GM: Economics, Politics and Social Stability

    The Big Three have a new customer, and it isn't you. As Detroit's former heavyweights fight for a slice of a $25 billion bailout package, more than humble pie is being eaten. If the automakers fail and take their companies into bankruptcy, Michigan as we know it ceases to exist economically. The trickle-down impact could rapidly become a waterfall: the seat supplier in Georgia loses three major customers. The factory worker who makes seats is out of a job. The bank who holds his mortgage takes another hickey. Commercial lending at that bank dries up. Ad nauseum. In the best of economic times, this would be a troublesome scenario. In today's economy, it's easy to see how policymakers are as worried about social stability as they are economics. No astute person thinks that the Big Three will be able to return to the business practices of last year. And no intelligent investor should be trying to evaluate portfolio decisions the same way this year either. We have moved from the realm of finance to political economy, and for that you need a different set of tools and a different mindset....
  • The Stock Market is Not in Uncharted Territory

    This week we visit some very thoughtful analysis by an old friend of Outside the Box, Dr. John Hussman of the Hussman Funds. Is it 1932? Are we in a Depression? Where is the bottom? John gives us a very balanced view and actually offers some positive insight on the markets. There may be light ahead. (Note: there is a chart from Ned Davis Research that is, as John notes, not to be distributed further. I did call Ned Davis Research and they graciously gave me permission to use it as well.) Have a great week, and enjoy some positive thoughts below....
  • Obama's Challenge

    With the election of a new US President, everyone is focused on the 'First 100 Days.' How Obama transitions into the presidency impacts not just the U.S. but the entire global system. What happens to U.S. relations with Iraq, Iran, and Afghanistan? What's going to happen at Treasury and to all the programs addressing the financial crisis? What's going to emerge from the next G20 summit? You need to read the analysis below, written by my good friend George Friedman at Stratfor. He details the immediate issues facing the president-elect, including one of the stickiest: Europe's desire for a global banking regulatory regimen. How will Obama respond to European pressure? George has built his company Stratfor and its reputation on forecasting the future, and I'm amazed at how often he's right -- on broad themes and specific events....
  • When the Chickens Come Home to Roost

    Can the credit crisis get any worse? In this week's Outside the Box my London partner Niels Jensen shows that it indeed can. Banks, and mainly European banks, have large exposure to emerging market debt of all types through both sovereign, corporate and individual loans. Just as banks have had to write down large losses from the subprime crisis and other related problems, next will come a wave of potential losses from yet another source. Niels then goes on to give us a look the size and problems with hedge fund deleveraging. Altogether, this is a very interesting letter and one that is written from a non-US point of view that I think you will find instructive....
  • Two Little-Noted Features Of The Markets And The Economy

    This week I have a very special Outside the Box for you. Peter Bernstein is recognized as one of the more brilliant and insightful analysts of our times. At 89, he has been writing prescient material longer than most of us "young guys" (I am 59, and hope I am still writing at 89, or even able to write!) have been even marginally in the markets. His Economics and Portfolio Strategy Letter is read by the true cognoscenti of the investment world. He has given me permission to reproduce his latest letter in which he offers two insights. Rather than give you some teaser copy, why don't you just jump in a read. And trust me, anything that Peter writes is worth reading more than a few times....