September 2010 - 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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  • Pakistan and the U.S. Exit From Afghanistan

    In the wake of the newly appointed heir to the North Korean dictatorship position, I've been thinking about the 'cult of personality'. Traditional reporting will often focus on the personality of leaders or, in the case of democracy, the details of leaders' interactions. While it's interesting to think about, some would call it one-sided, even topical. When I've got investments on the line, those are two words I don't want to describe my research.

    The decisions of a single personality seem unreliable. But when you look deeper, you can see that most nations and even leaders with personality are forced to make decisions in a reliably logical fashion. What may seem like a broad spectrum of choices when examined carefully are actually just one or two logical ones. The personality of the leader is of much less consequence than the nation's geopolitics.

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  • All QE2, All the Time

    Everywhere I turn is another article about Quantitative Easing Part 2. Will they or won’t they? My question last week was will it make any difference? After I sent my letter out, I came across this missive from the always fascinating Ed Yardeni. I like to read Ed because he is not afraid to take an out of consensus call. He is his own man, something of a rarity in the world of economists.

    He highlights a report from the Fed on the problem with the money multiplier. It has gone away. (Really? You think?) If you took Econ 101 this was a basic staple.

    He writes: “Fed officials are clueless about how quantitative easing is supposed to impact the economy. They aren’t even sure if it has any effect on the economy. The Fed study cited here confirms this known unknown.”

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  • Sovereign Subjects: Ask Not Whether Governments Will Default, but How

    As I am traveling in Europe for a few more days, it seems appropriate to review the very fascinating work of Arnuad Mares of Morgan Stanley in London. He poses the very provocative question: “Ask Not Whether Governments Will Default, but How?” and comes up with some very interesting statistics. He suggests that simply looking at debt to GDP misses the point and offers four other ways we should also evaluate sovereign debt risk. This is a very worthy contribution to Outside the Box.

    The question I get over and over as I travel and present my thoughts is “When is the US going to get real about its fiscal deficits?” There is little sympathy for the massive deficits we are running. We are making Europe, or at least the part of Europe I am visiting, very nervous. Let us hope after the next elections we can say we are getting a handle on the deficits, and from both sides of the aisle and not just the Republicans. This is going to require cooperation.

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  • Looking to 2012: China's Next Generation of Leaders

    The Chinese have a bit of a challenge on their hands. One could reason that as the world's most populous country, China would also have the highest number of individuals living in poverty. However, I was shocked to learn that the number is over 600 million. Talk about a mess. If you do any sort of business, or just have a general interest in the Far East, I recommend you get a heads up on the leadership changes we'll see in the next year.

    Today I'm including an article and a video from STRATFOR, a global intelligence company. I watched the video first - it's an overview of China's new leadership and what that means for the next generation. If you want more analysis (which I definitely did), read the article below too. You'll learn about the deep structural reforms that may be required to prevent China's economy from overheating, as well as the rising influence of the military and how the new leaders will address the flaws in China's economic model.

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  • Market Still Deluding Itself That It Can Escape The Inevitable Dénouement

    One of my favorite analysts is Albert Edwards of Societe Generale in London. Acerbic, witty and brilliant. Emphasis on brilliant. The fact that he is a Doppelganger for James Montier (who long time readers are well acquainted with) is a coincidence (or he would say vice versa). I only kind of have permission to forward this note to you, but better to ask forgiveness… So, this week he is our Outside the Box. And a short but good one he is.

    I am in Amsterdam and it is late, but deadlines have no time line. Tomorrow more work on the book. It is getting close to the end. Most books are finished when the authors quit in disgust. How many edits can you do? I am close.

    I wonder late at night, with maybe a few too many glasses of wine, why I feel like a book is so much more than an e-letter. Really? The last ten years of what I have written are on the archives. Good (ok, sometimes really good) is there. But some are an embarrassment. What was I thinking?

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  • What Bernanke Doesn’t Understand

    This week’s Outside the Box is an incendiary blog written by Steve Keen on debt deflation and GDP growth. I am not certain as to his math (is he double counting debt and consumer spending?) but he does illustrate very well the problem of a deleveraging recession, which I have been writing about for a long time. This is just a different type of recession we are in. So rather than fret over the absolute certainty of the math, read this for an understanding of the nature of the problems we face. He has the direction right, I think, which is the important part for us to grasp.

    Then he just now posted a second blog on Quantitative Easing, which he ends with pointing out why it might “work” but also suggests that it would lead to yet another financial bubble. Again, very Outside the Box thinking. It has me going ‘hmmm.”

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  • U.S. Drawdown From Iraq Leaves Void

    The U.S. withdrawal date has come and gone. What will post-withdrawal Iraq look like? Can the Iraqi security forces fill the void? How will Iran exploit the diminished U.S. presence? To understand the answers to these questions you need a perspective the is to the point and contains no bias. In today's Outside the Box I'm including a insightful video from the analysts at STRATFOR, a global intelligence company.

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