June 2011 - 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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  • Chavez's Health and Implications for Chinese Investment

    For those of you keeping up with the much-discussed energy deal between China and Russia, you know the many reasons, both geographic and political, why it's unlikely to pan out. The geopolitically savvy folks over at STRATFOR told us about it a couple of weeks ago, and have moved their forecasting on to an existing energy relationship, between China and Venezuela—now potentially uncertain due to Hugo Chavez's precarious position in a Cuban hospital.

    Whether Chavez gets better or not, a political transition is down the line somewhere, and China could lose its current preferential treatment as primary investor in Venezuelan oil. This is the kind of thing we have to know about as investors. Yes, we all know that Chavez is ill. But what, if anything, does that mean for the South American energy sector? What about the future of oil, China, the U.S., and so on? This is the kind of forward-looking analysis you get from a news publication like STRATFOR. It doesn't get any better than these guys.

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  • The 3-D Hurricane and the New Normal*

    Today’s Outside the Box is from an old friend, but one who is new to my readers. Jason Hsu is a partner at Research Affiliates and helped create the Fundamental Indexes with Rob Arnott. Starting at Cal Tech, he went on to a PhD in economics, and is now a professor at UCLA and teaches in China and Taiwan. Wins all sorts of awards and has won the Rising Star of Hedge Funds award. In short, he is really smart.

    He sent me this piece last week, and I asked if I could use it. He graciously acceded. It is on what Jason and Rob call “the 3-D Hurricane of Debt, Deficits and Demographics.”

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  • Economic & Copper Advisory Services: Economic Report – June 2011

    This week’s Outside the Box is from one of the more interesting thinkers and observers of the markets I know, Simon Hunt. When we get together in London, conversations are lively, as we don’t always see eye to eye; but we can always discuss, in a very civil manner, the affairs of the world. This particular piece is wide-ranging and thought-provoking. Simon is always ready to apply actual times to his predictions, and he has held steady on them for years.

    It is late here in Geneva and I have to get up early for a speech. A big thanks to Hervig von Hove of Notz Stucki for hosting one of the more stimulating dinners with 16 people I have enjoyed in a long time, at his home out in the country, on a perfect night. I will probably make the discussion there the topic of this week’s letter. Charles Gave was in rare form. The Swiss gnomes were so very fascinating, and we had such an international table. These are the nights I wish my 1 million closest friends (a few of whom were there) could listen in on. More to come on Friday!

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  • Portfolio: Obstacles to a China-Russia Energy Deal

    They say that natural gas is a more dynamic study in geopolitics than oil. Yes, petroleum is what makes the world go 'round. But, once you get it to a super-tanker, and you can ship it anywhere. Natural gas, of which the world consumes 3,000 billion cubic meters per year, is much harder (or more expensive) to transport. You have to build miles and miles of expensive pipeline to get it to your buyer. So whatever countries your pipeline runs through, or to—you'd better stay friends.

    Today I'm sending you a video by STRATFOR on the much-discussed potential energy deal between Russia and China. Ideology aside, the two countries would seem like a compatible couple (Russia is the world's largest exporter of raw commodities, China the world's largest importer). But are they ready to tie the knot with a pipeline that would takes decades and hundreds of billions of dollars to build?

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  • Biotech and the Unintended Consequences of Moore’s Law

    Today we turn away from Europe and QE2 and talk about something I find far more interesting, if not as immediate. I have been talking and emailing with Pat Cox of Breakthrough Technology Alerts a lot lately. There is just so much happening in the biotech space and, as long-time readers know, that is my hobby and the one place I actually buy stocks in this market.

    There is just so much misinformation (and sometimes borderline lies by short-sellers). I asked Pat to give us an update on the state of the stem-cell world, and in typical Pat fashion he gives us a lot more to think about. Indeed, Moore’s Law is changing more than just computers.

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  • The Stark Choice for Europe

    This will be one of the more controversial Outside the Box posts in a great long time. Indeed, I debated with myself at some length. It will make some readers mad, but I decided it is more important to make most readers think. And, as it happens, there are parts of this week’s essay that I rather aggressively disagree with. That being said, there is a great deal of truth here. This represents a serious body of thought that is being debated, and we need to hear all sides, rather than just the ones we like.

    Michael Hudson is a research professor of economics at the University of Missouri, Kansas City and a research associate at the Levy Economics Institute of Bard College, which is a serious place, so this is no ill-informed screed. I generally like their stuff.

    Hudson first lays the European crisis at the feet of banks and the institutions (ECB, IMF, and the EU) that are taking the Greek (and other) bank debt and putting it into public hands. He has a very real point. Then he points out that Greece is far better off just walking away, a la Iceland (at least read the last part of this post, on Iceland). And in polls he cites, 85% of the Greek people are against taking on the debt and paying the banks.

    As I wrote last week, there is a revolution going on all over Europe, slowly building up as people realize that the “solution” being offered benefits banks and not German taxpayers or Greek creditors. Ireland will be watching. There is no easy way out. If there is a referendum on this new “troika” proposal, it is likely to lose. This is not over.

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