October 2012 - 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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  • Memo to Central Banks: You’re debasing more than our currency

    I can only pass on Societe Generale’s work to you once in a while, but the piece for today’s Outside the Box is important enough that its author, Dylan Grice, worked hard to convince his bosses to let me share it with you. Dylan is one of my favorite investments analysts, as well as just an all-around nice guy.

    In a change from his usual fun-loving demeanor, Dylan issues a serious warning here.

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  • Hoisington Investment Management Quarterly Review and Outlook Third Quarter 2012

    The Hoisington Quarterly Review and Outlook is one of the cornerstones of my reading on where the economy is headed. Van Hoisington and Lacy Hunt do a masterful job of turning data points into cogent, well-argued themes.

    This month they waste no time in dissecting the Fed’s recent move to QE3 and similar efforts in Europe, arriving at the conclusion that “While prices for risk assets have improved, governments have not been able to address underlying debt imbalances. Thus, nothing suggests that these latest actions do anything to change the extreme over-indebtedness of major global economies.”

    Their expectation: global recession. The only issue left to sort out, they say, is How deep will the downturn be?

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  • A Little Chronic Deflation

    One of the questions I (and other analysts) get asked most frequently is whether I think there is deflation or inflation in store for the US. My quick answer is "Yes." A brief answer is that we are in a deflationary period and have been for over 30 years, but like all cycles it will come to an end. A great deal of the "when" depends on how the US deals with its deficit following the election. If we put the US on a realistic glide path to a balanced budget (over time) then that deflationary impulse will last longer than most observers think, even given QE3+++. If we do not deal with the issue, and try once again to kick the can to the next election, inflation could be a very real problem.

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  • When Career Risk Reigns

    We have entered an era of increasing correlation among what were once considered diversified investment classes. That would not be so bad, but overall returns have been reduced as well, almost across the board. As the song says, “Nowhere to run and nowhere to hide.” (For the younger generation, listen to the far superior version on YouTube, which was the original by Martha Reeves and the Vandellas, and not the noise of Korn or Caliban.)

    This week’s Outside the Box takes us on a tour of recent research, which shows that correlations among a wide variety of asset classes are increasing. It comes as no surprise to serious investors that it is getting ever more difficult to construct a diversified portfolio. My friend and partner Niels Jensen of Absolute Return Partners in London looks at half a dozen different research papers of recent vintage to give us some insights into today’s investment climate and offer a few modest suggestions. All in all, a very useful piece of work. You can see more of their writing and research at www.arpllp.com.

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