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John Mauldin's Outside the Box

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  • Reckless Myopia

    Long time Outside of the Box readers are familiar with John Hussman of the eponymous Hussman Funds. And once again he is my selection for this week's OTB.

    This week he touches on several topics, all of which I find interesting. As he notes:

    'We face two possible states of the world. One is a world in which our economic problems are largely solved, profits are on the mend, and things will soon be back to normal, except for a lot of unemployed people whose fate is, let's face it, of no concern to Wall Street. The other is a world that has enjoyed a brief intermission prior to a terrific second act in which an even larger share of credit losses will be taken, and in which the range of policy choices will be more restricted because we've already issued more government liabilities than a banana republic, and will steeply debase our currency if we do it again. It is not at all clear that the recent data have removed any uncertainty as to which world we are in.'...
  • A Country for Old Men and a Bit of Samba

    We all know that a large wave of Baby Boomers in the US are approaching retirement. But what about the rest of the world? And what happens when those retirees need to spend out of savings? There is more than just a credit crisis and a government deficit crisis in our future. A rising level of retirrees to workers is happening even as I write. And the US is not, for once, the center of the problem. As this week's writer of your Outside the Box Niels Jensen explains, we cannot all export our way out of the problem. There is a global adjustment that must happen and when it does, it will have serious consequences for all. This week's letter is guaranteed to make you think. Set aside a few minutes to do so.

    ...
  • Credit Crisis Watch

    This week we look at a number of charts of various parts of the credit markets to see what kind of progress is being made on getting back to 'normal' or to a 'new normal.' And my friend Prieur du Plessis shows us there is reason to believe that we have seen the worst.

    'This too shall pass' are words we should all take to heart. Things will neither stay on permanently high or low plateaus. Those doom and gloomers who expect the world to keep devolving back to some pastoral age of scarcity where we will all need those guns and freeze dried food will be disappointed. We are simply hitting the re-set button on many of our institutions and businesses, and while the adjustment is painful, we will eventually get through it. Today's Outside the Box is a kind of map that tells us where we are in the process....
  • Long-Term Outlook: Slow Growth And Deflation

    This week I am really delighted to be able to give you a condensed version of Gary Shilling's latest INSIGHT newsletter for your Outside the Box. Each month I really look forward to getting Gary's latest thoughts on the economy and investing. Last year in his forecast issue he suggested 13 investment ideas, all of which were profitable by the end of the year. It is not unusual for Gary to give us over 75 charts and tables in his monthly letters along with his commentary, which makes his thinking unusually clear and accessible. Gary was among the first to point out the problems with the subprime market and predict the housing and credit crises. You can learn more about his letter at http://www.agaryshilling.com. If you want to subscribe (for $275), you can call 888-346-7444. Tell them that you read about it in Outside the Box and you will get not only his recent 2009 forecast issue with the year's investment themes, but an extra issue with his 2010 forecast (of course, that one will not come out for a year. Gary is good but not that good!) I trust you are enjoying your week. And enjoy this week's Outside the Box....

    And if you have cable and get Fox Business News, I will be on Happy Hour tomorrow Tuesday the 17th at 5 pm Eastern. Have a great week....
  • Reality Bites

    This week's writer of the Outside the Box is no stranger to long time readers. Michael Lewitt writes the HCM Market Letter and is one of my favorite writers and truly deep thinkers. He has recently decided to turn his letter into a subscription based model and is meeting with some success, as he should. So, sadly, he will no longer be a regular feature of OTB, but he did allow me to use the current letter, as I think it is one of his more provocative letters. This is a piece you want to think through. Michael discusses the continuing series of bailouts, the consequences of the stimulus package, the various policy options and the likely response of the economy to all of the above. Plus he makes a few market calls and some interesting observations. I am truly pleased to be able to send this to you....
  • Europe On the Ropes

    This week we look at the European bank markets through the eyes of my London partner Niels Jensen, head of Absolute Return Partners. I continue to believe that this is a brewing crisis which could have far more significant implications for the global economy than the Asian Crisis of 1998. In this week's Outside the Box, Niels has compiled a sobering set of data that suggests that only massive government involvement in Europe on a scale that is unprecedented will keep the wheels from coming off in Europe and the global economy. I have worked closely with Niels for years and have found him to be one of the more savvy observers of the markets I know....
  • Market Vertigo

    I get a lot of newsletters from money managers around the country, which I try and read as they are written by people who are “in the trenches,” actually making decisions on behalf of their clients. It broadens my perspective. Frankly, most are not all that well written and unimaginative, but who ever said writing was easy? But some really strike a chord with me. Today’s Outside the Box I have read twice, which is unusual for me. Cliff Draughn is a wealth manager in Savannah, Georgia (Draughn Partners) and a good friend. His letter is a wide ranging tome on a variety of topics, but is full of common sense and one that I think will resonate with readers. I trust you will enjoy this....
  • Semi-Annual U.S. Economic Outlook: Collapsing On Schedule

    This week I am really delighted to be able to give you a condensed version of Gary Shilling's latest INSIGHT newsletter for your Outside the Box. Each month I really look forward to getting Gary's latest thoughts on the economy and investing. Last year in his forecast issue he suggested 13 investment ideas, all of which were profitable by the end of the year. It is not unusual for Gary to give us over 75 charts and tables in his monthly letters along with his commentary, which makes his thinking unusually clear and accessible. Gary was among the first to point out the problems with the subprime market and predict the housing and credit crises. You can learn more about his letter at http://www.agaryshilling.com. If you want to subscribe, you can call 888-346-7444. Tell them that you read about it in Outside the Box and you will get not only his 2009 forecast issue but an extra issue with his 2010 forecast (of course, that one will not come out for a year. Gary is good but not that good!) I trust you are enjoying the holidays. And enjoy this week's Outside the Box....
  • 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....
  • The International Economic Crisis and Stratfor's Methodology

    Exhale for a moment, forget your losses for the time being, and try to appreciate the fact that you're living through the single most important development in global finance since Bretton Woods. This is a "tell the grandkids about it" moment, when governments all around the world have essentially decided in unison that it's time to rewrite the rules, the very framework, in which financial transactions take place. Stock trading, interbank lending, commercial paper, the very concept of private sector ownership are all up in the air right now. The only thing I can tell you with certainty is that if you try to evaluate your investments using the same metrics you've always relied on - P/E ratios, market share, interest rates, etc. - you're going to be as successful as a football-turned-baseball coach evaluating a pitcher by the number of touchdowns he throws. The rules are changing, gentle reader, changing at least for awhile from market-driven inputs to government-driven inputs. If you try to apply what you know from the "old game" without understanding that you're playing a "new game," the rules might not make sense. I'm sending you today a piece from my friend George Friedman on how his company Stratfor looks at economics. More precisely, this piece explains how they look at Political Economy. And from here on out, it's political economy that's going to be driving markets. If the old rule was "Never fight the Fed." It's now, "Never fight the Fed. And the Treasury. And the ECB. And the Bank of England. And the Bank of Japan...." You get my point....
  • Why The Worst Will Soon Be Over

    The credit crisis is global. Interestingly, some of the more creative and straight forward solutions are coming from England. This week in Outside the Box I am presenting you with a very well written (even entertaining) letter from Bedlam Asset Management from London www.bedlamplc.com on their view of the crisis. It is always instructive to look at your problems from the point of view of another party, and even more some when they give you some thoughtful and cogent analysis. I have to admit, seeing green on my screen feels good, but we are in a recession that is global and is likely to get worse. What we need to do now is assess what our response will be. First, we need to avoid the pitfalls and then look around for the opportunities which will be presented us. I think this week's Outside the Box will help you think through your personal situation....
  • The International Currency Crisis

    Many of us in the US are focused on our own woes. But this is a global credit crisis. In today's Outside the Box, we take a look at the currency markets, which are in an historic upheaval and also look at what is going on in Europe. I suspect that Europe is in for a period of much distress, as the world begins to deleverage That is why one government after another will back the deposits of banks within their countries, for otherwise capital will flee to countries like Ireland and Germany which ARE guaranteeing the deposits for all banks in their borders. Many European banks are leveraged 50 to 1 (not a misprint). I suspect that more government will do like Belgium and the Netherlands and inject capital directly into their local banks deemed too big to fail....
  • Banking Crises Around The World

    Do government bailouts in times of banking crises work? Philippa Dunne & Doug Henwood of The Liscio Report highlight a major study of 42 fairly recent banking crises around the world. Result? Some types of government intervention works and some don't. One characteristic that is needed though is speed. Dithering, a la Japan, is a recipe for disaster. This is a brief summary of the report (to which they provide a link) and their conclusions as to the basic outlines of what the US should do. Given that Europe is already in the throws of its own bank crisis, and the rest of the world could experience problems, this should be useful reading. They also provide graphs of banking crises and comparisons with developed countries and the resulting market experience....
  • 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....
  • 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....