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  • The Demographic Cliff and the Spending Wave

    For today's Outside the Box, my longtime friend Harry Dent is letting us have a look at chapter 1 of his latest (and I would say his greatest) book, The Demographic Cliff: How to Survive and Prosper During the Great Deflation of 2014-2019. Harry's grasp of the impact of demographics on economies and investments is unexcelled and unambiguous. We all know that demographics really matter, but Harry has looked deeper and harder and understood better than any of us.

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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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  • A Decade of Volatility: Demographics, Debt, and Deflation

    Harry Dent gave a speech I listened to a while back, and I got him to transcribe it for this week's Outside the Box. One thing about Harry is, you are never left wondering what he thinks about a topic. He sees inevitable demography-caused deflation in our future and makes some very intriguing arguments that deserve pondering.

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  • 2012 Investment Themes

    As my good friend Gary Shilling says, in leading off his piece on 2012 investment themes, which is this week’s OTB, “This year is just the first step in the long-run journey that will continue to be dominated by The Age of Deleveraging” – which also just happens to be the title of Gary’s latest book. Whether you call it that or call it the End Game, as I have, it shapes up as a profoundly different and challenging era for all of us. Gary identifies 9 causes of slow global growth in the years ahead:

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  • Time Loves a Hero

    As long time readers know, I am a big fan of Greg Weldon. This week he has very graciously allowed me to reproduce his client letter from last Thursday on some of the issues of Bernanke and Quantitative Easing 2. It prints a little longer than usual because of his format and all the charts, but this is one letter you should take the time to read.

    You can get a free trial (his service is not cheap but if you are a global macro fund or trader, you really should have it!) by going to www.weldononline.com.

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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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  • Demographics, Destiny and Asset Markets

    I am in Minnesota this morning doing a speech, but do have a very good candidate for this week’s Outside the Box. Tony Boeckh just published a piece by George Magnus on demographics and the markets that I think is very thought-provoking. Demographics is something I think about a lot and you should too. I will let Tony do the introduction of George.

    Have a good week. My goal is to write this Friday’s letter a little early so that I can get in some fishing time. And when you look at today’s ISM number, look past the headline number, which is just fine, and look at the weakness in the leading indicators. New orders declined by 5 points to 53.5, its lowest level since June 2009. Also, imports slowed noticeably, which is a bad omen for domestic demand. Overall, the ISM index suggests that real GDP and factory output slowed early this quarter.

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  • Recession, Deflation and Deficits

    I look forward at the beginning of every quarter to receiving the Quarterly Outlook from Hoisington Investment Management. They have been prominent proponents of the view that deflation is the problem, stemming from a variety of factors, and write about their views in a very clear and concise manner. This quarter's letter is no exception, where they once again delve into the history books to bring up fresh and relevant lessons for today. This is a must read piece.

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  • Spain: The Hole In Europe's Balance Sheet

    Today's offering for this week's Outside the Box starts off with a quote from Titus Maccius Plautus: 'I am a rich man as long as I don't pay my creditors.' Even 2200 years ago, it seems that problems of credit were an issue.

    I talked last Friday about the US being faced with a number of bad choices. But it is not just the US. Today we look at a piece from my friends at Variant Perception based on London. They are a relatively new institutional research house. I have been reading their material for some time and have begun to look very much forward to it. They do some very good in-depth analysis. I asked then to shorten a piece they did on Spain and Spanish banks for this week's Outside the Box. Spain will soon be faced with a number of very uncomfortable choices, but for now they appear in denial.

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  • Slow Long-Term Growth, And Government's Response

    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. His web site is down being re-designed, but you can write for more information at insight@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 until the end of the year. Gary is good but not that good!) I trust you are enjoying your week. And enjoy this week's Outside the Box.

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  • Debt and Deflation

    There is a reason I call this column Outside the Box. I try to get material that forces us to think outside our normal comfort zones and challenges our common assumptions. I have made the comment more than once that is it unusual for two major bubbles to burst and for the conversation to be all about rising inflation and not a serious problem with deflation.

    As Niels Jensen pointed out last week, the most important question that an investor can ask is whether we are in for deflation or inflation. And this week we read a well reasoned piece on deflation. This is one of the more important essays I have sent out. You need to set aside some time to absorb this one.

    Van Hoisington and Dr. Lacy Hunt give us a few thoughts on why they think it is deflation that will ultimately be the problem and not inflation we are dealing with today. This week's letter requires you to think, but it will be worth the effort....
  • Make Sure You Get This One Right

    There are those who sweat over every decision, worrying about how it will affect their lives and investments. Then there is the school of thought that we should focus on the big decisions. I am of the latter school.

    85% of investment returns are a result of asset class allocations and only 15% come from actually picking investment within the asset class. Getting the big picture right is critical. In this week's Outside the Box we look at a very well written essay about the biggest of all question in front of us today. Do we face deflation or inflation?

    This OTB is by my good friends and business partners in London, Niels Jensen and his team at Absolute Return Partners....
  • Quarterly Review and Outlook - First Quarter 2009

    There is a reason I call this column Outside the Box. I try to get material that forces us to think outside our normal comfort zones and challenges our common assumptions. And this week's letter does just that. I have made the comment more than once that is it unusual for two major bubbles to burst and for the conversation and our experience to be rising inflation and not a serious problem with deflation.

    Van Hoisington and Dr. Lacy Hunt give us a seminar on why they think it is deflation that will ultimately be the problem and not inflation we are dealing with today. This week's letter requires you to think, but it will be worth the effort.

    Now, if you put all of the various inputs together, Hoisington and Hunt show that theory suggests we will soon be dealing with deflation. It's counter- intuitive to what we hear today, which is why the Bank for International Settlements used the stagflation word in a recent report. The transition that is coming will not be comfortable....
  • Roadmap To Inflation And Sources Of Cheap Insurance

    What happens when inflation once again returns. As this week's Outside the Box writer, James Montier, writes, we may want to start thinking now about inflation insurance and he mentions a few ways to do so. But this letter is a must read for his bringing to light a speech by Fed chairman Ben Bernanke in 2000 given to the Japanese, where he suggest inflation targeting:

    'In the speech, he laid out a menu of policy options that are available to the monetary authorities at the zero bound. First, aggressive currency depreciation, as per Romer's analysis of the end of the Great Depression. Second on Bernanke's list is the introduction of an inflation target to help mould the public's expectations about the central bank's desire for inflation. He mentions the range of 3-4%!'

    I think you will find this week's OTB to be exceptionally thought provoking. Montier is one of my favorite economic thinkers (and a good friend). He works for Societe Generale in London in their Cross Asset Research group....
  • 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....