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  • Euthanasia of the Economy?

    Today's Outside the Box comes to us from my good friend and business partner Niels Jensen of Absolute Return Partners in London. Niels gives us an excellent summary of how QE has affected the global economy (and how it hasn't). I have found myself paraphrasing Niels all week.

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  • Hoisington Quarterly Review and Outlook

    Dr. Lacy Hunt and Van Hoisington of Hoisington Investment Management write a “Quarterly Review and Outlook” that is a must-read for me. This quarter they focus on US monetary policy, noting that “After peaking at 1.69 in the second quarter of 2010, M2 velocity declined for four consecutive quarters, and we estimate that a major contraction in velocity to 1.59 is likely for the third quarter.” (I mentioned the importance of the velocity of money in judging inflation vs. deflation prospects in this week’s e-letter, too.)

    They say, “If our analysis of a new contraction in GDP is correct, the U.S. economy should be viewed as operating in the midst of a long-term slump, regardless of terminology.”

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  • Three Competing Theories

    Long-time readers are familiar with the wisdom of Lacy Hunt. He is a regular feature of Outside the Box. He writes a quarterly piece for Hoisington Asset Management in Austin, and this is one of his better ones. Read it twice.

    “While the massive budget deficits and the buildup of federal debt, if not addressed, may someday result in a substantial increase in interest rates, that day is not at hand. The U.S. economy is too fragile to sustain higher interest rates except for interim, transitory periods that have been recurring in recent years. As it stands, deflation is our largest concern …”

    As I write, Europe is starting to unravel. This is going to be much worse than 2008, at least as far as Europe is concerned, and odds are high that it will be very bad for the US. And the markets are still acting as if the problems in Europe can be resolved. The recent bank stress tests were a joke, as they assumed no Greek or Irish defaults. This simply can’t be. There is a banking crisis of massive proportions in our future.

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  • Egypt's Next Crisis: The Economy

    Mubarak resigned, journalists packed their gear, and CNN went back to talking about obesity statistics - but Egypt's troubles are far from over. After weeks of protests (leading to strikes and, understandably, no tourists), the country's economy took an estimated 1.5 billion-dollar punch to the face.

    This appears to be the tip of the iceberg for Egypt's economical woes, however - as you'll read in the piece below from STRATFOR, a global intelligence company I've come to know and love. Mubarak's gone... as are his son's banking reforms. Resurrected is the military's practice of borrowing money from banks with no intention of paying it back - likely leading to a debt level of bailout proportions. The nation's not about to find the extra $16 billion a year it needs in its couch cushions.

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