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John Mauldin's Outside the Box

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  • Liquor before Beer - In the Clear

    I am in Argentina today, but still have found time to read a rather provocative speech by David Einhorn, who is President of Greenlight Capital, a 'long-short value-oriented hedge fund', which he began in 1996. Einhorn has long been a critic of the current investment banking business, and today he discusses the problems with not only the proposed new government regulations (or lack thereof), but also the problems with the US debt and our currency valuations. It is a most thought-provoking and fun speech.

    It is especially poignant as I sit in a country that has seen the ravages of hyper-inflation, talking with business leaders and investors who experienced the problems first hand and how they deal with it today. I will be writing about what I am learning this Friday I think. But now I have to run and give my third speech today. Have a good week!...
  • Should the Fed be Responsibly Irresponsible?

    This week I offer two short essays for your reading pleasure in Outside the Box. The first is from Ambrose Evans-Pritchard writing in the London Telegraph. He gives some more specifics about the situation in Europe I wrote about this weekend.

    He ends with the following sober quote: 'My awful fear is that we will do exactly the opposite, incubating yet another crisis this autumn, to which we will respond with yet further spending. This is the road to ruin.' This is a must read.

    And the second piece? Last week in Outside the Box we looked at an 'Austrian' (economic) view of the inflation/deflation debate from my friends at Hoisington. This week we look at the 180 degree opposite with Keynesian aficionado Paul McCulley, who argues that the Fed should be Responsibly Irresponsible and target higher inflation. This essay has brought some rather heated arguments in print and from some of the people who will be with Paul and me at the annual Maine fishing trip. And you can bet I will put them all together with a little wine to see how the argument ensues. I will report back.

    ...
  • The $33,000,000,000,000 Question

    It has long been my contention that we are entering an extraordinary period of time in which using historical analogies to plot market behavior is going to become increasingly problematical. In short, the analogies, the past performance if you will, all break down because the underlying economic backdrop is unlike anything we have ever seen. It makes managing money and portfolio planning particularly challenging. Traditional asset management techniques just simply may not work. Buy and hope strategies may be particularly difficult to navigate.

    Part of the reason we are co challenged in our outlook is that we are experiencing a deleveraging on a scale in the world that is absolutely breath-taking in its scope. And to balance that, governments are going to have to issue massive amounts of sovereign debt to deal with their deficits. But who will buy it, and at what price? And in which currency? This week's Outside the Box gives us some very basic data points that illustrate the challenge very well. But the problem is that even though we can see the challenge, it is not clear what the final outcome will be, other than stressful volatility as the market reacts....