Browse by Tags

John Mauldin's Outside the Box

Blog Subscription Form

  • Email Notifications
    Go

Archives

  • Birthdays and Investment Risk

    “Tail risk (the risk of large losses) is dramatically underestimated by many investors and the tools we have available to manage such risks are hopelessly inadequate. Financial theory which is taught at business schools and universities all over the world is plainly wrong.”

    This week we turn to my friend Niels Jensen of Absolute Return Partners in London for our Outside the Box offering, in which he looks at tail risk, Modern Portfolio Theory, and a risk he identifies as Birthday Risk. It is a lively and easy read, which is also designed to make you think about your basic investment principles.

    ...
  • What Happened to the American Declaration of War?

    You're probably aware by now that I'm an avid reader of the global intelligence company STRATFOR. But this piece by their founder George Friedman is truly exceptional.  If you're an American voter, interested in politics, or anyone interested in or affected by U.S. military actions (in other words, everyone), you should read this article. Why has no one else asked this question? And, as George points out, if this one part of the Constitution can be so repeatedly and publicly ignored by Congress and the president, what's next?

    ...
  • The Confidence Game

    This week’s Outside the Box is a little different. It’s a stroll down history lane and thoughts on confidence, from Grant Williams, in the form of an introduction to his letter Things that Make You Go Hmmm. Grant currently resides in Singapore, and I find him a very thoughtful read and a wonderful resource. Sit back, relax, and enjoy.

    And for those interested, I think I am scheduled to be on Marketplace on your local NPR Radio station on Tuesday, which is today for most readers. Good to be back home for a few days! And now, let’s think about confidence in a little different way.

    ...
  • Japan, the Persian Gulf and Energy

    The Prime Minister of Japan recently stated that his nation was facing its worst crisis since World War II. While most of the world is focused on tragic images of floodwater and rubble, and fixated on radiation levels, there is a bigger picture to be examined – one that also includes  energy, coal and the Strait of Hormuz.

    Human nature draws our focus to the present. We look for immediate repercussions to a devastating world event. But the real advantage lies in understanding the broader perspective. In order to get this deeper understanding, you could choose to spend endless hours scouring global new sources day and night, constantly questioning their legitimacy and bias. Or you could take a better approach and hire a team of geopolitical experts and uber-intelligent analysts.

    ...
  • Game Changer

    This week we look at another except from Ed Easterling's gonzo book on stock market return projections called Probable Outcomes. This section is entitled Game Changer, and it is that and more. (Again thanks to Ed for letting us read his work!)

    Game Changer is a thought-provoking, somewhat detailed, analysis with two major surprises.  The first is that GDP growth was well-below average last decade (a trend that could continue this decade)…and second, slowing growth has a substantial negative effect on valuations (P/E).  This ties well into my own Endgame and provides "implications" about slower growth, etc.  (which is what I project from work of my own). Slower growth drives lower P/Es (even without higher inflation or deflation) and could drop the market by a third or so relative to "normal" cycles.

    ...
  • The Complexity of Persian Gulf Unrest

    While the world's attention was (and still is) on the fighting in Libya, George Friedman—founder of a global intelligence company called STRATFOR—told his employees to watch the tiny island of Bahrain. Libya's protests are more violent, but the unrest in Bahrain, he said, will have much stronger strategic implications.

    It's easy to look at the news event that makes the most noise (and makes for good television). It's much more critical to pay attention to the event that, depending on its outcome, could disrupt the world economy. If unrest in Bahrain gets out of hand, Saudi Arabia's Shiite minority could follow suit with protests of their own, and the Iranian-Saudi balance in the Persian Gulf could teeter heavily toward Iran. Imagine if Iran fully controlled the area through which 40% of the world's seaborne oil must pass daily. Does Bahrain have your attention now?

    ...
  • Stay Out of the ROOM

    One of my favorite analysts is Ed Easterling of Crestmont Research. We used to get together a whole lot more when he lived in Dallas, but he has since moved to the wilds of Oregon. Ed’s first book, Unexpected Returns, is a classic work that I think is a must-read for all stock market investors.

    And now he favors us with yet another book, called Probable Outcomes: Secular Stock Market Insights, in which he takes on the mostly silly research, done by so many analysts, that purports to show what an investor can expect to make from his retirement portfolio over time. I can’t tell you how disastrous this simplistic analysis can be for retirees.

    ...
  • 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.

    ...
  • A Sideways View of the World

    Today's OTB features an excerpt from my friend Vitaliy Katsenelson's recently published The Little Book of Sideways Markets. Vitaliy is CIO at Investment Management Associates, a value investment firm in Denver, and he is a prolific and engaging writer (you can find and subscribe to his articles at http://ContrarianEdge.com). I had the pleasure of writing the foreword to Vitaliy's book, and here is a brief excerpt:

    "Markets go from long periods of appreciation to long periods of stagnation. These cycles last on average 17 years. If you bought an index in the United States in 1966, it was 1982 before you saw a new high – that was the last secular sideways market in the United States (until the current one). Investing in that market was difficult, to say the least. But buying in the beginning of the next secular bull market in 1982 and holding until 1999 saw an almost 13 times return. Investing was simple, and the rising markets made geniuses out of many investors and investment professionals.

    ...
  • Intelligence Guidance: The Situation in Egypt

    When protests started in Egypt last week, mainstream news outlets cried "democracy!" and compared the situation in Egypt to the Berlin Wall and Tienanmen Square. Meanwhile, STRATFOR (an intelligence company I've followed for years) spoke of a different possibility.  At the time it may have been counter-intuitive for most institutions to draw parallels to 1979 Iran, but my friend and the company's founder George Friedman produced an internal document that raised that possibility.   Days later, news outlets began asking questions about groups like the Muslim Brotherhood, and realizing there could be other forces behind the unrest than simple calls for Western-style democracy.

    ...
  • Pavlov’s Bulls

    My long-time readers are familiar with Jeremy Grantham of GMO, as I quote him a lot. He is one of the more brilliant and talented value managers (and I should mention, very successful on behalf of his clients). He writes a quarterly letter that I regard as a must-read. In fact, anything Jeremy writes is a must-read. This week’s OTB is a little longer than most, but it is actually two separate parts, which can be read at different times – but you want to take the time. He makes his predictions for the year in the first part, and gives us some valuable insights into the stock market in the second. The first part reads quick. Think through the second part.

    ...
  • 2011 Investment Strategies: 9 Buys, 9 Sells

    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. In 2009 in his forecast issue he suggested 13 investment ideas, all of which were profitable by the end of the year. Last year he gave us 16 which the large majority hit the mark. 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 track record in this decade has been quite good. I want to thank Gary and his associate Fred Rossi for allowing us to view this smaller version of his latest letter, where he gives us 18 investable strategies for 2011

    ...
  • STRATFOR's 2011 Annual Forecast

    As you know, I'm an avid researcher when it comes to my own annual forecast, which you saw a couple of weeks ago. One of my favorite resources is STRATFOR, a global intelligence company founded by my friend George Friedman. Their focus is geopolitics, which means they cover political, economic and military developments all around the world. They have an annual forecast of their own, and George has been gracious enough to allow me to share it with you. As long-time OTB readers may know, STRATFOR's annual forecast can be very provocative.

    Here are some examples of this year's themes:

    - The U.S. is unlikely to withdraw from Iraq as promised in 2011.
    - The U.S. economy will grow.
    - In Europe, more countries will need bailouts. (A couple of names might surprise you.)
    - Russian-German relations will strengthen.
    - Japan will rot, but it will rot in seclusion.

    ...
    Filed under: , , ,
  • Hoisington Fourth-Quarter Report

    Long-time readers of Outside the Box are familiar with the names Dr. Lacy Hunt and Van Hoisington. They are a regular feature here, as quite frankly, anything that Lacy writes or says I pay serious attention to. This is their regular quarterly report, where they outline seven things that are likely to retard US growth. An easy read, but take the time to think this through.

    Hoisington Investment Management Company (www.hoisingtonmgt.com) is a registered investment advisor specializing in fixed-income portfolios for large institutional clients. Located in Austin, Texas, the firm has over $4 billion under management, composed of corporate and public funds, foundations, endowments, Taft-Hartley funds, and insurance companies.

    ...
  • Geopolitical Journey, Part I: The Traveler

    My friend and fishing buddy George Friedman travels as much as I do. Yet even when we visit the same place, it's like we're in two different countries. I see a river and think about fishing. George sees a river and explains a geographical reality that's shaped that nation's history. I read the menu at a gourmet restaurant and draw conclusions about my appetite; George observes what kind of shoes the children wear and draws conclusions about the country's future. No joke.

    George has developed a way to wield a geopolitical eye in worldly travels - and learn from it. He's currently traveling through key, but less-mentioned, countries of Eastern Europe, on a quest to understand how they see the Russian resurgence and what that means for America's options. He's using his travels to write a series for STRATFOR, a global intelligence company he founded. I've included the first piece of the series below.

    ...