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  • Portfolio: Obstacles to a China-Russia Energy Deal

    They say that natural gas is a more dynamic study in geopolitics than oil. Yes, petroleum is what makes the world go 'round. But, once you get it to a super-tanker, and you can ship it anywhere. Natural gas, of which the world consumes 3,000 billion cubic meters per year, is much harder (or more expensive) to transport. You have to build miles and miles of expensive pipeline to get it to your buyer. So whatever countries your pipeline runs through, or to—you'd better stay friends.

    Today I'm sending you a video by STRATFOR on the much-discussed potential energy deal between Russia and China. Ideology aside, the two countries would seem like a compatible couple (Russia is the world's largest exporter of raw commodities, China the world's largest importer). But are they ready to tie the knot with a pipeline that would takes decades and hundreds of billions of dollars to build?

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  • The Doctor and the Dealman: An Energy Update

    It has been a busy day in Rome, doing the Vatican Museum, St. Peter's and the Trevi Fountain. But I have to find time to get you your Outside the Box and have I got a great one for you. David Galland of Casey Research was kind enough to let me use an interview he did with two of his energy research staff normally only available to his subscribers. A big thank you to David.

    This is a special treat for Outside the Box readers, as they talk about the future of the energy markets. I have been following their work for some time and I think they are the real deal if you are looking for an energy letter to regularly read....
  • The Commodities Con

    A quick introduction for this week's Outside the Box. This is from my London Partner Niels Jensen, talking about the problems with long only commodity funds. This is something I discuss frequently but have not written about in some time. Quite simply, many of the commodity ETFs do not deliver what they promise and in fact many of the inverse funds can lose you money even when you make the right macro call.

    Niels gives us a very good explanation of why this is so. So for those of you who have 'diversified' into commodity ETFs (not actively managed funds!) or are thinking about it you might really want to read this.

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  • Ecuador: Correa's Play for Greater Influence in the Oil Sector

    Today I'm sending you a piece on Ecuador's recent move to change the terms of its contracts with oil investors to keep more of the returns in the state. As we watch the world's energy market, political details like this are essential to know. The article explores the geopolitical implications of the move and the how key investors are likely to react.

    This is nothing short of the real world with real consequences on the amount the meter reads to fill up your gasoline tank, your investments abroad and the overall worth of those dollar bills in your wallet right now. You don't get this kind of information on your typical media news networks. The truth is, this event is one you may not have heard about - not only do you have to keep your ears to the ground, you've got to know where to look....
  • Brazil: Reactions to a Proposed Energy Law

    With the current financial crisis, we have to be even more astute in locating worthy investment opportunities. I've written lately about choices we're facing as a country – but we have choices as individuals as well: choices that demand solid insight to make well-informed decisions and recognize opportunities at a time when they're not as plentiful as they used to be. It's not enough to know what's happening on Capitol Hill or Wall Street, we must expand our investigations to a global perspective.

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  • On Energy Production and US Intelligence Failures

    I send you Outside the Box each week not to make you comfortable but to make you think. Usually it is on some financial topic, but life is more than investments. Economics is not an isolated discipline (more like an art form I think) so we have to have a real understanding of the world around us. This week I offer two essays which made me both think and reflect. We live in a world which wants easy solutions to complex problems, and wish as we may, will not get easy solutions which will work.

    The first essay is by Pewter Huber on the reality of energy production. We all want to be able to "go green." How realistic is that? The second is by my friend George Friedman on torture and US intelligence failures.

    Peter Huber is a Manhattan Institute senior fellow and the coauthor, most recently, of The Bottomless Well. His article develops arguments that he made in an Intelligence Squared U.S. debate in January. George is well known to OTB readers. He is president of Stratfor and was with the CIA (as was his wife Meredith) before they founded Stratfor, what I think of as the premier private intelligence agency in the world.

    I suggest you put on your thinking caps and take some time to read both of these very important essays, and enjoy your week. I am off to Orlando and the CFA conference....
  • Iran: Using Oil as a Weapon, But Only Rhetorically

    The hottest media topic of the New Year is the Israeli-Palestinian conflict in Gaza. And as I was reading the New York Times on Tuesday, I came across this sentence in one of the articles that was staggeringly truthful and more than a little unsettling in its implications for me as an investor. 'There are other ways to construe the context of this conflict of course. But no matter what, Israel's diplomats know that if journalists are given a choice between covering death and covering context, death wins.' Now, I'm NOT trying to get into a debate about the rights and wrongs of either side, but if you're an investor, and you're trying to make decisions about where this conflict might drive oil prices, for example, then context is everything. And according to the New York Times, if you're relying on journalists for context, forget it. But you do have an alternative....
  • 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....
  • Mediterranean Flyover: Telegraphing an Israeli Punch?

    Kudos to my friend George Friedman and his crew at Stratfor. If you didn't see the article in this week's Barron's about Stratfor's analysis of the geopolitical risk premium built into oil prices, you missed a really good piece of work. You've probably heard Napoleon's quote that 'Amateurs discuss strategy, and professionals discuss logistics.' If you want a perfect example of how that quote plays out for the markets, take a look at Stratfor's article below. It's precisely the kind of sober, fundamental research that makes Stratfor my invaluable source for geopolitical intelligence. No matter where you're looking at putting your money today, the impact of energy prices simply can't be overstated. The commodities trade, US and foreign equities, debt and interest rates, everything is being driven by energy prices right now. Whether you're trying to factor energy as a direct input into the price and consumption of manufactured goods or dealing with monetary policy's impact on the dollar and debt markets, you're implicitly making an energy trade....
  • Intelligence Guidance

    This week I want to share with you one of the more important tools in my arsenal for keeping up with what is going on in the world. As I've told you before, George Friedman and his team at Stratfor are my go-to guys for geopolitical intelligence. Their insights into this facet of the world are simply without peer. Now I want you to see their Intelligence Guidance which they publish each Friday for the upcoming week; last week's edition is below....
  • A Kind Word for Inflation

    This week's Outside the Box will challenge a few of your base assumptions. Paul McCulley, the managing director at PIMCO, offers us a kind word for inflation and the reasons that the Fed will be on hold for a lot longer than the markets currently think. And part of that is to avoid a real recession or even a depression. Getting this debate right is important. These are indeed interesting times we live in. I look forward to being with Paul at the end of July on our Maine fishing expedition, where he can defend his proposition to the group of economists and analysts gathered there. Have a great week....
  • The Geopolitics of $130 Oil

    The greyhairs among us remember the Arab Oil Embargo in 1973 and that economists of the time called it an "exogenous" shock to the system. For the first time, geopolitical events had a huge impact on world energy markets. All the financial models...
  • What the Export Land Model Means for Energy Prices

    Goldman Sachs recently forecasted that oil would be at $141 a barrel by the end of the year, and rising to $200 a barrel in the not too distant future. I have seen other forecasts calling for oil to slip significantly under $100 a barrel before starting...
  • A Mystery in the Middle East

    This is a Special Edition of Outside the Box from my friend George Friedman and Stratfor. You've heard me say before that these guys see the world in a different way, but this piece just makes it crystal clear. There are serious rumblings about a...
  • Do Not Forget About Changes in Velocity

    Introduction This week in Outside the Box, Louis-Vincent Gave, Charles Gave, Anatole Kaletsky, and company of GaveKal Research delve into the underlying misconceptions that presumes money velocity is and will remain constant, in the equation that says...