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  • Orders and Production: No Time for Complacency

    We have been assaulted with economic news of all sorts, from every corner of the globe, while trying to watch the Olympics and while we would rather be enjoying summer and decompressing (at least in the Northern hemisphere).

    But the data keeps coming. My friend John Silvia, the Chief Economist of Wells Fargo, has been with me in Maine this past weekend. And as we caught fish and shared our thoughts, we also both managed to get out our respective writing done. His note this morning is a particularly interesting analysis of US data, which has him wondering about his call for tepid growth but no recession

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  • Joan Sees Red

    It seems like the whole world is expecting Ben and Mario to ride in and save the day with yet more stimulus. But to what effect, I wonder. Is a short-term rise in the market a cure for the basic disease of too much debt? And, as today’s Outside the Box hilariously points out, it can even make things worse.

    Joan McCullough is perhaps my favorite curmudgeon. She writes so freely and with such style and feeling, but she also gives us such exquisite bits of information that no one else seems to find. Today, as I sat in a Denver hotel, I read her and just had to laugh a few times (mostly to keep from crying). She can be a tad hard on sensitive nerves, but we are all adults here, right? Be forewarned, though, that while she may pokes at someone you don’t like today, tomorrow she may be pointing out the issues with your guy. She is an equal-opportunity skewer.

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  • Hoisington Quarterly Review and Outlook

    The relationship between high total public debt and interest rates is controversial (to some); and in today’s Outside the Box Van Hoisington and Dr. Lacy Hunt of Hoisington Investment Management tackle the subject head-on, in their “Quarterly Review and Outlook” for Q2 2012. They bring important new evidence to the debate, citing three academic studies (including an April 2012 paper coauthored by Rogoff and Reinhart) and an historical retrospective that focuses on the debt-disequilibrium panic years of 1873 and 1929 in the US and 1989 in Japan. In their view, the onus of responsibility for the “Panic of 2008” falls on the sometimes-slumping shoulders of the Federal Reserve, for making money and credit too easily available, and then “[failing] to use regulatory powers to check the unsound lending and the concomitant buildup of non-productive debt.”

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  • Flirtin’ with Disaster

    This week I offer a main course, a veritable piece de resistance, for Outside the Box readers, from my friend Rich Yamarone. Rich is Chief Economist for Bloomberg and one really sharp talent. He helps write Bloomberg Brief: Economics, a daily notebook that comes out every business morning with an all-encompassing view of what's happening and will happen.

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  • Necessary But Not Sufficient

    We woke up this weekend to a €100 billion "rescue" of Spanish banks, and the initial reaction of the market was relief. But did we not just see this movie, but with Greek subtitles rather than Spanish? Was this another of those "necessary but not sufficient" plot lines that Europe is so good at? Kick the can down the road and hope for a happy ending?

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  • Macro-EU: The Solution Illusion

    Nobody, in my book, slices and dices data more thoroughly or convincingly than Greg Weldon. In this week's Outside the Box, he first dispels the illusion that either of the two most-expected outcomes of the growing eurozone crisis is really any kind of a solution – neither expelling Greece nor keeping Greece in the club is going to work, he argues – and then, in a feat of legerdemain, he conjures up an alternative that just might work – and backs up his idea as only Greg can. But is this a rabbit he's pulled out of his hat, or is it ... a Black Eagle?

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  • The Pain in Spain

    I want to emphasize that I do not think Spain is hopeless. Rather, it has a narrow set of limited options that will require a great deal of austerity and economic pain on the part of Spain and significant help from the rest of Europe, combined with the forbearance and patience of the bond market or massive buying of Spanish bonds by the ECB for an extended period of time. I think it will need to be the latter, as the bond market is on the brink of breaking down on Spanish debt, failing a realistic path to economic balance and growth. The way ahead is most difficult and treacherous. It appears to me that at the end of the day only ECB participation can buy Spain the time it needs. If they give Spain the time, it can get through. But the pain will then be spread to the valuation of the euro and thus the entire eurozone.

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  • European Countries That Make You Go Hmmm…

    Today's Outside the Box comes to us from Grant Williams, who covers the world from his perch in Singapore, in his always instructive and always entertaining Things That Make You Go Hmmm... I felt for him right at the outset today, because (like yours truly) he was trying really hard ... not to talk about Greece.And so, he announced, he was going to talk about Spain and about oil; but then, before he even made it through his opening paragraph, there was this:

    "... ahhhh NUTS! They did it AGAIN.... ok... the Greek restructuring. It's not as though I could ignore it, now, is it? ... Oil can wait until next time.... no doubt it'll be an issue then too."

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  • Sorting Out the Euro Mess

    I had the pleasure of spending the morning and part of the afternoon today with Louis Gave and Anatole Kaletsky at a seminar here in Dallas; and we shared a long lunch, where Europe and China were the topics of conversation. So, with their permission, here is their latest "Five Corners," in which Charles Gave and Anatole Kaletsky discuss last week's summit, and then engage in an internal debate about whether Italy really has a significant trade deficit with Germany. As I expect from GaveKal, it's not your typical analysis. And since I have to run to dinner – and glean more insights from their team (there will be homework when I get back!), this introduction to Outside the Box is short, and we can jump right into today's piece. Have a great week.

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  • It’s All Greek To Me

    Long-time readers will be familiar with Michael Lewitt, one of my favorite thinkers and analysts. He has gone off on his own to write his letter, and I am encouraging him to write even more. I call Michael a thinker because he really does. He reads a lot of thought-provoking tomes and then thinks about them. And then writes, making his readers think. The world needs more Michael Lewitts.

    Today, he roams the world, commenting as he goes, starting of course with Europe. I have permission to use the first half of this most recent letter as today’s Outside the Box, leaving off the investment recommendations that he shares with his subscribers. If you are interested you can subscribe at www.thecreditstrategist.com.

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  • Things That Make You Go Hmmm…

    Do we need a law that makes it illegal to push a moose out of a moving aircraft? In baseball, what are the odds of a perfect game? How difficult will it be to solve the problems of the Eurozone? These and other issues are meditated upon by Grant Williams in his Things That Make You Go Hmmm… letter, which is this week’s Outside the Box. Maybe it was the baseball set-up (as my Rangers battle the Cardinals in the World Series) or that I keep getting asked about Europe here in New Orleans at the 2011 Oppenheimer Wealth Management Roundtable, but Grant really pulled me through his weekly missive when I got started, and I believe you will enjoy it as well. Long and short, Grant lays out the problems that we face in a very realistic assessment. I will also point out that he makes me look like a euro-optimist.

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  • Germany's Choice: Part 2

    For today's special edition OTB, let's turn our fiscal eye across the pond to all that's going haywire in Europe. But not the continent's banking crisis, per se. Today's piece takes a broad look at who's really running the show. I'll give you a hint - they've done it before, and it wasn't too long ago. The folks at STRATFOR (a global intelligence publication) have spent the better part of two years saying that Germany will run Europe. The newly redesigned EFSF (European Financial Security Facility) can be considered concrete evidence of such.

    From Berlin's point of view, the Eurozone is its sphere of influence, and its preservation is in Germany's national security interest. It's a new Europe, where Germany's not just the checkbook anymore, but holds some reins.

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  • The Stark Choice for Europe

    This will be one of the more controversial Outside the Box posts in a great long time. Indeed, I debated with myself at some length. It will make some readers mad, but I decided it is more important to make most readers think. And, as it happens, there are parts of this week’s essay that I rather aggressively disagree with. That being said, there is a great deal of truth here. This represents a serious body of thought that is being debated, and we need to hear all sides, rather than just the ones we like.

    Michael Hudson is a research professor of economics at the University of Missouri, Kansas City and a research associate at the Levy Economics Institute of Bard College, which is a serious place, so this is no ill-informed screed. I generally like their stuff.

    Hudson first lays the European crisis at the feet of banks and the institutions (ECB, IMF, and the EU) that are taking the Greek (and other) bank debt and putting it into public hands. He has a very real point. Then he points out that Greece is far better off just walking away, a la Iceland (at least read the last part of this post, on Iceland). And in polls he cites, 85% of the Greek people are against taking on the debt and paying the banks.

    As I wrote last week, there is a revolution going on all over Europe, slowly building up as people realize that the “solution” being offered benefits banks and not German taxpayers or Greek creditors. Ireland will be watching. There is no easy way out. If there is a referendum on this new “troika” proposal, it is likely to lose. This is not over.

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  • Macro E.U. — D.O.A.

    I am attending the Global Interdependence Center’s latest conference here in Philadelphia, writing you from the Admiral’s Club on my way to Boston. The chatter last night at dinner and between sessions was focused on the risks in Europe. I did an interview with Aaron Task on Yahoo’s Daily Ticker, where I noted that European leaders are starting to use the word containedwhen they talk about Greece. Shades of Bernanke and subprime. This too will not be contained.

    And that brings us to this week’s Outside the Box. Greg Weldon has graciously allowed me to use his latest missive on Europe’s woes. A teaser:

    “The EU, like the US, suffers from what we might call the 'Cyrenaic Syndrome', a dynamic linked to the ancient Greek philosophers Aristippus and Hegesias of Cyrene, who, in 3rd and 4th Centuries BC, hypothesized that the goal of life was the avoidance of pain and suffering. Addicts accomplish this thru substance abuse. The EU is trying to accomplish this thru pure denial, and an outright refusal to accept that austerity, like sobriety, is the ONLY way to actually deal with the problems it faces.”

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  • The Mess in Europe

    The disconnect in Europe just gets worse and worse, as I sadly predicted at least a few years ago, and have made a big deal out of over the last year, with the very pointed note that a European banking crisis is the #1 monster in my worry closet. Today, within 15 minutes of each other, I ran across the following three notes, from Zero Hedge, the London Telegraph, and the Financial Times, with a quote from Bloomberg as well. Read them all. And then try and figure out how they can all get what they want. There are going to be tears and lots of them somewhere. Greek three-year rates are now at 21%. And so I decided to link these three short pieces into your Outside the Box this week. To kick things off, a few teaser quotes and observations:

    “On Saturday Jurgen Stark, an executive board member of the ECB, warned that a restructuring of debt in any of the troubled eurozone countries could trigger a banking crisis even worse than that of 2008.

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