John Mauldin's Outside the Box

John Mauldin reads hundreds of articles, reports, books, newsletters, etc. and each week he brings one essay from another analyst that should stimulate your thinking. John will not agree with all the essays, and some will make us uncomfortable, but the varied subject matter will offer thoughtful analysis that will challenge our minds to think Outside The Box.

John Mauldin's Outside the Box

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  • Ending the Era of Ponzi Finance

    There is a level of (let's call it) discomfort among investors and business people everywhere I go in the world now. It is becoming increasingly palpable with each passing month. The overriding sentiment seems to be, "That which cannot be sustained will not be."

    We live in a world that is premised on economic structures that are now unsustainable, and that is a word we are going to hear used more and more this year. Unsustainable. It will be a theme in my writing, not only in my annual forecast issue, which will be out in a few days, but throughout the year. But just because things are unsustainable does not mean the end of the world for you and me. It is just that our world will change. Our job is to make sure that we manage the transition.

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  • US Birth Rate Hits New Low – A Nation of Singles

    Today’s OTB is not directly about the economy or investment, but rather about a key demographic shift that will certainly have a major effect on both. I have a somewhat different take on the shift than our author, my very-long-time friend Gary D. Halbert (founder of ProFutures and former business partner from the ’90s); and I will be writing about this next year. There is a significant transformation going on in my thinking about how the political world in the US (and, I suspect, much of Europe as well) impacts the economy.

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  • Sorting Out the Decade

    In today's Outside the Box I bring you two pieces that, at first glance, may not seem to have much to do with each other. First, Bill Gross, PIMCO managing director, runs down the fierce structural headwinds that our hard-pedaling global economy faces over the next decade. I am going to deal at length with not only his GDP projections for the rest of the decade but those of Grantham and others in the last two Thoughts from the Frontline of this year. This is a challenging environment for traditional portfolio construction, but it’s par for the course as we slog through the secular bear market I was first writing about in 1999.

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  • Looming Crisis: State Budgets Soon to Be Under Siege

    Today in Outside the Box we explore the very sad fact that once again I was unduly optimistic. My good friend Ed Easterling shows that it is quite likely that the pension shortfalls are approaching $4 trillion. And the longer we wait to deal with the problem, the worse it will get.

    The biggest part of the problem, as I wrote back in 2003, is unrealistic assumptions about future investment returns. That has not changed. You can find consultants who will tell you there is “only” a $1 trillion problem. However, if you assume that interest rates will remain low and equity returns will look like they did the last ten years, then the underfunding might look more like $4.6 trillion.

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  • Popular Delusions: The bull case for safe havens

    I am sending this OTB from the Lindbergh Terminal of the Minneapolis–St. Paul Airport, on my way back from Bismarck, ND. I have now been to 49 states, with only South Dakota to go. The Bakken oil field is amazing and the helicopter tour was eye-opening. I am going to write about it this weekend as part of looking at the larger picture of energy and change.

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  • One (Biotech) Ring to Rule Them All

    The world appears fixated on the fiscal cliff. And indeed, I have been shooting a video here in NYC all day with my friends (the usual brilliant suspects, et al.) on how the world looks after the election. And to say that my close-up interview/conversation with the chiefs of staff of Majority Leader Harry Reid and Senator Rob Portman (David Krone and Rob Lehman, respectively) had more than a few blockbuster moments is an understatement.

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  • Four More Years

    The American electorate may share the same national bed, but they have vastly different dreams. In this report, our take on the election’s significance is similarly bifurcated. Anatole see it as a cathartic political cleansing allowing for a deal on the fiscal cliff, but Charles as a disaster. Arthur asks whether the Republican Party can win nationally without reconciling itself to America’s changed demographics and the realities of the new knowledge-intense economy. Will Denyer contends that an Obama win is probably bad for the dollar and gold – but he doubts that would have been different with Romney.

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  • The Role of Risk in Asset Allocation

    Diversification of your investments is the only real free lunch, or so we are told. But how do we go about deciding what to diversify into? In this week’s short Outside the Box, my friend Jason Hsu of Research Affiliates argues that the real basis for diversification should be risk. And given that risk seems to be rising everywhere we look, thinking about how to deal with risk in our portfolios makes a great deal of sense.

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  • Memo to Central Banks: You’re debasing more than our currency

    I can only pass on Societe Generale’s work to you once in a while, but the piece for today’s Outside the Box is important enough that its author, Dylan Grice, worked hard to convince his bosses to let me share it with you. Dylan is one of my favorite investments analysts, as well as just an all-around nice guy.

    In a change from his usual fun-loving demeanor, Dylan issues a serious warning here.

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  • Hoisington Investment Management Quarterly Review and Outlook Third Quarter 2012

    The Hoisington Quarterly Review and Outlook is one of the cornerstones of my reading on where the economy is headed. Van Hoisington and Lacy Hunt do a masterful job of turning data points into cogent, well-argued themes.

    This month they waste no time in dissecting the Fed’s recent move to QE3 and similar efforts in Europe, arriving at the conclusion that “While prices for risk assets have improved, governments have not been able to address underlying debt imbalances. Thus, nothing suggests that these latest actions do anything to change the extreme over-indebtedness of major global economies.”

    Their expectation: global recession. The only issue left to sort out, they say, is How deep will the downturn be?

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  • A Little Chronic Deflation

    One of the questions I (and other analysts) get asked most frequently is whether I think there is deflation or inflation in store for the US. My quick answer is "Yes." A brief answer is that we are in a deflationary period and have been for over 30 years, but like all cycles it will come to an end. A great deal of the "when" depends on how the US deals with its deficit following the election. If we put the US on a realistic glide path to a balanced budget (over time) then that deflationary impulse will last longer than most observers think, even given QE3+++. If we do not deal with the issue, and try once again to kick the can to the next election, inflation could be a very real problem.

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  • When Career Risk Reigns

    We have entered an era of increasing correlation among what were once considered diversified investment classes. That would not be so bad, but overall returns have been reduced as well, almost across the board. As the song says, “Nowhere to run and nowhere to hide.” (For the younger generation, listen to the far superior version on YouTube, which was the original by Martha Reeves and the Vandellas, and not the noise of Korn or Caliban.)

    This week’s Outside the Box takes us on a tour of recent research, which shows that correlations among a wide variety of asset classes are increasing. It comes as no surprise to serious investors that it is getting ever more difficult to construct a diversified portfolio. My friend and partner Niels Jensen of Absolute Return Partners in London looks at half a dozen different research papers of recent vintage to give us some insights into today’s investment climate and offer a few modest suggestions. All in all, a very useful piece of work. You can see more of their writing and research at www.arpllp.com.

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  • What If the Fed Has It All Wrong?

    As long-time readers know, I get a large volume of research sent my way. I can't get to all of it every week, but I really do try. And today's Outside the Box, from a new (to me) source, hooked me from the first few paragraphs.

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  • 2012 – The Most Important Year Yet in Technology

    As you'll recall, I spent much of last week with the folks at Casey Research, at their most recent investment summit.  They always put on a top-notch show, and there were many impressive speakers.  But, as a big fan of technology, both for its place in the future of our economy and for the sheer coolness factor of some of the amazing things we can now achieve, I really liked one talk in particular.

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  • A Decade of Volatility: Demographics, Debt, and Deflation

    Harry Dent gave a speech I listened to a while back, and I got him to transcribe it for this week's Outside the Box. One thing about Harry is, you are never left wondering what he thinks about a topic. He sees inevitable demography-caused deflation in our future and makes some very intriguing arguments that deserve pondering.

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