September 2008 - Thoughts From The Frontline

This highly acclaimed blog is primarily focused on private money management, financial services, and investments. John Mauldin demonstrates an unusual breadth of expertise, as illustrated by the wide variety of issues addressed in-depth in his writings.

Thoughts From The Frontline

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  • Who's Afraid of a Big, Bad Bailout?

    Flying last Tuesday, overnight from Cape Town in South Africa to London, I read in the Financial Times that Republican Congressman Joe Barton of Texas was quoted as saying (this is from memory so it is not exact) that he had difficulty in voting for a bailout plan when none of his constituents could understand the need to bail out Wall Street, didn't understand the problem, and were against spending $750 billion of taxpayer money to solve a crisis for a bunch of (rich) people who took a lot of risk and created the crisis. That is a sentiment that many of the Republican members of the House share. As it happens, I know Joe. My office is in his congressional district. I sat on the Executive Committee for the Texas Republican party representing much of the same district for eight years. This week, Thoughts from the Frontline will be an open letter to Joe, and through him to Congress telling him what the real financial problem is, how it affects his district and help explains to his constituents the nature of the problem, and why he has to hold his nose with one hand and vote for it with the other. I think this is as good a way to explain the crisis we are facing this weekend. This letter will print out a little longer because there are a lot of charts, but the word length is about the same. Let's jump right in....
  • Betting on Financial Armageddon

    My Dad used to tell me there is no accounting for standards when looking at something that seemed odd. Today, we have faulty standards for accounting that are ripping apart the fabric of the world's economy. How can a security that has a high probability of full repayment be downgraded from AA to junk levels? What we will explore today tell us a lot about why we are in the crisis state of affairs. Since I wrote you last Friday, the financial landscape of the world has changed even more. And what will happen this weekend will change it even more. And our kids will be paying for it for a long, long time. At the end I offer a few thoughts on the events, and if there is time my thoughts on the new short covering rules. All in all, it should make for an instructive and interesting letter. We'll jump right in....
  • Housing: Are We Near the Bottom?

    This week we look at the housing market in some detail. When can we expect it to turn around? Part of the problem is a new wave of foreclosures is coming due, and this time it is not subprime. And that means more problems for the large financial companies. Also, as predicted here, consumer spending is taking a hit as consumers are finding it increasingly difficult to get credit and a deteriorating labor market hits total spending. There are some very interesting details in the data that was released this week. And we take a quick peek at the outlook for inflation. What is in the pipeline, so to speak? It should make for an interesting letter....
  • Additional Thoughts on the Continuing Crisis

    We are entering the next stage of the credit crisis, and one which is potentially more troubling than what we have seen over the past year, absent some policy reactions by the central banks and governments world wide. The crisis was started by an intense run-up in leverage by financial institutions and investors world wide, investing in increasingly risky assets such as subprime mortgages and then the realization that leverage could hurt. The deleveraging process started to intensify last year about this time. The easy part of that process has been just about done. Now is the time for the really hard work. It will not be pretty. In this week's letter, we look at the process and think about its implications for the markets and the economy, and visit some data on the housing market and unemployment....