May 2009 - 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

Blog Subscription Form

  • Email Notifications
    Go

Syndication

Have You Seen This?

Archives

  • This Way There Be Dragons

    In fantasy novels the intrepid heroes come across a sign saying 'This Way Be Dragons.' Of course, they venture on, facing calamity and death, but such is the nature of fantasy novels. We live in a very real world, and if we don't turn around there will be some very nasty dragons in our future. This week we look at three possible paths we can lead the world down. We then review a number of charts and data on the housing market.

    If you just read the headlines on this week's data, you could be forgiven for assuming the worst is over -- not. And then finally we look at some rather stark comparative data on the health-care systems of the US, Canada, and Great Britain. Everyone knows the US pays way more in terms of GDP than the latter two countries. Are we getting our money's worth? There is a lot to cover, and I hope to finish this on a flight to Naples, so let's jump right in....
  • The Paradox of Deficits

    There is something that is bumping around in my worry closet. The bond market is not behaving as if there is deflation in our future, and the dollar is getting weaker. Unemployment keeps rising, but most of all, the US government deficit looks to be spinning out of control. This week we look at all of this and take a tour around the world to see what is happening. There is a lot of interesting material to cover.

    As of this week, total US debt is $11.3 trillion and rising rapidly. The Obama Administration projects that to rise another $1.85 trillion in 2009 (13% of GDP) and yet another $1.4 trillion in 2010. The Congressional Budget Office projects almost $10 trillion in additional debt from 2010 through 2019. Just last January the 2009 deficit was estimated at "only" $1.2 trillion. Things have gone downhill fast.

    But there is reason to be concerned about those estimates, too. The CBO assumes a rather robust recovery in 2010, with growth springing back to 3.8% and then up to 4.5% in 2011. Interestingly, they project unemployment of 8.8% for this year (we are already at 8.9% and rising every month) and that it will rise to 9% next year. It will be a strange recovery indeed where the economy is roaring along at 4% and unemployment isn't falling. (You can see their spreadsheets and all the details if you take your blood pressure medicine first, at www.cbo.gov.)...
  • Faith-Based Economics

    Why does government data need to be revised so often? Is it conspiracy, as some claim, or is it methodology? And if it is methodology that leads to faulty data, then why not change the methodology? Is unemployment a lagging indicator, as conventional wisdom suggests? We look again at the underlying assumptions to suggest that things are not always the same. And finally, we look at unsustainable trends, fiscal deficits, and health care -- there is a connection.

    But first, a quick note about the latest 'Conversations with John Mauldin' that I just did with Don Coxe and Gary Shilling. These two esteemed analysts have different views on whether commodity prices will rise or fall, and are not afraid to make their views known. I edited the final transcript today, and I can tell you that even though I was 'at the table' I learned a lot reading it the second time. If you want to understand the nature of what is a very central debate, this is a must-read. This was a VERY lively debate. Most of my friends know that I am not shy, but it was hard to get a word in edgewise as these guys went at it. It was great fun to watch....
  • Green Shoots or Dandelion Weeds?

    Go to Google. Type in 'green shoots.' In about a 10th of a second you will find 28,900,000 references. Scrolling through a few pages, you find a lot of references to the beginning of the end of the recession. Today we look at some data to see if we can indeed see the end. Most readers will be surprised to know that the number of people employed in the US went up (!) in April. Yet so did the unemployment rate. Is that green shoot just another dandelion weed in our economic garden?

    We'll jump into that and more, but first let me quickly mention the new subscription service that we began offering this year, called 'Conversations with John Mauldin.' One of my 'secrets' is that I have a very powerful rolodex (or, for the younger crowd, my contacts list). In this new project, each month I call up one or two of my special contacts in the investment and economic world and hold a conversation with them about the important topics of the day -- where the US and global economies are going, how we should be investing, what opportunities and pitfalls are out there, etc. Some will be names you recognize, and others will be names you will want to know. You get to listen in, download to your computer, or read a transcript -- whichever you prefer....
  • Sell in May and Go Away

    The old adage that one should 'sell in May and walk away' has been around for years. I mentioned that bromide about this time last year, urging readers to head for the sidelines if they had not already done so. I was also suggesting a strategic retreat in August of 2006 (after which the markets went up 20% before plummeting). In this week's letter we look at the actual data and offer up a fresh viewpoint. Then we turn our eyes to the recent GDP numbers, which were awful, though many took comfort in the apparent rise in consumer spending. Are Americans back to their old ways? It will make for an interesting letter....