March 2015 - 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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  • Never Smile at a Crocodile

    As I sit here on Friday morning, beginning this week’s letter, nonfarm payrolls have just come in at a blockbuster 295,000 new jobs, and unemployment is said to be down to 5.5%. GDP is bumping along in the 2%-plus range, right in the middle of my predicted Muddle Through Economy for the decade. US stocks are hitting all-time nominal highs; the dollar is soaring (especially after the jobs announcement); and of course, in response, the Dow Jones is down 100 points as I write because all that good news increases the pressure for a June rate hike. Art Cashin pointed out that, with this data, if the FOMC does not remove the word patient from its March statement, they will begin to lose credibility. The potential for a rate increase in June is back on the table, but unless we get another few payrolls like this one, the rather dovish FOMC is still likely to wait until at least September. Who knows where rates will be end of the day, though? Anyway, what’s to worry?

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  • Living in a Free-Lunch World

    The world has been on a debt binge, increasing total global debt more in the last seven years following the financial crisis than in the remarkable global boom of the previous seven years (2000-2007)! This explosion of debt has occurred in all 22 “advanced” economies, often increasing the debt level by more than 50% of GDP. Consumer debt has increased in all but four countries: the US, the UK, Spain, and Ireland (what these four have in common: housing bubbles). Alarmingly, China’s debt has quadrupled since 2007. The recent report from the McKinsey Institute, cited above, says that six countries have reached levels of unsustainable debt that will require nonconventional methods to reduce it (methods otherwise known as defaulting, monetization; whatever you want to call those measures, they amount to real pain for the debtors, who are in many cases those least able to bear that pain).

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