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  • Be Careful What You Wish For

    This week we turn our attention to the elections and their aftermath. Long-time readers know I am a Republican, but I offer some sobering advice to my friends on my side of the aisle: Be careful what you wish for. It's one thing to get a few votes. It's quite another to live up to promises that simply can't be kept. We will start our analysis by looking at the GDP numbers that came out today, and we will end by pointing out that there will be no easy choices. And then we can turn our attention where it should be, to the World Series here in Texas.

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  • The Last Chapter

    This week you will get a kind of preview as this week's letter. I am desperately trying to finish the first draft of my book and am one chapter away from having that draft. I have promised my editor (Debra Englander) that she would see a rough draft next week, and the final version will be delivered on the last day of September. More on that process for those interested at the end of the letter. But this week's letter will be part of what will probably be the 4th or 5th chapter, where we look at the rules of economics.

    There is just so little writing time left that I have to focus on that book for a little bit. I am writing this book with co-author Jonathan Tepper of Variant Perception (who is based in London), a young and very gifted Rhodes scholar with a talent for economic analysis and writing. We each write the first draft of a chapter and then go back and forth until the chapter has been much improved. Alas, gentle reader, you will only get my first draft. You will have to wait for the book to get the new, improved version. But this is the last one I have to write. And Jonathan has done all his initial chapters. We are on the home stretch.

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  • The Problem with Pensions

    Sadly, I find myself with more than enough time to compose yet another Thoughts from the Frontline in an airport, as a flight booking error has me at JFK for six hours instead of fishing in Maine. Details for those interested or amused at the end. But it does allow me to offer you a peek into a very sobering report on how badly underfunded public pension are. The situation is worse than you think. Then we will close with a eye-opening report on China from the gracious Simon Hunt, who is allowing me to reprint his latest missive in toto. You really want to read this one. And we start with this rumor from Reuters, just in. Read this and weep.

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  • 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....
  • Time for a Reality Check

    It is not just the US that is in recession. The world is slowing down, and rapidly. This week we quickly survey the rest of the world, and then come back to the US. We follow up with the implications for corporate earnings worldwide, and specifically address my speculations about earnings forecasts for 2009. Let's start with some charts from my friend Simon Hunt, out of London. The following chart shows World Merchandise Export Values and World Industrial Production falling off a cliff. This is the worst such period since the end of World War II. And as the data we will examine next indicates, it is likely to get worse....
  • The Endgame

    Deflation? Stimulus? Deleveraging? Recession? A soft depression? A return to a bull market? With all that is going on, how does it all end up? When we get to where we are going, where will we be? In chess, the endgame refers to the stage of the game when there are few pieces left on the board. The line between middlegame and endgame is often not clear, and may occur gradually or with the quick exchange of a few pairs of pieces. The endgame, however, tends to have different characteristics from the middlegame, and the players have correspondingly different strategic concerns. And in the current economic endgame, your strategy needs to consist of more than hope for a renewed bull market....