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John Mauldin's Outside the Box

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  • The Bond Market: Beware of Junkyard Dogs

    It should come as no surprise that credit spreads are shrinking between what in theory are risk-free investments and other investments. Retirees and other investors are reaching farther and farther for yield, piling into all sorts of increasingly risky investments.

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  • Blodget on Market History

    I remember the first time I walked into Henry Blodget’s new startup, Business Insider, back in 2009. Twelve fresh-faced kids were crammed into a room about the size of my bedroom, pounding away on laptops, creating a new destination website. He took me over to a corner; we sat down in front of a few cameras; and he began shooting question after question at me, later turning the session into a series of interviews.

    You walk into his office today and it’s still packed wall-to-wall with fresh-faced kids (the older I get the younger they look), but the offices are much larger, and it seemed to me last time that there had to be at least 150 people in them. But the interviews are still quick-paced, even if they’re now conducted in a special room, with upgraded equipment.

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  • The world’s greatest stock picker? Bet you sold Apple and Google a long time ago.

    My good friend Barry Ritholtz, famous for launching The Big Picture blog (and since graduating to being a regular Bloomberg columnist as well as writing a weekly column for the Washington Post), is well-known for being a contrarian. Barry is a regular dinner partner when I get to New York, and he also participates in the annual Maine fishing trip. We frequently trade information … and barbs. The word colorful affectionately comes to mind when I think of Barry (and maybe opinionated would work).

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  • Geopolitics and Markets

    Growing geopolitical risk is on everyone’s mind right now, but in today’s Outside the Box, Michael Cembalest of J.P. Morgan Asset Management leads off with a helpful reminder: the only time since WWII that a violent conflict has had a medium-term negative effect on markets was in 1973, when the Israeli-Arab war led to a Saudi oil embargo against the US and a quadrupling of oil prices. And he backs up that assertion with an interesting table of facts labeled “War zone countries as a percentage of total world… [population, oil production, GDP, etc.].”

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  • Is There a Biotech Bubble?

    I’m bringing you a special Outside the Box today to address a very specific question that is on many investor’s minds: is there a bubble in biotech? To answer that question, Patrick Cox, editor of Mauldin Economics’ Transformational Technology Alert, teases apart the data on stock performance in the biotech space and then goes beyond the data to show us how the unique characteristics of the sector bear on the question of bubble or no bubble.

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  • Challenging the Consensus

    It’s been a busy week here in Dallas, but then aren't they all lately? But it’s good to be busy at home for the next few weeks. Lots of material to be written and edited, plans to be made, and trips to be scheduled, of course. My current sedentary lifestyle will soon revert to its normal peripatetic frenzy, but it’s good to give the body a bit of rest. Enjoy your week.

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  • The Blip

    Dr. Robert Gordon is a professor of economics who has held a named chair at Northwestern University for decades; but as the author of this piece says, "[T]he scope of his bleakness has given him, over the past year, a newfound public profile." Gordon offers us two key predictions, both discomfiting. The first pertains to the near future, when, he says, our economy will grow at less than half its average rate over the last century because of a whole raft of structural headwinds.

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  • Following the Fed to 50% Flops

    John Hussman is one of the savviest investing minds I know, and so I never miss his Weekly Market Comment. This week he wrote about an interesting disconnect between what investors believe about "fighting the Fed" (i.e., don't do it) and the reality of S&P 500 returns, and I've made that piece today's Outside the Box.

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  • Are We There Yet?

    Vitaliy Katsenelson is a modern-day American success story, the kind we need more of. He grew up in Murmansk, in the extreme northwest corner of Russia, north of the Arctic Circle and close to the Finnish border. He says he barely escaped a career in the engine rooms of Russian Navy vessels when his family wrangled a visa to emigrate to the US in 1991.

    He finished high school here, knocked out a BA in finance at the University of Colorado at Denver, and followed up with an MS in finance and his CFA.  At that point, a local Denver firm, Investment Management Associates, snapped him up; and before long he was one of the two principals in the company, alongside Michael Conn.

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  • A Sideways View of the World

    Today's OTB features an excerpt from my friend Vitaliy Katsenelson's recently published The Little Book of Sideways Markets. Vitaliy is CIO at Investment Management Associates, a value investment firm in Denver, and he is a prolific and engaging writer (you can find and subscribe to his articles at http://ContrarianEdge.com). I had the pleasure of writing the foreword to Vitaliy's book, and here is a brief excerpt:

    "Markets go from long periods of appreciation to long periods of stagnation. These cycles last on average 17 years. If you bought an index in the United States in 1966, it was 1982 before you saw a new high – that was the last secular sideways market in the United States (until the current one). Investing in that market was difficult, to say the least. But buying in the beginning of the next secular bull market in 1982 and holding until 1999 saw an almost 13 times return. Investing was simple, and the rising markets made geniuses out of many investors and investment professionals.

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  • Hoisington Fourth-Quarter Report

    Long-time readers of Outside the Box are familiar with the names Dr. Lacy Hunt and Van Hoisington. They are a regular feature here, as quite frankly, anything that Lacy writes or says I pay serious attention to. This is their regular quarterly report, where they outline seven things that are likely to retard US growth. An easy read, but take the time to think this through.

    Hoisington Investment Management Company (www.hoisingtonmgt.com) is a registered investment advisor specializing in fixed-income portfolios for large institutional clients. Located in Austin, Texas, the firm has over $4 billion under management, composed of corporate and public funds, foundations, endowments, Taft-Hartley funds, and insurance companies.

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  • Keynesian Confusion

    Michael Lewitt is one of the most provocative writers I know. Her consistently gives me something to chew on with his monthly letter. How he comes up with all those quotes (usually from sources I have never read but should have) amazes me. He has a unique view of the markets as he run Collateralized Debt Obligation funds and really understand the nitty-gritty of the bond and credit markets.

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  • Insolvency Too

    As readers know, I was in Europe a few weeks ago, making a LOT of presentations. My London-based partners seem to feel that an hour or two of down time is wasted and only for sissies. I learn as much as I impart, and come away with lots of interesting information. Every now and then I learn something that gets into the category of what in the wide, wide world of (multiple expletives deleted) economics is going on? Subprime was like that when I first read about it. Could you really design CDOs that were so patently absurd and then sell them to the Europeans and Asians? Turns out you could.

    Last week, Niels Jensen (head of Absolute Return Partners) and I were talking with a variety of pension funds. They started telling us about this thing called Solvency II. Outside the arcane world of European pension funds and insurance companies, it is not on the radar screen of most people. But it may be one of the more explosive problems in our future. Cutting to the chase, the new rules require insurance companies and pension funds to buy more bonds to match their liabilities. But as yields go down they are required to buy yet MORE bonds and then yields go down some more. And so on. The possibility of serious defaults by these same pension funds in the wake of these new rules (setting aside whether it makes sense to actually require pension funds to set aside enough assets to pay their obligations) is all too real. And more pervasive than we now think.

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  • Market Still Deluding Itself That It Can Escape The Inevitable Dénouement

    One of my favorite analysts is Albert Edwards of Societe Generale in London. Acerbic, witty and brilliant. Emphasis on brilliant. The fact that he is a Doppelganger for James Montier (who long time readers are well acquainted with) is a coincidence (or he would say vice versa). I only kind of have permission to forward this note to you, but better to ask forgiveness… So, this week he is our Outside the Box. And a short but good one he is.

    I am in Amsterdam and it is late, but deadlines have no time line. Tomorrow more work on the book. It is getting close to the end. Most books are finished when the authors quit in disgust. How many edits can you do? I am close.

    I wonder late at night, with maybe a few too many glasses of wine, why I feel like a book is so much more than an e-letter. Really? The last ten years of what I have written are on the archives. Good (ok, sometimes really good) is there. But some are an embarrassment. What was I thinking?

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  • America’s Greatest Wealth Creation Engine

    Those who know me well know that I am in incurable optimist. I think the world is going to be better in ten years than it is today. I thought that 20 years ago and 10 years ago and expect to think that 10 years from now. Part of that reasoning comes from the accelerating pace of change in the technology world. The next 10 years will see more change than the last 20-30 years combined!

    And that means opportunity. Yes, with ups and downs and twists, but opportunity nonetheless.

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