John Mauldin's Outside the Box

John Mauldin reads hundreds of articles, reports, books, newsletters, etc. and each week he brings one essay from another analyst that should stimulate your thinking. John will not agree with all the essays, and some will make us uncomfortable, but the varied subject matter will offer thoughtful analysis that will challenge our minds to think Outside The Box.
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  • The Geopolitics of Iran

    For nearly 30 years, long before it was a charter member of the "Axis of Evil," Iran and the US have been locked in a hate-hate relationship. Walk down the street any Friday afternoon, and you're as likely to hear "Death to America!" as "Hi Ali, how are you?" Three decades of animosity, an externally opaque society, and no trade relations between the two countries mean that many of us have just the barest understanding of what's really going on over there. But whether it's a negotiated settlement with the US over Iraq, or a war-risk premium for crude oil, to threats and counterthreats with Israel and the US, Iran's decisions have enormous impact on the global economic system. All of the sudden, the picture of the "mad mullahs" you get from the papers seems expensively inadequate....

  • A Short Covering Rally

    How do you spell short-selling rally, gentle reader? In this week's Outside the Box we look at several short items (pardon the pun) from various sources, which paint a not pretty picture. The first hit my inbox this morning from Art Cashin (of CNBC fame and also Head Floor Trader for UBS). "Deconstructing The Rally - The sharp rally that sprang from the new short sale restrictions has been spiky and, in several ways, very powerful. The impact of the short rule change was evident. As Barron's notes, the 150 stocks with the heaviest short interest rallied a stunning 15%. The stocks with the smallest short positions rose only 2%. That may be a function of existing shorts scrambling to cover to pass the new, belated, scrutiny. That thesis got added weight from a couple of areas. The Merrill Lynch results got mostly panned by several analysts and TV pundits. Nonetheless, the stock closed 24% above its lows for the week. Also, the financial sector ETF rose nearly 25% from the lows. "All of the above suggests that the rally is based on the two pronged government move. First, put a safety net under the financials, especially Fannie and Freddie. Second, restrict opportunities to sell the financials short. We'll wait to see if those efforts have further legs this week."...

  • Inflation Is Not The Problem

    This week we are going to do something unusual for Outside the Box. Normally I take an essay and send it to you to read. Today I am going to give you a link and strongly suggest you click to it. Long time readers are familiar with friend and comrade James Montier, who along with Albert Edwards, migrated to Societe Generale earlier this year. They are co-heads of Global Cross Asset Strategy and based in London. Kate Welling does some of the best interviews anywhere in her Welling@Weeden letter, and this one of Montier and Edwards is typical of her immensely enjoyable style. She gave my good friend Prieur du Plessis permission to reprint the letter, and I provide you with a link to his blog and if you scroll down 6 short paragraphs you get the link to the letter, which includes the graphics and is much more fun than just me cutting and pasting. You can also subscribe to Prieur's blog if you wish. Once a week he provides a very useful review of what was written the previous week....

  • Quarterly Forecast: Third Quarter 2008

    As we begin the new quarter, now is an excellent time to take stock of your basic investment thesis. Ask yourself if your allocations still reflect what you think the world is going to look like over the next several months. And as part of that process, I'm here to tell you that making "financial" decisions based solely on "financial" inputs grossly oversimplifies the way the world really works. As I've said before, investing in debt, equity, or commodity markets without geopolitical intelligence is like trading juice futures without getting a weather forecast. You can do it, but good luck to you. I get my geopolitical intelligence from Stratfor. My friend George Friedman and his team have just published their 3rd Quarter Forecast. I got George to give me a copy I can share with you in this Special Edition of Outside the Box. As a Stratfor Member, you can get the 3Q Forecast - as well as their other forecasts and daily analyses - at a preferential rate available to my readers by clicking here. I strongly encourage you to add this valuable weapon to your investing arsenal....

  • Quarterly Review and Outlook - Second Quarter 2008

    There is a reason I call this column Outside the Box. I try to get material that forces us to think outside our normal comfort zones and challenges our common assumptions. And this week's letter does just that. I have made the comment more than once that is it unusual for two major bubbles to burst and for the conversation and our experience to be rising inflation and not a serious problem with deflation. Van Hoisington and Dr. Lacy Hunt give us a seminar on why it will be deflation that will ultimately be the problem and not the current inflation we are dealing with today. This week's letter requires you to think, but it will be worth the effort. Remember our lesson from Economics 101. If you raise the supply of something, in normal markets the price goes down. And if you increase the price, suppliers will respond by producing more....

  • The End of the Inflation Scare?

    I mentioned in last Saturday's letter a report by Louis Gave of GaveKal fame on whether inflation may be waning and its importance. Louis gave me permission to use it as this week's Outside the Box. It is typical of the thoughtful analytical work they do. Louis and his partners and associates at GaveKal write some of the more thought-provoking material I read. They really challenge my position on numerous matters, causing me to look at many items from a different view. That of course, makes this particular piece good for Outside the Box. Whether you agree or disagree, you need to know why you hold a position. If you can't articulate the "against," how can you be sure you truly understand the "for"? I think given the current debate on inflation, this week's Outside the Box is a must read....

  • Intelligence Guidance

    This week I want to share with you one of the more important tools in my arsenal for keeping up with what is going on in the world. As I've told you before, George Friedman and his team at Stratfor are my go-to guys for geopolitical intelligence. Their insights into this facet of the world are simply without peer. Now I want you to see their Intelligence Guidance which they publish each Friday for the upcoming week; last week's edition is below....

  • A Kind Word for Inflation

    This week's Outside the Box will challenge a few of your base assumptions. Paul McCulley, the managing director at PIMCO, offers us a kind word for inflation and the reasons that the Fed will be on hold for a lot longer than the markets currently think. And part of that is to avoid a real recession or even a depression. Getting this debate right is important. These are indeed interesting times we live in. I look forward to being with Paul at the end of July on our Maine fishing expedition, where he can defend his proposition to the group of economists and analysts gathered there. Have a great week....

  • The Road To Revulsion

    What does a bubble look like and how do they end? In this week's Outside the Box, James Montier of Societe Generale in London looks at not only the psychological analysis, but also at the propensity for commentators to continually proclaim the end of the problem and a resumption of business as usual. He includes a fascinating piece from Marc Faber documenting the various quotes about how well the economy was doing from 1928-32. This makes for fun, if a little sobering, reading. I think you will find this letter very interesting....

  • The Geopolitics Of China

    No matter where in the world I am, in South Africa, in Europe, in La Jolla, there's one question I get asked over and over, "What about China?" And small wonder. The increasing impact of China in the last generation is just staggering and seemingly accelerating every day. If you're in the market for oil, minerals, arable land, equities or debt, you're bidding against Chinese government-sponsored entities with a $1 trillion warchest. And the list of markets where China is a key player grows every day. Bottom line: whether you're filling up your gas tank or trading credit default swaps, China's decisions impact your pocket book....

  • Fooling With Inflation

    This week in Outside the Box we look at Bill Gross's recent essay on measuring inflation. How you measure inflation makes a difference not only in social security payments but also in what your real returns on bonds are. As Bill notes, there is a...

  • The Mean Season

    Regular readers of Outside the Box will be familiar with Michael Lewitt's thoughtful commentary. Today, he reminds us that much of the turmoil we are in could have been avoided with proper regulatory structures and then does a very poignant analysis...

  • The Geopolitics of $130 Oil

    The greyhairs among us remember the Arab Oil Embargo in 1973 and that economists of the time called it an "exogenous" shock to the system. For the first time, geopolitical events had a huge impact on world energy markets. All the financial models...

  • Joining The Dark Side: Pirates, Spies and Short Sellers

    Is the market over-valued? In this week's Outside the Box, one of my favorite global equity analyst's (and no stranger to regular readers), James Montier of Societe Generale does some very interesting analysis on the European and US markets and...

  • What the Export Land Model Means for Energy Prices

    Goldman Sachs recently forecasted that oil would be at $141 a barrel by the end of the year, and rising to $200 a barrel in the not too distant future. I have seen other forecasts calling for oil to slip significantly under $100 a barrel before starting...
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