Fwd: America’s Greatest Wealth Creation Engine - John Mauldin's Outside the Box E-Letter

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From: John Mauldin and InvestorsInsight <wave@frontlinethoughts.com>
Date: Mon, Aug 30, 2010 at 8:39 PM
Subject: America's Greatest Wealth Creation Engine - John Mauldin's Outside the Box E-Letter
To: jmiller2000@gmail.com

Contact John Mauldin Print Version Volume 6 - Issue 36 August 30, 2010 America's Greatest Wealth Creation Engine by Alex Daley and Doug Hornig 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. This week's Outside the Box is a short essay from my friend Alex Daley who writes the letter Casey's Extraordinary Technology. I have had the pleasure of spending time and corresponding with Alex, and he is one of the smartest guys I have ever met. Alex had a VERY senior position at Microsoft and has a serious range of experience. In his varied career, he has worked as a senior research executive, a software developer, project manager, senior IT executive, and technology marketer. Aside from his technological prowess, Alex has been involved in numerous startups as an advisor to venture capital companies and a successful angel investor in his own right, with a long history of spectacular investment successes. Every month, he analyzes and recommends the best tech stocks to get in now - from biotech firms to cyber-security providers with innovative solutions. You can get a free trial subscription to his letter, which I find very valuable in keeping me up to date on what is going on as well as providing some direction (his portfolio has done well!). Click on the link if you are interested. Read more here. Your paying attention to tech analyst. John Mauldin, Editor Outside the Box America's Greatest Wealth Creation Engine By Alex Daley and Doug Hornig To judge by the headlines, you might think we Americans have lost the ability to create wealth. The stock market is floundering, even after flatlining for a decade. The overall economy is in the doldrums. Domestic heavy industry has all but disappeared. Real estate has crashed. The airlines, the automakers, the banks, all have gone to Washington, begging bowl in hand, demanding handouts from a government that, like the average citizen, is drowning in debt. Bad news abounds, no doubt. Yet, amid all the doom and gloom, it's easy to overlook the fact that the real engine of growth in the modern world is chugging right along. Easy because many investors have turned their attention intently in the direction of interest rates and housing starts and the pontifications of Ben Bernanke, failing to notice that one of the markets they left behind is now leaving them behind. Over the past decade, while the overall market was weakly limping along, these companies have been steadily growing revenues, adding jobs, and spewing profits. At the same time as brash startups were reinventing news, entertainment, communication, medicine, and virtually every other aspect of our work and home lives, promising to deliver still more growth even in this weak economy. We're talking about technology, of course. Technological development is impersonal and implacable. It cares not who controls Congress or chairs the Fed. It has been the stuff of American life for a century - from the assembly line to the smartphone. Most importantly, it's done what a successful segment of the economy is supposed to do, bring about prosperity by adding to the tangible wealth of the country. And it did so the old-fashioned way, by creating things useful to society. It made money for the innovators who were able to parlay their intellectual property into products that people wanted to buy. It made money for the people who worked for the innovators. It made money for companies, and their employees, that increased efficiency by integrating technological advances into their businesses. And it made money for investors who backed the leading lights in the field. Tech, in short, has not only raised everyone's standard of living, it has created wealth. Lots of wealth. And it continues to do so today, right through all of our economic turmoil. One incredibly simple measure of the prosperity created is market capitalization, the sum total of the wealth held by investors. Thirty years ago, in 1980, the entire stock market boasted only three mega-companies, i.e., those with market caps in excess of $40 billion (the equivalent of $100 billion today, in inflation-adjusted dollars): Exxon, IBM, AT&T. Those three are still with us, and all still boast $100B+ caps. But they are joined by no fewer than 21 other U.S. companies. Taken together, the 24 have a collective market cap of $3.8 trillion. Technology allowed this to happen. Consider that in 1980, five of the top 24 - Apple (#2), Microsoft (3), Cisco (15), Google (19), and Oracle (23), tech companies all - either hadn't gone public or didn't even exist. Intel (21) was around, but almost no one had noticed. IBM (7) was an industry leader then, but only as the primary maker of clunky mainframes. Hewlett-Packard (24) had yet to introduce either inkjet or laser printers. Walmart (4) was still dreaming of the ultra-efficient, automated distribution system that would transform its business. The contrast between the old and the new could not be more stark. From the 1980s to today, General Motors has slid steadily downward, racking up billions in losses that culminated in a painful bankruptcy/bailout. Over the same period, a handful of geeks from Seattle grew their dorm-room startup, Microsoft, into a global software empire with over $60 billion per year in revenue. Along the way, the company turned four employees into billionaires and an estimated 12,000 into millionaires, while amassing some $250 billion in equity for shareholders. In 1990, Countrywide Credit emerged as the nation's leading mortgage banker. That same year, networking company Cisco Systems went public at a split-adjusted $0.08 per share and helped to usher in the Internet age with its routers and switches. Countrywide disappeared into Bank of America in 2008, after its credit rating was slashed to "junk" by Standard & Poor's; Cisco now employs over 65,000 people and has created over $120 billion in market value. Over the past 10 years, the airlines posted loss after loss, received numerous government bailouts, and saw the XAL airline stock index fall from 175 to 35, erasing billions in shareholder value. Meanwhile, a little Silicon Valley firm with a rather silly name, Google, built a $25 billion a year advertising behemoth and rocketed its market cap to over $140 billion. And the list goes on. Dell computers are still widely known for their "Dude, you're getting a Dell!" ad campaign, but it's been more like, "Dude you're getting $23 billion since your 1988 coming-out party!" Global electronic storage leader EMC has gone from a tiny outfit when it went public in 1986 to $37 billion today. And that's not including its subsidiary VMware, spun off on its own and now valued at some $25 billion. Since 2000, biotechnology leader Celgene has added over $20 billion in wealth to its shareholders' pockets. It isn't just the behemoths, either. Smaller companies across the industry, and straight through America's supposed lost decade, have granted themselves licenses to print money. Since its 2002 IPO, for example, Netflix has built up a $5.6 billion market cap. Computer graphics chip maker NVIDIA has conjured $5.8 billion in new wealth since its 1999 public debut. Boating equipment supplier Garmin reinvented itself last decade through GPS navigation systems, to the tune of $5.8 billion. Even today, as we struggle through what many have labeled the next great depression, technology keeps on creating fortunes. Founded in 2000 and IPO'd in 2009, restaurant software pioneer OpenTable has put on weight to the tune of nearly $1 billion in market cap and is still growing furiously. Network security outfit Fortinet, also founded in the doldrums of 2000 and taken public just last year, has secured some $1.1 billion for its shareholders and the fast-growing new market it created. Sure, the easy-money days were 1980-2000, when the tech-heavy NASDAQ Index soared from around 160 to 4,700. That's a stunning compound annual growth rate of 18.5% for 20 years. If you managed to ride the wave trough to peak, every dollar you threw at the NASDAQ turned into 30. And the beauty of it was, you didn't have to know silicon from soy sauce. You could have put your investment cash into almost anything. No longer. In 2000, the balloon popped. The dotcom bust slammed into the market, the economy went into recession, and the era of indiscriminate investing came to an abrupt and well-deserved end. The NASDAQ Index remains at just about half the high-water mark established ten years ago. Small wonder so many have lost all faith in technology. Which is too bad. Because technology is an unstoppable force. It doesn't grind to a halt, or even slow down, just because it falls out of favor on Wall Street. Inventors continue to innovate, entrepreneurs continue to market the resultant products, and consumers continue to buy. Moreover, although the train has been rolling right along, it's far from too late to get on board. Savvy tech investors may have to put in the time and effort to sort the good companies from the bad this time around, thankfully. But there are more opportunities than ever to use the sector to build personal wealth. Some look at technology and see only the downsides. The oil spills, the loss of privacy, the ugly machinery of war. But we recognize that technological advances have, for the most part, made our lives longer, better, healthier, more comfortable, and more fun. There's no reason to believe that that trend won't continue. In fact, the biotech and nanotech revolutions now just getting underway promise to usher in a renaissance of such magnitude that it will likely make all our previous techno-magic seem like simple card tricks. (Although we will need to refrain from blowing ourselves up in the interim.) So the answer to the original question is: no, we haven't lost our ability to create wealth. At least not in one critical area for the future. And with every conceivable measure showing the rate of technological change increasing exponentially, we have accelerated it. Looking ahead, the eightfold increase in mega-caps since 1980 is likely to seem paltry thirty years from now. More foreigners will enter the ranks; many more, since China and India presently contribute fewer than two dozen to the world's 500 largest companies. And it's dead certain that the market leaders in 2040 will include many firms that today are no more than a gleam in a high schooler's eye. As an investor, cashing in on the tech boom of the past three decades has meant finding the most promising young companies at the beginning of their trip skyward. That will also be the case in the next three. Only the names will change.

John F. Mauldin johnmauldin@investorsinsight.com

You are currently subscribed as jmiller2000@gmail.com. To unsubscribe, go here. Reproductions. If you would like to reproduce any of John Mauldin's E-Letters or commentary, you must include the source of your quote and the following email address: JohnMauldin@InvestorsInsight.com. Please write to Reproductions@InvestorsInsight.com and inform us of any reproductions including where and when the copy will be reproduced. Note: John Mauldin is the President of Millennium Wave Advisors, LLC (MWA), which is an investment advisory firm registered with multiple states. John Mauldin is a registered representative of Millennium Wave Securities, LLC, (MWS), an FINRA registered broker-dealer. MWS is also a Commodity Pool Operator (CPO) and a Commodity Trading Advisor (CTA) registered with the CFTC, as well as an Introducing Broker (IB). Millennium Wave Investments is a dba of MWA LLC and MWS LLC. Millennium Wave Investments cooperates in the consulting on and marketing of private investment offerings with other independent firms such as Altegris Investments; Absolute Return Partners, LLP; Plexus Asset Management; Fynn Capital; and Nicola Wealth Management. Funds recommended by Mauldin may pay a portion of their fees to these independent firms, who will share 1/3 of those fees with MWS and thus with Mauldin. Any views expressed herein are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest with any CTA, fund, or program mentioned here or elsewhere. Before seeking any advisor's services or making an investment in a fund, investors must read and examine thoroughly the respective disclosure document or offering memorandum. Since these firms and Mauldin receive fees from the funds they recommend/market, they only recommend/market products with which they have been able to negotiate fee arrangements. Opinions expressed in these reports may change without prior notice. John Mauldin and/or the staffs at Millennium Wave Advisors, LLC and InvestorsInsight Publishing, Inc. ("InvestorsInsight") may or may not have investments in any funds cited above. PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE INVESTMENTS, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER. Communications from InvestorsInsight are intended solely for informational purposes. Statements made by various authors, advertisers, sponsors and other contributors do not necessarily reflect the opinions of InvestorsInsight, and should not be construed as an endorsement by InvestorsInsight, either expressed or implied. InvestorsInsight and Business Marketing Group may share in certain fees or income resulting from this publication. InvestorsInsight is not responsible for typographic errors or other inaccuracies in the content. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results. We encourage readers to review our complete legal and privacy statements on our home page. InvestorsInsight Publishing, Inc. -- 14900 Landmark Blvd #350, Dallas, Texas 75254 © InvestorsInsight Publishing, Inc. 2010 ALL RIGHTS RESERVED

Fwd: The Dark Side of Deficits - John Mauldin's Weekly E-Letter

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From: John Mauldin <wave@frontlinethoughts.com>
Date: Sat, Aug 28, 2010 at 4:34 PM
Subject: The Dark Side of Deficits - John Mauldin's Weekly E-Letter
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Thoughts from the Frontline Weekly Newsletter The Dark Side of Deficits by John Mauldin August 27, 2010
In this issue: Secular Bull and Bear Markets It's Not the (Stupid) Economy The Consequences of a Credit Crisis The Dark Side of Deficits LA, Europe, Kansas City, and Houston
In the pre-crisis days, I used to write about things like P/E ratios, secular bull and bear markets, valuations, and all of the things we used to think about in the Old Normal. But what about those topics as we begin our trip through the New Normal? It's time to reconvene class and think through what might change and what will remain the same. I think this will be a fun read - and let me tip my hand. I come out on the side of a new secular bull that gets us back to trend - but not just yet. The New Normal has to have its turn first. (Note: this will print out longer than usual, as there are a lot of charts.) And speaking of first, I once again need some help from readers. I will be in "jail" next week for the Muscular Dystrophy Society. I need you to help bail me out. You can go to https://www.joinmda.org/downtowndallas2010/johnm and make a donation to help kids and families who really need help in these difficult times, and also help sponsor research that will eventually cure this disease. If you follow the link, you can see a cute video - and then make your donation! I thank you and I am sure Jerry's kids thank you too! Secular Bull and Bear Markets Market analysts (of which I am a minor variety) talk all the time about secular bull and bear cycles. I argued in this column in 2002 (and later in Bull's Eye Investing) that most market analysts use the wrong metric for analyzing bull and bear cycles. (For the record, even though I am talking about the US stock market, the principles apply to most markets everywhere. We are all human.) "Cycles" are defined as events that repeat in a sequence. For there to be a cycle, some condition or situation must recur over a period of time. We are able to observe a wide variety of cycles in our lives: patterns in the weather, the moon, radio waves, etc. Some of the patterns are the result of fundamental factors, while others are more likely coincidence. The phases of the moon occur due to cycles among the moon, the earth, and the sun. In other situations, though, apparent patterns are no more than the alignment of random events into an observable sequence. All cycles have several components in common. Cycles have a start and an end, they have characteristics that repeat from cycle to cycle, and they often have an explainable cause. Stock market observers have identified what they believe to be scores of cycles, patterns, correlations, and relationships that have spawned a seemingly endless inventory of predictions and trading schemes. Every trader has his favorite system, well-fortified with back-tested "research" and "facts." These systems all work fine until you begin to use them with real money. The patterns are so numerous that some market experts discount all theories and acquiesce to a philosophy of randomness (that would be you, Burt!). However, just because we don't understand it, doesn't mean there's not useful information contained within a pattern. I argue that we should use valuations and not prices as the criterion for determining secular bull and bear cycles. If you use valuations, the cycles jump off the page at you. Using prices, it is very difficult. Let's look at a table prepared by my good friend Ed Easterling of Crestmont Research. Ed co-authored the two chapters in Bull's Eye Investing on stock market cycles and has a treasure trove of charts and tables on a wide variety of investment topics at www.crestmontresearch.com. And his book Unexpected Returns is a must-read for anyone who manages money, whether their own or someone else's. OK, the following chart shows secular bears in terms of valuations. There have been four bulls and five bears (we are in one now) since 1900. (You can see a larger chart at Ed's site, under secular cycles.) Secular bulls begin with low valuations and continue until valuations get "too high" in terms of P/E ratios. The opposite for secular bears. The average cycle over the last 110 years lasted about 13 years. These are not short-term phenomena. Within those longer-term secular cycles you can have so-called cyclical swings based on price, and some of those counter-trend cycles can be quite large! The first cycle of the twentieth century was a bear. It started in 1901 with the market P/E ratio cresting at 23. Twenty years later, with the P/E ratio firmly in single digits at 5, the bear went into hibernation. Over the twenty years of that secular bear, the Dow Jones Industrial Average (DJIA) had managed to tick up from 71 at year-end 1900 to 72 at year-end 1920. But, during those two decades, the market moves were far from calm. Annual returns from New Years' Eve to New Years' Eve ranged from -38% to +82%! The best-performing three years were +82%, +47%, and +42%. After each of those years I am sure the pundits proclaimed the death of the bear. Yet the three worst years were -38%, -33%, and -31%. As we'll see with most secular bear cycles, the period was as violent and choppy as the high seas in a monsoon. Across the 20 years in this bear cycle, 45% were positive-return years - but never more than two in a row!  The 11 down years were generally singles or pairs, with only one three-year stretch at the start of the cycle. Although the average gain was +30% and the average loss was 17%, the change from beginning to end was a paltry +2% in total. Yet during that secular bear cycle, the economy grew and earnings rose. However, P/E valuations declined and offset virtually all of the economic growth. The market's price (P) was essentially unchanged from start to finish, and E (earnings per share) rose sharply. So with the market price (P) virtually unchanged, it is clear that the decline in the P/E ratio offset the gains in earnings (E). Earnings growth is often strong in bear markets - and that growth is eroded by declining P/E ratios. Most investors do not think of the years 1933-36 as being part of a bull cycle, as the markets did not make a new high from the 1929 high. We think of those times as the heart of the Depression. But P/E ratios rose from single digits to 19, and the market tripled in just a short time. It behooves those who are genetically predisposed to a bearish position to remember that markets have a logic of their own. The critical factor is to notice that at the start of each bull cycle, the markets had single-digit P/E ratios, with no exception. NO secular bull market ever began with high P/E ratios, even though significant rallies often started from high P/E ratios. The lesson of history is that all periods of high valuations come to an unhappy end. And that will be the case for cycles to come. Notice that real secular bull cycles begin with low double-digit or single-digit P/E ratios. Today the P/E on reported earnings is 16.3, down from the 42 at which this cycle started, but still a long way to go until we get to low double digits. You hear a lot of BS on various media about forward P/E ratios being only 11.5; so if that is the case then stocks are cheap, even by my standards. But those stock touts and shills use operating earnings, something that was really never done until the 1990s, and that is a way for companies and people who want you to buy stocks or mutual funds to maintain that valuations are better than you think. Operating earnings estimates are over 39% higher than estimated as-reported earnings. Reported earnings are real, in our pockets, what we put on our tax returns. Operating earnings are of the EBIH variety, that is Earnings Before Interest and Hype, or Earnings Before Interest and Bad Stuff (the BS of earnings). Those are the expenses they ignore because they pinky swear those mistakes will never happen again. Anybody using operating earnings on TV should have a flashing warning underneath their picture that says "stock promoter" or "cheerleader" or worse. I lose patience with such pandering. That being said, using reported earnings estimates, by the end of 2011 stocks may be getting to the place where there is some value in the broad market, based on history. Not by a lot, but enough that the next ten years might not be a write-off, again by historical standards. Enough to make me a bull? No, because we will likely not be down close to single digits. But we will be getting there. It's Not the (Stupid) Economy How many times are we told by the financial "experts" that the economy drives the stock market? It's often emphasized that when the economy picks up, the stock market will follow (or even lead). While this may be true in the short term, the data clearly shows it is not so in the long term. The economy and earnings can be rising even as the market falls or drifts sideways. Over time, the stock market is driven by two major factors: long-term earnings and price/earnings (P/E) ratios. We do recognize that the economy clearly affects long-term earnings. As a matter of fact, research demonstrates a strong relationship between earnings and nominal economic growth. However, the most significant driver of stock market returns is the valuation embedded in the P/E ratio. Over the past century, P/E ratios have cycled from higher levels to lower levels. The range from high to low has been substantial. Let's accept that earnings are generally growing, increasing over time. When P/E ratios are rising, the double impact of rising earnings and rising P/E's produces substantial stock market gains - secular bull markets. When earnings are rising yet P/E ratios are declining, the offsetting impact is a choppy, flat stock market with some rather large downdrafts from time to time - a secular bear market. Does the economy matter? Yes.  Does the stock market necessarily follow the economy? No. The key to knowing the longer-term direction of the market is to know the longer-term direction of the P/E ratio. Thus, the question of the day becomes: how can we know the direction of P/E ratios? Interestingly, average P/E ratios tend to trend over long periods of time, and markets move around them. Let's look at some charts that Ed sent to me this morning. The first is the move in P/E ratios since 1970, with Ed giving us the trendline as a dotted line. The red portion going into 2011 is based on estimated earnings. Notice that after being way below trend we are on our way (if estimates are right) to being back above. Now, let go back to 1900 and project forward on that trend line until 2030. Notice that earnings rise to almost $180 (in real terms), well more than double from where they are today. And that has been the trend for 110 years, so it is fairly well established. But now let's look at this same chart on a log scale, and with me adding a few lines of my own. Now, let me explain how I have marked up Ed's graph. First, I have circled in yellow the period from about 1930 through 1940. Note that the trend growth in earnings per share was well below the smoothed line we saw in the previous graph. No surprise, we were in a deflationary depression. But the point is that we got back to trend after the war and continued merrily on our way. Those ten years were not fun, but we did recover. Now fast forward to today. What if something like the same phenomena happened over the next 20 years? I penciled in a black line going sideways (from 2010) for about 7-9 years as earnings rise, but not as fast, and then a true boom back to the "normal" trendline by the end of 2030. And what a boom it would be to get back to the long-term trend! The Consequences of a Credit Crisis I have written in numerous letters that the aftermath of a credit-crisis recession is a lengthy period, maybe as much as ten years, where all sorts of markets are more volatile and there are more frequent recessions. By definition, recessions are not good for earnings. We should expect two recessions between now and the end of the decade. That is what comes with the end of a credit crisis and the ensuing deleveraging cycle. That is going to weigh on corporate earnings. But it will do more. Think about the period from 1966 through 1982. Four recessions, volatility, and P/E ratios ending up at 7, as Business Week famously declared "The End of Equities" on its cover. Who wanted to own stocks? Investors were disgusted. Could that happen this decade? I think it is very possible. The stock market goes sideways and P/E ratios keep marching right on down, as we go through two more recessions and people get disgusted with stocks, just like in the early '80s. Then, as we (hopefully) get our government fiscal house in order, and as new technologies kick in, we see a true boom in the 2020s! It is once again the Roaring 20s! The Dark Side of Deficits Two last charts from Ed. The first is the average GDP for the last 110 years, and the next is a graph of real GDP above and below that average of 3.3%. Note that GDP per capita in the 2000s was the second lowest for the last 110 years. Also that real GDP was the second lowest. Not pretty. One could take comfort from the long perspective that the US will get back to trend GDP growth of 3.3% and that earnings will go back to trend, as I illustrated in a previous chart. That would require a decade well above trend growth to balance things out. And that is what SHOULD happen. There is one caveat. The research of Reinhardt and Rogoff demonstrates that when the government debt-to-GDP level gets to about 90%, trend growth seems to drop by about 1%. They do not offer an explanation, just an observation. My speculation is that it might be government spending and debt crowding out private savings, not leaving enough for productive private investment. But whatever - if we do not get control of our deficit spending, we (in the US) risk putting our growth in jeopardy. If we do indeed see trend growth slip to 2.3%, then my optimistic "we get back to trend earnings by 2030," along with a roaring bull market, is at serious risk. Let me jump on Paul Krugman again. He writes a great op-ed in the NY Times today questioning whether we are in recovery, and then pounds the table for more stimulus money. He (and all neo-Keynesians everywhere, with too many in the government) only see the next 6-12 months. Running up debt today? No problem. Yet we risk our future potential growth if we continue on our present track. The research is clear. If we wish avoid some pain today, we create even more pain, and not that far in the future. There are those among us who are like teenagers, wanting to make the easy choice and avoid the pain today, not worrying about the consequences down the road. Not getting our fiscal deficits under control risks the whole economy. Let's summarize. We are still in a secular bear market. Valuations, while lower, are still not at what could be called historical cyclical bottoms. Patience is the order of the day. We will get there. And for the record, I will probably become a bull way too early and have to endure some pain on the way to profit. Such is life. And we risk that ultimately positive scenario if we do not get our federal fiscal house in order. If that does not happen, all bets are off. ALL BETS. LA, Europe, Kansas City, and Houston I was going to comment on Bernanke's speech, but this letter is near its end. Besides, what is there to really say? I have often complimented Bernanke on giving very clear speeches. This was not one of them. He was a three-handed economist (on the one hand, but on the other hand, and then on the other!) He covered every possible scenario, so no matter what happens he will have had something in the speech that was right. Oh, and he did say that more quantitative easing is on the table, even though the FOMC is deeply divided on that topic. Oh well. I (and Tiffani, Ryan, Lively, and the nanny) have to fly to LA on Tuesday for two days of previously unscheduled meetings, and then it's back to Dallas for a speech to the local Tiger 21 group. Then, starting September 11, I fly to Amsterdam for the International Broadcasting Conference, then to Malta, Zurich, Mallorca, Denmark (speech open to public), and London, home for one day, and then off for a speech to Cambridge Brokers on the 24th. Then I'm in Houston on October 1 for another public speech. And speaking of October, I turn 61 on the 4th. Where did the year go? It seems like we were just having my 60th birthday party a few weeks ago! I am experiencing an interesting new period of life. Tiffani has the nanny bring Lively (now 9 months) to my home office 2-3 days a week for the day, plus at lots of other times. I had forgotten what it is like to watch a baby grow up so fast - that first crawl, the first time she pulls up, first a lot of things. I am so lucky to be able to see all that! She recognizes my voice and gives me the biggest smile. And then Lively goes home and I don't have to change diapers. Is life great or what? Time to hit the send button. A late happy hour awaits. Have a great week. Henry turns 29 this weekend, so some of the kids will gather to wish him the best. They just keep growing up. Your waiting to channel his inner bull analyst, John Mauldin John@FrontLineThoughts.com Copyright 2010 John Mauldin. All Rights Reserved Note: The generic Accredited Investor E-letters are not an offering for any investment. It represents only the opinions of John Mauldin and Millennium Wave Investments. It is intended solely for accredited investors who have registered with Millennium Wave Investments and Altegris Investments at www.accreditedinvestor.ws or directly related websites and have been so registered for no less than 30 days. The Accredited Investor E-Letter is provided on a confidential basis, and subscribers to the Accredited Investor E-Letter are not to send this letter to anyone other than their professional investment counselors. Investors should discuss any investment with their personal investment counsel. John Mauldin is the President of Millennium Wave Advisors, LLC (MWA), which is an investment advisory firm registered with multiple states. John Mauldin is a registered representative of Millennium Wave Securities, LLC, (MWS), an FINRA registered broker-dealer. MWS is also a Commodity Pool Operator (CPO) and a Commodity Trading Advisor (CTA) registered with the CFTC, as well as an Introducing Broker (IB). Millennium Wave Investments is a dba of MWA LLC and MWS LLC. Millennium Wave Investments cooperates in the consulting on and marketing of private investment offerings with other independent firms such as Altegris Investments; Absolute Return Partners, LLP; Fynn Capital; Nicola Wealth Management; and Plexus Asset Management. Funds recommended by Mauldin may pay a portion of their fees to these independent firms, who will share 1/3 of those fees with MWS and thus with Mauldin. Any views expressed herein are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest with any CTA, fund, or program mentioned here or elsewhere. Before seeking any advisor's services or making an investment in a fund, investors must read and examine thoroughly the respective disclosure document or offering memorandum. Since these firms and Mauldin receive fees from the funds they recommend/market, they only recommend/market products with which they have been able to negotiate fee arrangements.
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You have permission to publish this article electronically or in print as long as the following is included: John Mauldin, Best-Selling author and recognized financial expert, is also editor of the free Thoughts From the Frontline that goes to over 1 million readers each week. For more information on John or his FREE weekly economic letter go to: http://www.frontlinethoughts.com/learnmore To subscribe to John Mauldin's E-Letter please click here: http://www.frontlinethoughts.com/subscribe.asp To change your email address please click here: http://www.frontlinethoughts.com/change.asp If you would ALSO like changes applied to the Accredited Investor E- Letter, please include your old and new email address along with a note requesting the change for both e-letters and send your request to wave@frontlinethoughts.com To unsubscribe please refer to the bottom of the email. PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE INVESTMENTS, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER. All material presented herein is believed to be reliable but we cannot attest to its accuracy. Investment recommendations may change and readers are urged to check with their investment counselors before making any investment decisions. Opinions expressed in these reports may change without prior notice. John Mauldin and/or the staffs at Millennium Wave Advisors, LLC may or may not have investments in any funds cited above. John Mauldin can be reached at 800-829-7273. EASY UNSUBSCRIBE click here: http://www.frontlinethoughts.com/unsubscribe.asp Or send an email To: wave@frontlinethoughts.com This email was sent to jmiller2000@gmail.com Thoughts from the Frontline 3204 Beverly Drive Dallas, Texas 75205