Fast and Slow

Why is US growth faster than Europe?

Source: drdianahoppe.com

In 2008 and 2009, the global economy collapsed, brought down by a credit crunch that started in here but quickly spread around the world. Since then, the US economy, while weak, is moving back towards normal. Europe, on the other hand, looks like it’s about to enter its third recession in six years. Why the difference?

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A Flash of Insight (Part 2)

How do people develop new ideas?

Source: Wikipedia – Rainer Knäpper, Free Art License (http://artlibre.org/licence/lal/en/)

Insight may come from Shakespeare’s “unpath’d waters and undream’d shores,” but it has to be nurtured. Great ideas usually come from individuals who are part of a group, who work where people encourage and refine one another. People are social creatures, Aristotle says. The rare self-sufficient individual is “either a beast or a god.” So the community needs to be cultivated. What is such a community like?

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A Flash of Insight

Where do great ideas come from?

Source: Wikipedia – Fir0002/Flagstaffphotos

Sometimes something new comes up that takes the world by storm, like relativity or semiconductors or smartphones. Truly new ideas come from people who aren’t being paid to have ideas; they’re paid to be patent clerks or monks or managers. They come from folks who are quirky and individualistic and sometimes seem obsessed. It’s only afterwards the new concept seems almost obvious, and other people ask, “Why didn’t I think of that?”

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Eating the World?

Maybe Amazon won’t be eating the world.

Source: redbubble.com

Yesterday Amazon reported its third quarter results. And they weren’t pretty. In spite of growing revenues another 20% from a year ago, the company lost over $400 million the third quarter, up from a $40 million loss a year ago. Included in these numbers was a $170 million charge for their smartphone, which hasn’t been selling very well.

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Blowing Up or Blowing Out?

What’s up with inflation?

Source: Wikipedia

Inflation numbers were reported yesterday, and they were pretty tame. In fact, for the past year, core inflation has been running at a little less than 2%. And total inflation is now at the same level. But a lot of folks feel that if prices aren’t rising, their wallets must be shrinking. For them, a dollar today doesn’t go as far as it did a year or so ago. What’s up with that?

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Back to School

Are colleges the ideal investors?

Source: Dartmouth.edu

Private colleges have a long-term time horizon. Or at least, they’re supposed to. The first school endowments were agricultural estates that paid rent. A College Bursar’s job was to manage these estates by approving new leases, renewing old ones, selling timber, and appointing stewards. Sixty years ago land comprised more than half of the typical endowment.

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Lord Keynes, Investor

Is your money where your mouth is?

Source: theguardian.com

One of the more frustrating aspects of reading pundits today is that when they write about investments they have little practical understanding. Economists discuss investing or enterprise as if it is the simplest thing in the world to structure a portfolio or build a profitable business.

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Great Skier Theory

How important is an individual manager?

Source: Sports Illustrated

Tom Watson, Jr. liked to ski. He was also chief executive of IBM during a critical period of the company’s history. By all accounts he was quite successful, growing revenues over 15% per year during his 17 years at the helm from 1954 to 1971. He also directed IBM’s investment in a production facility in Essex Junction, Vermont, beginning in 1958. Over time the Essex facility grew from 500 to 8000 employees, and now directly or indirectly affects 10 to 20% of Vermont’s economy.

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Slacker Market

How much slack is there in the labor market?

Source: Wikipedia

It depends what you mean by slack. Most people think the unemployment rate is a good measure of slack, and it’s intuitively appealing: divide the number of job-seekers by the number of people in the workforce, and that tells you what percent of people want to work, but can’t find a job. After falling for the last five years, the unemployment rate—currently 5.9%–is almost back to its post-World War II average of 5.8%.

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Douglas Tengdin's Global Market Update