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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The Last Laugh?

“I am a man of the desert; nobody is going to laugh at my beard!”

Source: Wikipedia

That’s what the Saudi oil minister exclaimed as he stormed out of an OPEC meeting some 30 years ago. The $34 oil price—equal to $100 today—had been supported by massive cuts in Saudi production. They were the “swing producer” that allowed the cartel to maintain its higher price. But OPEC was being torn apart by over-pumping, price discounting, and increased non-OPEC production. So the Saudis decided to pump all they could. The price then fell over 75%, to $8 per barrel.

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Go With the Flow?

Does momentum investing work?

Source: Callen Associates

Investors have a tendency to chase returns. That’s why mutual fund companies hype their most recent performance in big, bold letters, just above the fine-print disclaimer: “Past performance does not guarantee future results.” There’s a reason they advertise this way: everyone loves a winner.

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Douglas Tengdin's Global Market Update