Warren the Great

By | 2014-09-03T18:29:00+00:00 April 30th, 2008|Global Market Update|

Warren Buffet is biting off a stake in Wrigley’s gum. At a time when the US economy is softening, the Oracle of Omaha is buying. What lessons can we learn? In an interview, Buffet was asked straight out: why now? He answered quite clearly: the best time to buy a really great business is when you can. The folks at Wrigley want to sell. And so since Warren Buffet likes to invest in  well-established brands—think Coke, Gillette, and See’s candy—and Wrigley’s has been around [...]

Hedging Your Bets

By | 2014-09-03T18:27:34+00:00 April 29th, 2008|Global Market Update|

Is there a global elite out there? You bet there is. Do they operate under different rules than you or me? Sometimes yes, sometimes no. There’s no question that the rich can get richer. Hedge fund managers George Soros and James Simon earned over $3 billion last year betting against the US housing market. And they can use vehicles like Credit Default Swaps that aren’t available to us mere mortals. But do the super-rich possess super-powers? Not likely. Studies show that the average hedge [...]

Confidence in the Consumer

By | 2014-09-03T18:26:35+00:00 April 28th, 2008|Global Market Update|

You see the latest consumer confidence numbers? Do you even want to? According to the University of Michigan, confidence fell in April to its lowest level since the early ‘80s. But do you ever wonder how they come up with these numbers? They take a telephone survey of only 300 people. It’s no surprise that people sound depressed: layoffs and foreclosures have people in a funk. And if they think the interviewer is downbeat, they’re likely respond in kind. So what do the data [...]

Falling in Love

By | 2017-07-17T12:35:25+00:00 April 25th, 2008|Global Market Update|

“We can’t sell that stock! I love that stock!” How many times have I heard these words? More than I care to remember. Whether it’s a stock, or a house, or something else, people have a tendency to get overly attached to things that they own. Maybe it’s our tendency to personalize everything. Or maybe we just get greedy. Whatever the reason, many investors hang onto their purchases long after there’s any economic reason to do so. How else can we explain mutual funds [...]

The Rogue

By | 2014-09-03T18:24:28+00:00 April 24th, 2008|Global Market Update|

Late last year Societe Generale, or SocGen, was rocked by a trading scandal. Now its head honcho has to step down. Fifteen years ago, Daniel Bouton moved from the government’s finance office to SocGen’s executive suite. Since then he’s presided over remarkable growth as the bank grew five-fold. In the process, SocGen became an equity derivatives powerhouse, and the stock rose about 10% per year. But their risk management systems didn’t keep up with their business growth. A low-level functionary figured out how to [...]

Animal Spirits

By | 2014-09-03T18:23:15+00:00 April 23rd, 2008|Global Market Update|

John Maynard Keynes famously wrote that spontaneous optimism, or “animal spirits,” have more of an effect on our economic decision-making rather than rational calculation. Now we have proof. A couple of Cambridge University dons had 17 stock traders in London give saliva samples twice a day. What they found was that when the traders’ bets paid off, their testosterone levels were significantly higher. That led to more confidence and often further winnings, leading to a positive feedback loop. The researchers speculate that long periods [...]

An Oil Drought of Choice

By | 2014-09-03T18:22:07+00:00 April 22nd, 2008|Global Market Update|

Why has oil production been so slow to respond to higher prices? Since 2003 prices are up 3 ½ times. We’d expect companies to look for oil everywhere. The returns would be there. So what gives? First, the oil companies have been pretty pessimistic when it comes to prices. Many of them have forecast future crude prices of around $60 / barrel. That would imply pump prices of less than $3. We wish. But if you’re paying a $100 million for an offshore rig, [...]

Ticker Tape, Schmicker Tape (Part 3)

By | 2014-09-03T18:20:52+00:00 April 21st, 2008|Global Market Update|

So what is really important in investing? Last week we derided the notion that short-term wiggles and jiggles matter to anyone except people who profit from investor panic. But what should investors do, then? Strange as it may seem, the best thing that many investors can do to understand the markets is to get out and plant a garden. You see, planting a garden requires planning, patience, a reasonable amount of work, and a longer term perspective. You need to distinguish between everyday annoyances [...]

Ticker Tape, Schmicker Tape (Part 2)

By | 2014-09-03T18:13:41+00:00 April 18th, 2008|Global Market Update|

So why don’t we focus on the flashy elements of finance? Why don’t we comment on the latest changes in stock prices and index levels? At one level, it makes sense for a financial firm to follow the latest prices. And we do. But most of our research is done in anticipating the market’s reaction to the latest news. Once the price has changed, 90% of the news is already out there. There just isn’t that much value to be gained by following the [...]

Ticker Tape, Schmicker Tape (Part 1)

By | 2014-09-03T18:12:27+00:00 April 17th, 2008|Global Market Update|

This commentary is called the “Global Market Update,” but you may have noticed that we don’t do much discussion of daily price movements in stocks and bonds. Many people wonder why. First, we don’t think that daily price changes are particularly helpful. There aren’t many investors out there who need to know if GE went up and eighth, or Johnson & Johnson down a quarter. That kind of daily blather just adds to the noise pollution on the airwaves. Second, short-term speculation has been [...]