Pet Rock

By |2014-09-03T20:13:50+00:00July 17th, 2008|Global Market Update|

Ever heard of the phrase, “dumb as a box of rocks"? Some rocks are pretty valuable these days. Especially the yellow, shiny ones. Gold has been on a tear. Since the equity market topped out in the summer of 2000, the mystical metal has been the investment of choice, rising three and a half times, or 17% per year and outpacing 85% of the stocks in the S&P. Gold’s recent performance has many questioning the wisdom of “fiat” money, which is created by the [...]

Fannie’s Bottom

By |2014-09-03T20:11:13+00:00July 15th, 2008|Global Market Update|

What if they held a wake and nobody came. That’s what it seems like as we watch Fannie Mae and Freddie Mac thrash around. The two mortgage giants have fallen about 90% since last Summer. Still, they’re involved with over half of all the mortgages originated in the country. The market is worried that with housing prices declining more and more homeowners will find themselves upside-down on their mortgages and just turn in the keys. If that happens, Fannie and Freddie’s capital may be [...]

Bottom’s Up!

By |2014-09-03T20:10:02+00:00July 15th, 2008|Global Market Update|

As Princess Leia said to Luke Skywalker, “This is some rescue!” Since the Treasury assured investors that Fannie and Freddie would continue “as is,” stocks of the big mortgage originators have fallen another 50%. What gives? This is a case of safe investments being … safe. Bondholders in Fannie and Freddie have hardly seen a hiccup.  But stock investors are rightly concerned that if the Feds take control, they’re gonna get wiped out. Remember Bear Stearns? That “bailout” cost equity investors 95% off the [...]

Competitive Thoughts

By |2014-09-03T20:08:51+00:00July 14th, 2008|Global Market Update|

That’s the new catch-phrase. It embodies the concept that everyone, everywhere, will compete for everything. It’s what comes after globalization, and it’s a hypercompetitive free-for-all, where companies from around the globe vie with one another for talent, capital, customers, workers, and everything else.. But if customers, capital, and capabilities really are free to seek their own good in a world of vanishing boundaries, where are the new limits? And who wins and who loses? Unquestionably, consumers win. More and better stuff at cheaper prices [...]

General Musings (GM)

By |2014-09-03T20:07:47+00:00July 11th, 2008|Global Market Update|

“What’s good for the country is good for General Motors, and vice versa.” So spoke Charles Wilson while he was President of GM in 1953. Ironically, it was on Wilson’s watch that GM agreed to generous health and pension benefits for its workers, those same benefits which are now such and economic drag on the company. Now what would be good for GM is to offload its health and pension obligations onto the rest of the country. The big auto makers have energetically lobbied [...]

Housing Hubbub (Part 2)

By |2014-09-03T20:06:49+00:00July 10th, 2008|Global Market Update|

Now the pundits are having their say. Yesterday I discussed pending home sales. While they’re down year-over-year, they’ve been essentially flat for the last six months. That’s good news? Don’t we want the economy to grow? I thought flat was bad. Yes, but because the housing market has been falling, stability is actually quite encouraging. Interestingly, the number of pending sales has been falling since the middle of 2004. So while the underlying economics may be stabilizing, it may take a while for this [...]

Housing Hubbub (Part 1)

By |2014-09-03T20:05:34+00:00July 9th, 2008|Global Market Update|

The housing news is mixed, and the market is confused. Pending home sales for May were down about 15% from a year ago. While that isn’t good, it’s not as bad as it was over the winter, when pending sales were down over 20%. I’ve said before that housing figures between October and April are no good, but here’s evidence that some of the doomsayers may have a point. Even Janet Yellen, President of the San Francisco Fed, is downbeat on the prospects for [...]

Limbo Land

By |2014-09-03T20:03:42+00:00July 8th, 2008|Global Market Update|

How low can we go? Financial stocks are reeling. The World Bank estimates that mortgage losses will top $1 Trillion. Someone called The Bridgewater Group predicts that there will be $1.6 Trillion in losses during this downturn. If you talk to a prediction market guru, he’ll note that the global financial stocks have declined $3.3 Trillion since the credit crisis began. What should we think? Everything hinges on the creditworthiness of the US economy, and the housing market is at ground zero. We don’t [...]

Managing Mr. Market

By |2014-09-03T20:02:18+00:00July 7th, 2008|Global Market Update|

So what should we do? With the stock market down over 10% so far this year and most newspapers trumpeting the news that a “new bear market” has begun, how should investors respond? “First, do no harm” the ancient health credo proposes. It’s good market advice as well. Whatever you do, don’t panic. The market has seen bear markets before, and it will again. The key is to avoid selling when it’s low and buying in exuberance when it’s up. Second, manage your money, [...]

You *Can* Eat the View

By |2014-09-03T20:00:22+00:00July 3rd, 2008|Global Market Update|

Many rural counties are growing faster than urban centers. But when people move out of the city they often find that the same job pays less than it would in Boston or New York. Why? Classical economics would note that rural workers often have to do more general tasks and aren’t as specialized  as their urban counterparts. Ever since Adam Smith described that pin factory, the productivity gains from specialization have been part of economic legend. Ten pin-factory workers can make about ten thousand [...]