Biting the Fed’s Hand

By | 2014-09-03T20:57:40+00:00 August 29th, 2008|Global Market Update|

How is the Fed doing? In the idyllic setting of Jackson Hole, central bankers meet, greet, and eat. Between schmoozing, they listen to papers and presentations. This last week a London School economist gave Obi-Wan Bernanke and Don Kohn a serious dressing down. Willem Buiter presented a 144-page paper, 143 pages of which were devoted to slamming the central bank for its handling of the past year’s financial crisis. He says the Fed overreacted to what is essentially a Wall Street problem and is [...]

Show me the Money

By | 2014-09-03T20:56:28+00:00 August 28th, 2008|Global Market Update|

Dividends are a good thing. So why have they gotten such bad press lately? When you invest in a stock, cash that the company pays you is your dividend. All kinds of information about the company can be changed, but you know for sure what you’ve gotten back. And paying dividends requires management discipline. So why are dividend-paying stocks doing so poorly? Over the past two years the market has returned only 2% per year, but a market-basket based on dividends has been down [...]

Party Time

By | 2014-09-03T20:55:17+00:00 August 27th, 2008|Global Market Update|

Does it get any better than this? Consumer confidence is down at depression levels. New  home sales are near all-time lows. Some of our largest financial institutions are looking at government bailouts. And the Cubs have the best record in baseball. Can Armageddon be far off? This bad news is old news to the financial markets. The stock market has fallen by about 20% since last fall. That leads to bad feelings about the markets, the economy, and life in general. But life goes [...]

Going Swimmingly

By | 2017-07-17T12:35:25+00:00 August 20th, 2008|Global Market Update|

Michael Phelps’ performance was amazing. The Olympian overcame a childhood fear of the water and the scorn of adolescent peers to win more gold medals than any person in history. Often in investing we have to confront our fears and do what is unpopular. In fact, what’s ultimately most profitable rarely feels comfortable at the time. And what’s comfortable rarely ends up profitable. It’s like our brains are wired for failure. This is part of the reason investing is so hard. Many adaptive instincts [...]

Second (Citi) Thoughts

By | 2014-09-03T20:52:49+00:00 August 18th, 2008|Global Market Update|

There are no bad investments. Only bad prices. Citibank is facing some serious challenges. The company’s market value reflects this. Does that make Citibank a bad investment? Probably not. The price has declined almost 70% over the last year precisely because the company is looking at so many issues. But many people now feel that the parts are now individually worth more than the whole. Take their consumer business. Years ago they bought Diner’s club, Associates, and Macy’s credit cards and wove them into [...]

The Citi That Never Sleeps

By | 2014-09-03T20:51:43+00:00 August 15th, 2008|Global Market Update|

What’s wrong with Citibank? The bellwether US bank has lost almost 70% of its market cap over the past year. The $2.2 trillion bank is at the epicenter of the sub-prime debacle and has written off $55 billion in bad debts so far. It wasn’t supposed to be this way. When Sandy Weill pulled together a world-class investment bank, insurance company, wealth management group, and a commercial and international bank, the diverse product lines were supposed to support each other. But the synergies of [...]

Stimulating Questions

By | 2014-09-03T20:50:13+00:00 August 14th, 2008|Global Market Update|

Was the economic stimulus plan a flop? Marti Feldstein, a Harvard economics professor and former adviser to President Reagan, thinks it was. He figures that people only spent about 12% of their checks. The rest went into savings. Many dispute his methodology, but probably true that less than a quarter was immediately spent. The rest may have gone to pay bills or pay down credit cards. If that’s the case, we sure didn’t get much of a bang for our $100 billion. But this [...]

Successful Investing (Part 4)

By | 2014-09-03T20:48:50+00:00 August 13th, 2008|Global Market Update|

Diversify, diversify, diversify. That’s principle number four. Successful investors don’t “let it ride” and keep their bets on the same horse. They know that what goes up, comes down. And what goes around, comes around. Take the most basic diversification of all—between bonds and stocks. Many long-term investors own 100% stocks, for the simple reason that this is the asset class that has the greatest growth potential. But if you add just a quarter of bonds to the mix, and consistently rebalance, your risk [...]

Reversal

By | 2014-09-03T20:47:47+00:00 August 12th, 2008|Global Market Update|

Two points. That’s what wrestlers score when they get a reversal. And that’s what seems to have happened in the US stock market. A month ago, higher energy prices had people worried that a dampened consumer would weigh on the housing market, which would lead to more foreclosures and additional banking writoffs, and maybe even more failures. Now, lower energy prices have people expecting that a revived consumer will stabilize the housing market and lead to a financial recovery. That’s why financial and consumer [...]

Already?

By | 2014-09-03T20:46:45+00:00 August 11th, 2008|Global Market Update|

I knew it! Oil breaks $115 and the doom-mongers are already coming out. Now that supplies are rising, speculators are leaving the market, and consumers are driving less, the gloomers are seeing storm clouds around this silver lining. The theory is that the only reason oil prices are falling is because global demand is falling. And that’s because the world is entering a recession. But there are a lot of reasons why demand is down. Some is technological, as people drive smaller cars. Part [...]