Big Oil

By |2014-09-04T17:00:26+00:00December 16th, 2008|Global Market Update|

Remember oil prices? They were supposed to strangle the economy. Well, it didn't work out that way. Six months ago the "peak oil" crowd were all agog with predictions of economic Armageddon based on oil prices. Since oil was headed for $200 or $300 per barrel, they said, we all had either better start learning Arabic or strap solar panels to our hybrid cars. But a funny thing happened on the way to the panic. The market didn't go along. Now market mavens are [...]

Control Freak

By |2014-09-04T16:58:40+00:00December 12th, 2008|Global Market Update|

With Bank of America planning major layoffs, a lot of folks are worried. While hardly unexpected, the big bank’s plans to cut 35,000 jobs are still discouraging. Many people are upset, and wonder if the axe is going to fall on them. When times are unsettling, the best thing to do is focus on what you can control. You can’t control whether your office is shut down, but you can control whether you’re becoming more valuable to your employer. You can’t control what the [...]

Diversify This

By |2014-09-04T16:58:02+00:00December 11th, 2008|Global Market Update|

What do we mean by diversification? And how do we achieve it? Diversification reduces your investment risk spreading your assets around. It has been said that there really only three types of investments: loans, land, and ownership of an enterprise. Everything else is a mixture of these three. Loans are paid back over time, usually with periodic interest; land is what a structure sits on (and produces rent); and ownership entails control over a company’s affairs. By spreading your wealth between these asset types, [...]

Classical Investing (Part 3)

By |2014-09-04T16:56:53+00:00December 10th, 2008|Global Market Update|

In Sophocles' Oedipus plays we see another investing principle. In Oedipus the King the hero begins an inquiry to find out what happened to the former King of Thebes. Although it looks like he's going to incriminate himself, Oedipus doggedly looks for the truth, even gainsaying the Queen who claims that some things are better left unknown. Oedipus persists, and when the full truth is disclosed he blinds himself in his agony. But as the story continues in the next play, he ends up [...]

Schizophrenia

By |2014-09-04T15:55:10+00:00December 8th, 2008|Global Market Update|

People ask me what I think of the market, and I honestly tell them that I am of two minds. On the one hand, we have the worst employment market in a generation. Following the cessation of leasing programs in August, auto sales fell off a cliff. We now have the practical consequences of the seizure in consumer finance. It’s frightening to invest during such volatile times. But on the other hand the equity market is resilient, LIBOR spreads are coming in, banks are [...]

Lessons from Tragedy

By |2014-09-04T15:37:09+00:00December 5th, 2008|Global Market Update|

There’s no such thing as a free lunch. That’s the lesson of last Friday’s shopper stampede. Last week a Wal-Mart employee was trampled to death as bargain-hunters stormed the store. The 34 year-old man was thrown back onto the floor as the crowd surged around and over him. Such behavior isn’t limited to New Yorkers. In London the furniture store Ikea had to close just after opening when 6000 shoppers forced their way in. The chain had offered 90% discounts on leather sofas. Similar [...]

X?

By |2014-09-04T15:31:16+00:00December 4th, 2008|Global Market Update|

Responses to the financial crisis so far have been ad-hoc. Do we need an overarching strategy? Sixty-one years ago George Kennan authored an article that laid out a broad vision for confronting and containing the Soviet threat. This framework gave U.S. policy-makers a structure from which to approach various crises, such as the Berlin blockade, The Korean conflict, and the Cuban missile crisis. The article was general enough to be applicable in lots of different situations and non-partisan: it didn't waste time with recriminations [...]

Does “Make Work” Work?

By |2014-09-04T15:30:17+00:00December 3rd, 2008|Global Market Update|

As the economy contracts, calls are coming in for the government to create jobs. In the ‘30s Keynes was puzzled by the sight of millions of job-seekers who couldn’t find work. The power of government spending fascinated him, and so he proposed that the Federal Government create jobs employ able-bodied laborers. The result was the NRA, CCC, and other alphabet agencies. At its best, the job programs created valuable infrastructure: dams, roads, and schools. At its worst, it paid people to dig holes and [...]

Bailout, Shmailout

By |2014-09-04T15:28:53+00:00December 2nd, 2008|Global Market Update|

What's happened to the auto companies? And what should we do about it? There's no question that the credit crunch has exacerbated conditions for the Big Three. Back in August Chrysler announced that because of insurance issues they were eliminating leasing as a financing option. The other companies quickly followed suit. Auto sales have fallen 30% since then. But it's also true that for years the only profitable vehicles coming out of Detroit were gas-guzzling SUVs and pickup trucks. Building your business plan around [...]

Classical Investing (Part 2)

By |2014-09-04T15:27:59+00:00December 1st, 2008|Global Market Update|

What can the Classics teach us about investing? A lot. In Homer’s Iliad we learn a lot about war and the ups and downs of life in the Bronze Age. In one memorable scene in Book 12 one of Homer’s heroes gives his rationale for fighting: since he enjoys the fat of the land, it is his part to bear the various fortunes of war. Homer’s lesson here is that you have to take the bad with the good. To apply this to investing, [...]