Know Thyself

By | 2014-09-05T13:07:54+00:00 May 29th, 2009|Global Market Update|

What is the difference between investment and speculation? Many practitioners have considered this question. Is it the time frame? The instruments? The actors? In our experience, the line is clear: the difference between investment and speculation is internal versus external orientation. Investment is a reflective exercise, and begins by asking yourself what your goals and limits are. Speculation is an external activity, and begins with a search for profits. So an investor begins by formulating a plan. A speculator looks for a hot tip. [...]

Hard Labor

By | 2014-09-04T21:19:56+00:00 May 28th, 2009|Global Market Update|

How is labor faring in the auto industry's troubles? The administration has taken an active role in the negotiations between creditors, management, and the unions. In Chrysler's case, the union seems to be getting a bigger share of the company than the secured lenders. A win for Labor, right? Well, in the short run, yes. But who's gonna lend to industries with politically powerful unions, now? There are lots of industries-from newpapers to airlines to heavy machinery-that need capital to update their operations. When [...]

A New Calculus for Housing

By | 2014-09-04T21:16:47+00:00 May 27th, 2009|Global Market Update|

When I studied math, I understood how to calculate the slope of a line, but its curve? That was confusing. My teacher called it the "second derivative." And it was important, because it told you which way the slope was changing. When the slope was down but the second derivative was positive, then the line was curving up. Eventually, the slope would be positive. That's where we seem to be in the housing market. The latest figures show that prices are still falling around [...]

Relational Finance

By | 2017-07-17T12:35:23+00:00 May 26th, 2009|Global Market Update|

Most financial managers try to practice rational finance, where emotions are removed from the investment process. But at Charter, we practice relational finance as well. Relational finance is when you invest in such a way that you don't have to worry about the future. It means that you don't dread the arrival of your next statement in the mail. It means that long-term goals are managed, not only by squeezing out more return, but also by managing your expenses. It may not maximize profits, [...]

In Memoriam

By | 2014-09-04T21:14:56+00:00 May 25th, 2009|Global Market Update|

Happy Memorial Day! Formerly known as Decoration Day, Memorial Day commemorates the men and women who have died in battle while serving our country in the military. First enacted to honor Union soldiers after the Civil War, it was expanded after World War I to include soldiers killed in all American wars. Now notable as the unofficial start of summer and the running of the Indy 500, we do well to remember those who served and died on this day of barbeques and softball. [...]

First Aid

By | 2014-09-04T21:13:25+00:00 May 22nd, 2009|Global Market Update|

When I was a Boy Scout, I earned the First Aid merit badge. In an emergency I learned that one of the first things to do is stop the bleeding. And one of the best ways to stop the bleeding is to apply pressure directly to the wound. That's why there's no imperative to fix health care right now. There's no pressure on consumers, providers, or the government to change things. Even though it's been estimated that Medicare as currently configured amounts to a [...]

California Here We Come?

By | 2014-09-04T21:10:54+00:00 May 21st, 2009|Global Market Update|

In The Grapes of Wrath a hard-bitten Oklahoma family heads for California to escape the Dust Bowl and the Depression. When they get there, times are still tough. On Tuesday California voters rejected a revenue initiative designed to save the state's finances. The resulting budget crisis could lead to insolvency. Since the state doesn't have the ability to print money, they can't fake their way out of this mess. One option is to go to Uncle Sam for a bail-out. The political calculus is [...]

Inside the Box

By | 2014-09-04T21:09:43+00:00 May 19th, 2009|Global Market Update|

Often businesses are rewarded for thinking outside of the box. With Wal-Mart, it's inside-the-box thinking that matters. Wal-Mart sales have been improving due to "downscaling," where people who usually shop at Tiffany's shop at Kohls, and Kohls buyers shift to Wal-Mart. Since Wal-Mart's efficient operation allows it to be the low-cost leader, there's not a lot of places for people to go downscale from Sam's Club. But what happens when things get better? Do customers migrate back? Wal-Mart has been working hard to see [...]

Bair Market

By | 2014-09-04T21:08:36+00:00 May 17th, 2009|Global Market Update|

Sheila Bair is on a tear. The FDIC chair recently noted that some bank managements will have to go. She obviously wasn't talking about banks that have nothing to do with the TARP plan, or banks who are rushing to pay back the money because of what Wells' CEO Kovacevich called the Government's "asinine" attitude. No, it would have to be Bank of America and Citigroup, the poster-children. And their Boards as well. Although the FDIC has since issued "clarifications," Bair's signal came through [...]

The Wizard

By | 2014-09-04T21:07:06+00:00 May 15th, 2009|Global Market Update|

Is Washington really the Land of Oz? President Obama got a lot of health care "leaders" together to commit to keeping health care costs from rising. His announcement raises several questions: 1. Costs compared to what? Since we don't know what future costs are, how can we know if this commitment saved any money? 2. What's gonna reduce the costs? Will doctors and nurses take a pay cut? How then will we attract new health care workers? Will insurance and drug companies forgo their [...]