A Bad Bet (Part 2)

By | 2014-09-04T19:34:15+00:00 August 31st, 2009|Global Market Update|

Foxwoods' bankruptcy means trouble for more than just the State of Connecticut. Foxwoods Casino is one of the largest gaming operations in the U.S. It now may become the biggest tribal company ever to default. In a recent email, Michael Thomas, a leader of the tribal council who is seeking reelection, told tribal members that they would be paid before banks or bondholders, if revenues run short. That's not very smart. Creditors can't take over assets or operations on tribal lands, but what goes [...]

Classical Investing (Part 9)

By | 2014-09-12T10:57:32+00:00 August 30th, 2009|Global Market Update|

In running a company, is it better to be feared or loved? A recent study asked just this question. Are successful managers ones who focus on execution: budgets, goal-setting, accountability-or team-building: building consensus, having listening-skills, and developing mutual respect? Ideally, you would have both: a goal-oriented boss who listens to his people respectfully and proceeds to get the job done: ahead-of-schedule exceeding the standards, with no drama. But often those skills are mutually exclusive. On a scale of being conscientious or agreeable, one side [...]

All That Glitters …

By | 2014-09-05T13:17:12+00:00 August 27th, 2009|Global Market Update|

All that is gold does not glitter, the rhyme says. Now we have proof. Economists have been studying the “resource curse” for years. Why is it, they ask, that countries endowed with abundant natural resources--like gold, oil, or minerals—grow more slowly than resource-poor countries? They’ve come up with three reasons. First, a commodity-based economy is inevitably tied to the boom-and-bust cycle of that good. In the flush years, extra cash leads to overinvestment, wasteful spending, and too much debt. In the bust years, financial [...]

Making the Grade

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

Ben Bernanke has been re-upped as Fed Chairman. Now he won't have to grade term papers for another five years. By re-nominating the current chair, President Obama has made a sensible, risk-averse decision. After all, Bernanke has been a steady hand at the tiller of monetary policy, and has managed his way through the worst financial crisis in most of our lifetimes with few significant errors. In a tenuous time economically, it makes sense to keep the same person as Fed Chair. But the [...]

Back to School

By | 2014-09-12T10:57:40+00:00 August 22nd, 2009|Global Market Update|

With our kids heading back to college, I have one word to offer, just one word: statistics. In the 1967 movie "The Graduate," Mr. McGuire offers a word of advice to Dustin Hoffman's character, Benjamin Braddock. That word was "plastics." At the time, manufacturers were experimenting with plastic bikes, plastic trash cans, and plastic furniture. Mr. McGuire was trying to help Ben Braddock latch onto a growing field. Well that field right now would be statistics. We live in a sea of data: from [...]

Gone Up to the Mountain

By | 2014-09-04T19:24:34+00:00 August 21st, 2009|Global Market Update|

Last weekend the Federal Reserve held its summer conference in Jackson Hole, Wyoming. This is part of a grand tradition that goes back centuries. Ever since Moses came down from Sinai with those tablets, leaders have gone up to the mountain to receive wisdom and achieve enlightenment. You see, economics is the new theology. There are competing sects: the monetarists, the Keynesians, the supply-siders. There are civil debates along with heretics and "flamings." And we have a central authority charged with implementing received (monetary) [...]

The Wages of Virtue

By | 2014-09-05T13:16:25+00:00 August 10th, 2009|Global Market Update|

“Socially Responsible” investing is based on the premise that sometimes you can do well by doing good. A recent study evaluated how well it performs. There are two forms of socially responsible investing: “positive” screens that tilt portfolios towards companies that promote a diverse workforce, invest in their communities, and have vigorous consumer advocacy; and “negative” screens that exclude stocks of companies associated with alcohol, tobacco, or other factors. The results were striking. Portfolios that tilted towards responsible companies outperformed the market, while portfolios [...]

Dollar Uber Alles

By | 2014-09-05T13:15:46+00:00 August 4th, 2009|Global Market Update|

What happened in Zimbabwe? Zimbabwe had the 30th hyperinflation episode in world history. The first happened during the French Revolution, when inflation topped 50% per month. In late 2008 Zimbabwe’s monthly inflation rate topped out at 79 billion percent. The government had literally printed money to pay its debts. After Mugabe destroyed his economy through confiscation, they didn’t have the tax receipts to pay the army and other workers, and they couldn’t borrow. So they just printed what they needed. Prices inevitably rose. The [...]

Basket Case

By | 2014-09-05T13:15:17+00:00 August 3rd, 2009|Global Market Update|

Is the Dollar done? That’s what some analysts think. After the Chinese publically worried about their Dollar assets and suggested moving to a basket of currencies, some concluded that a commodity-based basked might hold the future of global finance. Higher real rates for the greenback would inevitably follow. But we’ve seen this movie before. It’s a short trailer with no plot. You can’t enact a currency by decree. Companies and countries need to issue debt in that currency, and they only do that if [...]

Grassy Highways

By | 2014-09-12T10:57:56+00:00 August 2nd, 2009|Global Market Update|

Everyone points to the Interstate system as the ideal infrastructure project. Sixty years ago, America was choking on roadway bottlenecks. Dwight Eisenhower once oversaw a coast-to-coast army convoy that took three weeks. As president, his highway initiative cut that time from weeks to days. Now our highways facilitate commerce from around the world to every part of the country. Most places can be accessed in a matter of hours. This is an example of a productivity-enhancing government program. It’s what economists mean by a [...]