Giving Thanks

By | 2017-07-17T12:35:20+00:00 November 30th, 2009|Global Market Update|

What is Thanksgiving for? Oh, I know that millions are inebriated with turkey and stuffing and potatoes and football, but why do we make a national holiday out of it? Part of it has to do with celebrating our national legends, the self-image we have of pioneers carving out a life for themselves in the wilderness, We celebrate the initiative, ingenuity, and cooperation that enabled the early Pilgrims to come, learn, and grow in the New World. Part of it is a celebration of [...]

Lucky or Good?

By | 2014-09-12T10:56:08+00:00 November 29th, 2009|Global Market Update|

Did we luck out by avoiding Dubai Ports? Four years ago there was a political firestorm when a Dubai company proposed to take over a British port operator. That would have put Dubai Ports World in charge of services at 22 US cargo ports, included Boston, New York, Philadelphia, Houston, and New Orleans. Coast Guard officials raised the issue of security risks, and Congress voted to block the deal. With controversy swirling, Dubai Ports sold American operations to a US company, and proceeded to [...]

Training Wheels

By | 2017-07-17T12:35:20+00:00 November 25th, 2009|Global Market Update|

Why did Warren Buffet pay so much for Burlington Northern? Buffett’s price locks him into a 5% return on equity, half of his normal target. He does get a lot of previously invested capital, and a solid energy-efficient freight transport business. He didn’t invest in some pipe-dream high-speed passenger rail system guaranteed to lose money. But it’s fascinating to consider the personal issues. When Warren was a kid, he longed for a multi-track Lionel train set. He never got it. After he got rich, [...]

Inflation Nation

By | 2014-09-12T10:56:25+00:00 November 24th, 2009|Global Market Update|

For now it looks like the inflation bugs have the upper hand. Gold and commodities are soaring, Congress is calling for Geithner’s head, and all the commentary seems to be about oceans of liquidity driving markets higher. The TIPs market is the latest red-flag. The real yields on short-term inflation-protected bonds issued by the Treasury have all gone negative. That means that buyers are locking in a yield to maturity that is less than the inflation rate on TIPs shorter than five years. Either [...]

Keeping Our Balance

By | 2014-09-05T14:20:07+00:00 November 23rd, 2009|Global Market Update|

Is the Fed out of balance? Are the “oceans of liquidity” they’ve created going to come back to bite us? To be sure, Fed policy is easy. With the worst financial crisis in 50 years just behind us, it has to be. The popping real-estate bubble led to an insolvency crisis at the banks, and now the Fed is recapitalizing the banks by holding short-term rates close to zero. Hey, it worked for Greenspan in the early ‘90s. But those zero short-term interest rates [...]

Exchange Traded Future

By | 2014-09-05T14:16:42+00:00 November 18th, 2009|Global Market Update|

Why are ETFs growing? Exchange Traded Funds are mutual funds that trade on an exchange. The concept has been around for decades. But in the past, what are now called “closed end” mutual funds almost always traded at a significant discount to the market value of their underlying holdings. This limited their appeal. Open-ended ETFs began to appear a decade ago, and the concept really took off in the aftermath of the tech bubble. These funds closely track their underlying holdings because institutional investors [...]

Rare Birds

By | 2017-07-17T12:35:20+00:00 November 17th, 2009|Global Market Update|

Has Fed-watching become as arcane as bird watching? Several years ago hundreds of enthusiasts traveled to Arkansas to capture a glimpse, or photograph, of the Ivory Billed Woodpecker, a species once thought extinct. In the same way, hundreds of Fed-watchers were on hand Monday to hear what Chairman Bernanke had to say to the Economic Club of New York. And what did he say? That the economy is growing slowly, and that the Fed will be on hold for a while; absolutely nothing of [...]

Foxes and Hedgehogs

By | 2017-07-17T12:35:21+00:00 November 13th, 2009|Global Market Update|

“The fox knows many things, but the hedgehog knows one big thing.” So goes the old saying. Some people are sorters: they see the world through one defining idea. This gives them focus and direction. These are the hedgehogs. Others are gatherers: they see things through lots of lenses. They’re always looking for new ideas, new analytical tools, and different perspectives. They’re foxes. Which approach is best? Clearly, in an economy that rewards specialization, hedgehogs have their place. Neurosurgery and rocket science require focus. [...]

Classical Investing (Part 9)

By | 2017-07-17T12:35:21+00:00 November 12th, 2009|Global Market Update|

Did the banks make a deal with the devil? In the story of Faust, the protagonist makes a deal: in exchange for his soul, the devil will get him whatever he wants: money, love, or power. A year ago, the big banks would do anything to survive. Facing runs by institutional investors, banks sold pieces of themselves to the government in exchange for asset guarantees and access to the Fed. A Depression was averted and most of the banks survived. But now they don’t [...]

Buried Treasure

By | 2017-07-17T12:35:21+00:00 November 11th, 2009|Global Market Update|

Chris Dodd unveiled an 1100 page bank reform bill. Are there any nuggets in there? The Connecticut Senator is infamous for receiving sweetheart loans from Fannie Mae while overseeing the mortgage giant. But there are some sensible proposals in his bill. First, it would limit the Fed’s power to overseeing monetary policy. In an era of mission creep and personality cults, limiting any institution’s power is a good thing. Most financial derivatives would be centrally cleared, avoiding a big element of systemic risk. And [...]