The Big Short?

By | 2017-07-17T12:35:01+00:00 September 19th, 2011|Global Market Update|

What’s with all the predictions? Everyone’s into predictions: financial bloggers, political pundits, sportswriters, even my kids are into predicting who’s going to get which chores tomorrow. Predicting things seems to be in our blood--especially in the investment business. People always have opinions about what the economy’s going to do, where interest rates are going, what programs the government will support, and so on. The problem is, predictions are hard. There are all kinds of variables, and bad luck can play an enormous role. A [...]

Expert Opinion

By | 2017-07-17T12:35:01+00:00 September 16th, 2011|Global Market Update|

Why do we trust physicists more than we trust economists? Both are dependent upon complex math and reach abstruse, counterintuitive conclusions. Both use technical jargon and deal with important public policy questions. And both deal with fantastically complex questions about which there is often considerable controversy. So why do we look at the complex stuff we own, like iPads, heart stents, or web-based home offices and say, “Wow, the physics of that is awesome,” but when we see a global banking system with near-instantaneous [...]

Burning Bonds

By | 2014-09-12T10:41:53+00:00 September 15th, 2011|Global Market Update|

Meredith Whitney didn’t predict it, but there’s one muni market that’s facing financial trouble: tobacco bonds. In the early ‘90s a bunch of State’s Attorneys General sued the tobacco companies alleging fraud and deception. In 1998 the States settled with the tobacco companies for payments of about $200 billion over twenty-five years, based on sales. Now about $4.40 per carton is paid out to the States. Rather than wait for the revenue to come in, many states securitized them and borrowed against the revenues. [...]

Greece is the Word (Part II)

By | 2014-09-12T10:42:01+00:00 September 14th, 2011|Global Market Update|

What’s up with Greece? A stable, orderly debt restructuring has become disorderly and unsafe. And while the Greek government claims to have the cash to meet its austerity targets, the statistics say otherwise: their economy is falling into a deeper recession, and deficits are widening. German Prime Minister could sport a sign that reads, “I lent Greece $150 billion Euros and all I got was this lousy t-shirt.” Rising concern about a default prompted investors to dump the banks known to hold the most [...]

Learning Chinese?

By | 2014-09-12T10:42:09+00:00 September 13th, 2011|Global Market Update|

Are we destined to live in a Chinese century? 55 years ago, the US forced Britain to withdraw from the Suez canal zone by threatening to withhold financing. British Prime Minister Harold Macmillan quipped, “perhaps in 200 years you will know how we felt.” Some think it could take much less time. Might China become fed up with US support for Taiwan, and threaten to withhold financing from our Treasury market if we don’t reduce our presence in the Pacific? A recent study forecasted [...]

Learning Chinese?

By | 2011-09-12T00:01:14+00:00 September 12th, 2011|Economics, Global Market Update|

Are we destined to live in a Chinese century? 55 years ago, the US forced Britain to withdraw from the Suez canal zone by threatening to withhold financing. British Prime Minister Harold Macmillan quipped, “perhaps in 200 years you will know how we felt.” Some think it could take much less time. Might China become fed up with US […]

Managing the Future

By | 2017-07-17T12:35:01+00:00 September 9th, 2011|Global Market Update|

One of the most critical factors to consider when analyzing a company is its management. But what makes a good leader? The question has been studied for centuries: Plato, Sun Tzu, and Machiavelli had much to say. Homer compares Achilles with Hector, and the biblical King Saul is contrasted with David. The first thing a leader needs is passionate vision—the ability to see what hasn’t yet happened and ask, “Why not?” A business leader has to have a passion for the business and the [...]

Posting Losses

By | 2017-07-17T12:35:01+00:00 September 8th, 2011|Global Market Update|

What do we do with the Post Office? The US Postal Service was founded in1775 with Benjamin Franklin as the first Postmaster General. It employs over half a million workers and operates over 200 thousand vehicles. It’s authorized by its own clause in the Constitution, the “postal clause,” which empowers Congress to establish post offices and post roads. But the Post Office has a problem: it’s losing money. It’s running a $9.2 billion dollar deficit, and it may not be able to make a [...]

Five-Year Olds and Finance

By | 2017-07-17T12:35:02+00:00 September 7th, 2011|Global Market Update|

Can we learn financial lessons from 5-year olds? In 1972 a Stanford psychologist studied self-control in young children. He put a marshmallow in front of each child and told the child that if they could wait 15 minutes, they could have a second one. Of the 600 children in the study, about 200 were able to wait long enough to earn the second marshmallow. In two follow-up studies, the children who waited had significantly better results in school and higher test scores, even decades [...]

Panic is Not a Strategy

By | 2014-09-11T09:51:18+00:00 September 6th, 2011|Global Market Update|

What should you do about your investments? With the US economy slowing and the European debt crisis still simmering, markets have been in turmoil. Some folks are saying that this is a replay of 1937, when a nascent recovery was choked off by restrictive Fed and fiscal policy. Or if those downplaying the importance of Greek debt are making the same mistake analysts made in 2007 when they downplayed the importance of sub-prime debt in the mortgage market. Everyone seems to be selling; should [...]