Why do some economies grow, while others don’t ?

By | 2012-07-31T08:40:42+00:00 July 31st, 2012|Global Market Update, Investing, Investing|

Why do some economies grow, while others don’t? In his magnum opus, “The Origins of Political Order,” Francis Fukuyama argues that democracy is a stool that stands on three legs: a centralized state, political accountability of the state’s leaders, and the rule of law. Without any one of these elements, democracy is not possible. By happenstance, those three factors correspond to the three branches of US Government—executive, legislative, and judicial. Contrary to some utopian dreams, a truly weak state doesn’t safeguard liberty. It facilitates [...]

(post) Modern Portfolio Theory – Part 2

By | 2014-09-09T15:41:59+00:00 July 30th, 2012|Global Market Update|

What’s the ideal investment portfolio? Most people think of investments as a way to earn money by having their money work for them, and that’s as good an approach as any. The problem is, any investment entails risk, because we don’t know what the future holds. 50 years ago Harry Markowitz won the Nobel Prize for noting if we graph out a portfolio’s long-term risk and return, it normally has an upward slope, in which more return requires more risk. His colleague Bill Sharp [...]

Home Sweet Recovery

By | 2014-09-09T15:41:18+00:00 July 27th, 2012|Global Market Update|

Is the housing sector recovering? One of the most frustrating aspects of this recovery has been the behavior of housing. Because the financial crisis was primarily caused making and securitizing subprime mortgages, the housing sector overshot and collapsed. This created an inventory overhang in single family homes, and millions of folks in the home building and real estate industry were put out of work. So any recovery in new home sales is especially important. After all, it’s home construction that adds the most to [...]

Strategy versus Tactics

By | 2014-09-09T15:40:04+00:00 July 25th, 2012|Global Market Update|

What is strategic investing, and how does it differ from tactical investing? Strategic investing is investing for long-term needs. It looks at the world in terms of structures and institutions, and invests in those areas that respect property rights, the rule of law, and that allow capital to flow freely. It understands that small companies, troubled companies, and junior claims on cash flow are more risky, and so their returns are more volatile. But if the investor is able to wait long enough—sometimes decades—that [...]

(post) Modern Portfolio Theory

By | 2017-07-17T12:34:48+00:00 July 23rd, 2012|Global Market Update|

What’s the best way to put a portfolio together? There’s a school of thought that says people are basically alike: apart from their individual tolerance for risk, they desire a modest amount of income and capital growth from their investment portfolios, so they should combine a balance of index funds together to have a low-cost, broadly-diversified portfolio. There’s a lot to be said for this approach: it’s inexpensive and it gets people started on the investment process. And people usually get more conservative with [...]

Burgernomics

By | 2014-09-09T15:38:44+00:00 July 20th, 2012|Global Market Update|

Economics has been called the “dismal science,” and economists are stereotyped as dour, unsmiling grumps immersed in their data and charts. But sometimes they have flashes of whimsy and caprice. Such is the case with the “Big Mac Index.” Since 1986 The Economist magazine has published the price of a Big Mac, around the world, in order to compare which currencies appear to be overvalued and which look undervalued. Since Big Macs are perishable and can’t easily be transported across national borders, the Big [...]

Backwards Day

By | 2014-09-09T15:38:11+00:00 July 19th, 2012|Global Market Update|

241 years ago, Lord Cornwallis surrendered to George Washington on the plains of Yorktown, Virginia. 10,000 British troops were captured, effectively ending the Revolutionary War. Tradition has it that during the formal surrender ceremonies, the British band played the ballad, “The World Turned Upside Down.” Has asset management turned upside down? The riskiest assets are deemed safe, and the safest are certifiably risky. Cash, considered the safest of safe havens, is losing value relative to inflation. Inflation has been running between 2 and 2 [...]

Changing Direction?

By | 2014-09-09T15:36:29+00:00 July 18th, 2012|Global Market Update|

Is the economy giving us a head-fake? Back in the Cretaceous Era, I played a little football. And one of the first moves I learned was a ball-carrier’s head fake. When approaching a defender, a ball-carrier will look and lean in one direction, then change at the last minute. If the defender has been watching the carrier’s head, he’ll be deceived and miss his tackle. For in 2010 and 2011, the economy gave investors a head-fake. Initial strength in employment and production faded over [...]

Child Tax Cliff

By | 2017-07-17T12:34:48+00:00 July 17th, 2012|Global Market Update|

Lost in the debate over how the looming fiscal cliff might affect taxes on the rich and cuts in defense spending is a little-followed portion of the Bush tax cuts: the child tax credit. Unless Congress renews the law, the $1000 refundable tax credit is scheduled to be cut in half at year-end. The child tax credit is one of those rare Washington accomplishments: a left-right compromise. Conservatives like the credit because it reduces taxes and supports families. Liberals have supported it because its [...]

Too Complex to Fail

By | 2014-09-09T15:33:23+00:00 July 16th, 2012|Global Market Update|

Is our financial system too complex? With LIBOR scandals, commodity-broker fraud, and big bank bailouts still making the news, many people are saying, “Stop the financial system, I want to get out!” But exiting our current financial system just isn’t practical. Sure, you could move off the grid, raise your own wheat, and exit the cash economy, but that’s all you would do. Moving back to an 18th century lifestyle would mean moving back to an 18th century standard of living, where basic survival [...]