A Rose is a Rose

By |2019-02-20T09:48:08+00:00August 9th, 2012|Global Market Update|

A Rose is a RoseWhat makes a stock expensive?It’s a truism to say that the way to make money in the market is to buy low and sell high. What goes into a stock price to make it cheap or expensive? It isn’t the dollar price: Apple shares at $600 are generally considered to be cheaper than Facebook shares at $20. That’s because Apple earned $42 / share over the past year, has $30 of cash / share on hand, and plans to pay [...]

Under the Tuscan Sun

By |2017-07-17T12:34:47+00:00August 8th, 2012|Global Market Update|

Ah, Tuscany. The name conjures up images of bright summer days, warm nights, a gorgeous landscape of fertile farms and rolling fields, and an artistic heritage that includes Puccini, Dante, Michelangelo, and da Vinci. The Romans began to irrigate these fields 2500 years ago, and it became a breadbasket to the Empire. At the heart of Tuscany lies the city of Sienna, and at the heart of Sienna lies its bank, Monte dei Paschi, the oldest bank in the world. Over the course of [...]

Of Facebook and Faust

By |2014-09-09T12:48:06+00:00August 7th, 2012|Global Market Update|

What’s up with Facebook? The most overhyped IPO in history is making history, in a negative way. The shares have declined by over 50% from their first day of trading, but they are still priced in nosebleed territory: 34 times projected earnings, versus 12 times for Apple and 13 times for Google. Among the challenges facing the newly-public company are: converting a successful desktop platform into a compelling smartphone app; retaining key employees; and above all turning a billion or so active users into [...]

A Mid-Cycle Built for Us

By |2014-09-09T12:47:31+00:00August 6th, 2012|Global Market Update|

What’s happening in the US Economy? With retail sales weak and employment growth spotty, it’s confusing when markets are down 200 or up 200 on successive days. So it’s good to look at the economy and market in historical context, and compare our current condition to what’s gone on in the past. There’s no question that we are still in recovery-mode. The Financial Crisis of 2008 left some deep scars in the economy: the banking system is still fragile; home foreclosures are still high; [...]

The Economics of Olympic Success

By |2014-09-09T12:46:51+00:00August 3rd, 2012|Global Market Update|

With the Olympics in high-gear and shouts of “USA! USA!” echoing across the Atlantic, this is a good time to evaluate what makes for athletic excellence. Of course, on an individual level, it’s a combination of talent, hard work, and equipment. But on a country level, it’s a combination of having an adequate population of young people and a wealthy economy to support athletes who train extensively. Support can come from the national government, private sponsors, or sports industry. But here have to be [...]

Whose Property?

By |2014-09-12T10:26:49+00:00August 2nd, 2012|Global Market Update|

This is ridiculous. Yesterday I wrote that a strong respect for property rights, and especially economic property, was essential for economic growth. That’s been the case from time immemorial. If the State or some bully can wantonly expropriate the fruits of your labor, you’re less likely to work hard. It’s one reason the Soviet economy suffered after massive collectivization in the ‘30s. In the current knowledge economy, intellectual property is critical to long-term success. Knowing how to organize and present information so that people [...]

Origins of Political Order

By |2014-09-12T10:27:02+00:00August 1st, 2012|Global Market Update|

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 [...]