Over the Edge?

By | 2012-12-11T03:52:33+00:00 December 11th, 2012|Global Market Update|

Why is it always cliffs and crises? If you’re like me, you’re thoroughly sick of all the talk of fiscal cliffs, budget deadlocks, and back-room last-minute deals that will or won’t avert some Congressional deadline that does or doesn’t threaten to push us over an economic precipice. Part of the reason we’re so tired of the subject is that it always comes up and no one ever seems to deal with it. It’s like we have chronic fatigue syndrome with regards to the deficit: [...]

The Triumph of the Small

By | 2017-07-17T12:34:44+00:00 December 10th, 2012|Global Market Update|

What’s the advantage of being small? For small investors, it’s a lot. They have less bureaucracy and office politics to deal with, they can just focus on investing and client service. And they have a much bigger universe of stocks to pick from. Small, illiquid issuers of stocks or bonds can’t be purchased by big institutional funds in adequate size to make a meaningful difference in performance. If the big boys can’t buy a stock, they’re not going to spend time researching it. That [...]

Backwards Backup

By | 2012-12-07T04:44:00+00:00 December 7th, 2012|Global Market Update|

Backwards Day strikes again! A couple months ago I wrote about “Backwards Day”: the day back in high-school where if someone asked how you were, you said “bad” if you meant good, people walked backwards down the halls, and put as many of their clothes on backwards as they could. Up was down; no was yes. I noted that with capital gains tax rates going up, it’s backwards day in tax-planning. Well, now it’s backwards day in corporate finance, too. Companies are declaring special [...]

Finding Financial Reality

By | 2012-12-06T11:47:14+00:00 December 6th, 2012|Global Market Update|

What good are financial statements? That may seem like a funny question from a financial analyst. But financial statements can distort, rather than reveal, the nature of a company. Beyond outright fraud, where managers just make things up, there are counterintuitive accounting practices that are misleading, like marking liabilities to market. For example, during the financial crisis, when banks got into trouble and their debt was downgraded, that created an earnings boost, as all those mark-to-market liabilities got cheaper. Financial statements are a necessary—but [...]

Capital vs. Fishy Labor

By | 2012-12-05T04:21:13+00:00 December 5th, 2012|Global Market Update|

Sometimes higher productivity costs jobs. Like travel agents and many assembly-line workers, some Navy workers are going to have their jobs replaced by computers and robots. Only this time the displaced workers are military-trained sea lions and bottlenose dolphins. The Navy has a $28 million program to train marine mammals to detect enemy mines and patrol for enemy divers. But now the Navy has developed a 12-foot torpedo-shaped robot that runs for 24 hours straight and can spot mines as well as the dolphins. [...]

Inside Out?

By | 2012-12-04T18:45:43+00:00 December 4th, 2012|Global Market Update|

Inside Out? – Only Nixon could go to China. That’s what I thought when I heard that Phil Hanlon, Dartmouth Class of 1977 and AD Fraternity brother had been selected to become the 18th President of Dartmouth College. Hanlon has a Ph.D. in Mathematics from Cal Tech and is currently Provost at the University of Michigan, where he also teaches undergraduates. He’s stated that he expects to focus closely on the college’s cost structure and finances. “We can’t continue superinflationary tuition increases,” he has noted. […]

The Triumph of the Engineers

By | 2012-12-03T14:10:58+00:00 December 3rd, 2012|Global Market Update, Uncategorized|

The Triumph of the Engineers – Was Superstorm Sandy a wake-up call? At their peak, flood-waters from Sandy crested in New York City at 14 feet above normal, leaving thousands homeless and millions without power. The damages may total over $40 billion dollars. Many are asking whether it is possible to adapt to increased storm risks due to rising sea levels and increasing urban density. The experiences of other coastal cities may prove instructive as city planners seek to adapt. […]

No Little People?

By | 2014-09-09T10:59:55+00:00 November 29th, 2012|Global Market Update|

Where have all the small IPOs gone? One of the unfortunate side-effects of the financial crisis has been the consolidation of the financial sector, especially brokerage firms. When Merrill Lynch, Bear Stearns, or National City got in trouble, they were merged into Bank of America, JP Morgan, and PNC. Other firms, like Lehman Brothers, just went away. The too-big-to-fail banks became even bigger. This has had an impact on the initial public offering (IPO) market. Everyone loves to discuss mega-IPOs like Facebook, which raised [...]

New Kid on the Block

By | 2014-09-09T10:58:40+00:00 November 28th, 2012|Global Market Update|

The British Prime Minister just selected the head of Canada’s central bank to run the 314 year-old Bank of England. What does it mean? Mark Carney is a 47 year-old Harvard undergrad, Oxford Ph.D. (in Economics) who spent 13 years managing sovereign credit risk for Goldman Sachs before serving as a Deputy Governor, and later Governor, of the Bank of Canada, beginning in 2003. He served the Bank of Canada well, lowering rates in March of 2008—rightly judging that the leveraged sub-prime loan crisis [...]

Short-Term Memories

By | 2014-09-09T10:56:52+00:00 November 27th, 2012|Global Market Update|

Remember Auction Rate Preferred notes? These investments seemed to offer something for nothing. Their interest rate would float at a spread above LIBOR and be reset weekly. If investors wanted their money back, there were supposedly a host of other investors ready to purchase the securities at their next auction. But it didn’t work out that way. When the financial crisis hit, a lot of the auctions failed. Short-term notes became long-term loans. Bonds that were as good as cash suddenly traded at a [...]