The Young and the Reckless

By | 2017-07-17T12:34:42+00:00 February 28th, 2013|Global Market Update|

Is it smart to be stupid? Are the incentives in trading and financial markets so skewed that it’s profitable to be foolish and reckless? It sure seems so. One of the frequent targets of financial reformers is proprietary trading—the infamous “prop desk.” At this work-station, young men and women stare at multi-screen monitors all day, divining relationships between volatility, forward rates, overseas markets, and other traders. The goal is to get 15 seconds to 15 days ahead of the next trend, and ride it [...]

An Italian Job?

By | 2013-02-27T10:00:05+00:00 February 27th, 2013|Global Market Update|

In the 1969 British caper film The Italian Job, Michael Caine assembles a team of criminals to steal a load of gold bullion from Fiat headquarters in Torino. In a series of mad-dash chase scenes and high-wire stunts, the crooks pull off the heist and head off to Switzerland, leaving the city in chaos In a remarkable parallel, Bunga-Bunga master Silvio Berlusconi has engineered his own high-wire electoral comeback, pushing Italian politics into gridlock and threatening the stability of the European common currency. Italy’s [...]

Building For The Future (Part 7)

By | 2013-02-26T10:15:53+00:00 February 26th, 2013|Global Market Update|

Home maintenance isn’t on most people’s list of favorite things to do, but without scheduled upkeep, bad things happen. Hot water tanks rust, roofs leak, painted walls start peeling, and your shiny new home begins to look tired and frayed around the edges. In the same way, an investment portfolio needs to be maintained if it is to continue to meet your needs. There are two major forms of adjustment to an investment portfolio: strategic and tactical. Strategic adjustment has to do with you--you [...]

Building For The Future (Part 6)

By | 2013-02-25T10:58:40+00:00 February 25th, 2013|Global Market Update|

Finishing out your home is a big part of the building process. Setting up electrical outlets, plumbing, heating, flooring and other details will, in many ways, determine how enjoyable it is to live there. Your structure may be sound; your plans perfect; your layout exactly suited to your needs; but if there aren’t enough outlets in the kitchen, or the cable connections are in the wrong place, you’re not going to be happy. In the same way, investment reporting establishes the way that you [...]

Building For The Future (Part 4)

By | 2013-02-21T13:10:12+00:00 February 21st, 2013|Global Market Update|

Once you have blueprints and a foundation, what do you do? The next issue builders face is choosing materials—balancing cost and quality. And the next choice for structuring a portfolio is asset allocation. Asset allocation balances risk and return. Different investment vehicles represent different forms of ownership, stand in different places in the capital structure, and so bear different levels of risk. In general, the more junior the claim your asset has on the cash flow of an entity, the more the risk that [...]

Building For The Future (Part 3)

By | 2013-02-20T10:00:16+00:00 February 20th, 2013|Global Market Update|

What’s the foundation for good investing? It’s a good question. Because foundations are—well—foundational. They support everything else. If a building’s foundation isn’t sound, the structure itself won’t be stable. Joinings will fail, and eventually the entire building will come down. A good foundation goes below any disruptive influences—like frost—and keeps things true. It allows you to build a much more interesting structure. In the same way, an investment portfolio needs to have a sound foundation. And the foundation of any portfolio is the investment [...]

Building For The Future (Part 2)

By | 2013-02-19T10:00:06+00:00 February 19th, 2013|Global Market Update|

How do you craft a portfolio? Assembling a financial portfolio is a lot like building a house. Everyone has a basic need for shelter, but once you get beyond the basics there are all kinds of decisions to make—where to locate, how big to make it, what kind of materials to use, and so on. Building a home can be stressful—but it can be exhilarating, too. In the same way, putting an investment portfolio together can be stressful but also can be exciting. The [...]

Building For The Future (Part 1)

By | 2017-07-17T12:34:42+00:00 February 15th, 2013|Global Market Update|

In many ways, assembling an investment portfolio is like building a house. Both tasks are public and intensely personal. Both require diligence and expertise. And both have general principles that everyone needs to follow, if they want to be satisfied with the result. In both building a house and a portfolio you don’t begin by buying nails, you start by going over a set of plans—the blueprints. These make it clear how your home will be sited, what the layout will be, and the [...]

The End of Economics?

By | 2013-02-14T11:12:07+00:00 February 14th, 2013|Global Market Update|

Did economists “get it all wrong” during the Great Recession? Certainly a lot of economists have made a lot of mistakes. Ben Bernanke, former Professor of Economics at Princeton, thought the problems in the sub-prime mortgage market were limited and contained in March of 2007. Greg Mankiw, Professor at Harvard, predicted that housing prices would stop rising so fast back in 1995, because most baby-boomers now owned a home. When you analyze something as complex and multifaceted as an economy with billions of prices [...]

The Wealthy Mindset

By | 2017-07-17T12:34:42+00:00 February 13th, 2013|Global Market Update|

What does it take to build wealth? Like many in my generation, I grew up watching Gilligan’s Island. My idea of a rich person was shaped by the behavior of Thurston Howell III and his wife “Lovey.” Week after week, they washed and dried their green-backs and did other silly things. What they wanted the currency for while stranded on a desert island was never clear. But the world is full of lots of non-fictional millionaires. Their lifestyles can be instructive. In his book [...]