Budget Set Asides

By | 2013-03-15T09:05:49+00:00 March 15th, 2013|Global Market Update|

In Rome, the Catholic Church has a new Pope. When I read the news, I couldn’t help but be impressed by how efficiently they acted. For an office that’s a lifetime appointment, that holds tremendous moral, spiritual, and worldly power, that has millennia of history behind it, the conclave of Cardinals took only 2 ½ days and 5 ballots to make their decision. Maybe it was the inspiring frescoes by Michelangelo in the Sistine Chapel where they met; maybe it was the delightful Italian [...]

The Death of a Market

By | 2013-03-13T09:07:05+00:00 March 13th, 2013|Global Market Update|

InTrade has stopped doing business. What does this mean? InTrade is either an online betting site, or futures site, or predictive market site—depending on your priors—that allowed participants to take small positions on political futures, weather futures, and other obscure items. They abruptly shut down their site on Sunday. In November, the US Commodities Futures Trading Commission compelled the Irish company to close its site to Americans, because they were offering betting contracts on gold and oil. The results were predictable: trading volume fell [...]

A Market Cycle Built for You

By | 2013-03-12T09:00:40+00:00 March 12th, 2013|Global Market Update|

East Coast, West Coast … The conventional wisdom used to be to buy East Coast companies during bear markets, West Coast companies during bull markets. With the East Coast concentration in consumer products and pharmaceuticals, and the West Coast focus on technology and cyclical companies. While that approach seems hopelessly simplistic, it does contain a nugget of truth: there are sectorial distinctions in the market that work better at different points in the business cycle. During downturns, defensive companies like Proctor and Gamble or [...]

Big Ben

By | 2013-03-11T09:00:17+00:00 March 11th, 2013|Global Market Update|

Is the Fed helping or hurting? In an era where the loudest, most passionate voices often seem to gain credibility simply by cranking up the volume, it’s useful to back up and look at some of the fundamentals. Monetary policy is complicated. It acts with long and variable lags. It’s easy to misunderstand, and even easier to distort. A lot of folks have garnered a lot of (underserved) attention for themselves and made a lot of money by attacking an institution that has multiple, [...]

The End of the Affair

By | 2013-03-04T10:33:14+00:00 March 4th, 2013|Global Market Update|

Does life imitate art? Graham Greene’s novel The End of the Affair seems to have something to say to investors. In this work, Greene describes a torrid affair between a young novelist and the wife of a sweet-but-boring civil servant. Set in London during the Blitz, at one point all three characters in this triangle seem to be saying “Get me out of here!” That’s what investors, the Fed, and the markets seem to be saying right now. The Fed has engineered ultra-low rates [...]

Of Bugs and Features

By | 2017-07-17T12:34:42+00:00 March 1st, 2013|Global Market Update|

The original computer bug was a moth short-circuiting a Mark II relay switch. Since then, it refers to any glitch that can disrupt a system. Financial markets are notoriously “buggy.” Sometimes their pricing becomes absurd. In 1982 stocks traded at an 8 price/earnings ratio. In 2000 this had expanded to 32. In 2007, AAA-rated sub-prime MBS only yielded 1.5% more than Treasuries; in 2003 junk bonds traded 10% above risk-free bonds. Unexpected news can create manias and panics. Careful, self-aware investors can take advantage [...]