Going Negative?

By |2013-05-31T10:22:08-04:00May 31st, 2013|Global Market Update|

Is Europe headed for negative interest rates? The Euro-zone has been in recession since mid-2011. Their recovery from the Financial Crisis of ’08 and ’09 was tepid, and the currency crisis over there has severely damaged business and consumer confidence. So ECB President Draghi is considering setting negative interest rates on bank reserves—charging banks for the privilege of stashing cash with the central repository. There’s precedent for such an action: Switzerland and Sweden have had such a policy in the past, and Denmark cut [...]

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Costs and Benefits

By |2013-05-30T08:38:30-04:00May 30th, 2013|Global Market Update|

Is college worth it? As millions graduate and face a sub-par job market, many are looking at their degree and their bills for student loans and wonder whether it all the time and effort and money are going to pay off. There’s now a web site that tries to quantify this return on educational investment by school. The methodology of the return number is deeply flawed---it depends on self-reported surveys and eliminates anyone who later earns a graduate degree—but at least it’s a start. [...]

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Fracking Beer

By |2013-05-29T10:21:26-04:00May 29th, 2013|Global Market Update|

The French have their wine, Russians have vodka, and Germans have beer. Different countries are often characterized by their foods. Belgian chocolates, Swiss cheese—it makes your mouth water. In Germany it’s beer: over 1300 brewers produce some 5000 different beers employing about 25,000 workers—all governed by a 500-year old law, the “Reinheitsgeboot.” It’s a part of their national character. Recently the Association of German Breweries sent an open letter voicing its concerns that hydro-fracking—the process of unlocking gas or oil deposits from shale by [...]

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The China Card (Part 4)

By |2013-05-28T09:31:49-04:00May 28th, 2013|Global Market Update|

So what does China need to do? The answer on everyone’s lips is growth: growth in output, growth in exports, growth in employment. If you have a growing economy, the additional economic output can cover a multitude of sins. But that’s actually been a problem in China. They’ve grown so strongly that they haven’t needed to be efficient. So issues of pollution, congestion, moving millions of people from the interior to the coastal manufacturing clusters, and quality control, overcapacity, and bad debts are catching [...]

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The China Card (Part 3)

By |2013-05-24T09:50:01-04:00May 24th, 2013|Global Market Update|

So what has gone wrong in China? The slowdown in Chinese economic growth has led to a 4% market decline this year, even as other world equity markets are growing at a double-digit rate. It may even have contributed to the recent record drop in Japanese stock prices. But what’s causing their economy to sputter? Some point to government capital controls: in prior years the banks have had capital requirements raised because of concerns about inflation. But a more likely candidate is capital misallocation. [...]

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The China Card (Part 2)

By |2013-05-23T11:04:56-04:00May 23rd, 2013|Global Market Update|

Why has China grown so rapidly? There are lots of low-wage countries. In the ‘90s the “Asian Tigers” of Singapore, South Korea, Taiwan, and Hong Kong specialized in finance or high-tech manufacturing and developed rapidly. Now they are fixtures in the global economy, hosting some world-class businesses. China has become a manufacturing powerhouse not simply via low labor costs, but from its solid logistical performance. Companies only put facilities in places where they can be productive, and to be productive they need adequate infrastructure, [...]

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The China Card (Part 1)

By |2017-07-17T12:34:39-04:00May 22nd, 2013|Global Market Update|

Has China lost its mojo? During the late ‘90s and early ‘00s the country became a manufacturing powerhouse, using inexpensive labor and managerial skill to surpass Japan, Germany, and the US in global exports. The value of its stock market soared, growing 5-fold between 1999 and 2007. China’s economy, and especially its coastal areas, have become boom-towns. But since the Financial Crisis that market has been in decline. Stocks have fallen 60%, led by Chinese oil companies and banks. While other indices have gone [...]

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Moving Mountains (Conclusion)

By |2013-05-21T09:58:22-04:00May 21st, 2013|Global Market Update|

So how do you stay safe in the mountains? One way to stay safe is not to go--to conclude that the risk is too great, that the weather is too poor and the opportunities too scanty. So it’s just more rational to stay home and water the garden. But the mountains offer us vistas and light that we don’t get in the valley. It’s not just “because it is there.” Sometimes going over the mountains is the only way to get where we need [...]

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Moving Mountains (Part 4)

By |2013-05-20T10:59:16-04:00May 20th, 2013|Global Market Update|

In spite of all you do, stuff happens. In spite of all your preparation, all your planning, all your experience, mountains and markets can and will surprise you. Mountains are chaotic systems: they disrupt the airflow around them, and so they can create extreme situations, where the turbulent winds and a lack of cover transform a beautiful clear day into a massive maelstrom where there’s no shelter. Markets are chaotic as well. That’s why the patterns we see, while perhaps reminiscent of previous market [...]

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Moving Mountains (Part 3)

By |2013-05-17T10:48:01-04:00May 17th, 2013|Global Market Update|

It’s been said that the difference between danger and disaster is preparation. “Be prepared” is the motto of the Boy Scouts, and it’s good advice when you’re headed into the mountains. You need to be physically ready for challenge of the peaks—core body strength, cardio-vascular endurance, and mental energy. You need to have adequate clothing and emergency supplies, like a headlamp and compass. And you need to know the mountain and trails you’re going to. Maps, guides, and experienced friends help you understand where [...]

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