Moving Mountains (Part 2)

By | 2013-05-16T09:44:13+00:00 May 16th, 2013|Global Market Update|

What are your limitations? It’s tempting to disparage limits, to say that they stop people from doing what they want to do when they want to do it. But setting limits is just a way of acknowledging our humanity—that we live in a real world, not a projection of our own imaginations. On Mount Washington acknowledging your limitations can save your life—establishing factors like turn-back times, where you decide not to press on to the summit, no matter how close you are; or recognizing [...]

Moving Mountains (Part 1)

By | 2013-05-15T09:39:11+00:00 May 15th, 2013|Global Market Update|

How does respect fit into risk management? When you’re in the mountains, the first thing you learn is respect for the mountain. No one ever “conquers” a peak. Hillary didn’t “conquer” Everest; Whymper didn’t “conquer” the Matterhorn. The men and women who made first ascents did something unprecedented, but the mountains are still there. And what we respect is the mountain’s weather, its terrain, its remoteness, its unpredictability. Mountains have a way of surprising you, and because you can be far from help, minor [...]

Moving Mountains (Introduction)

By | 2013-05-14T10:35:10+00:00 May 14th, 2013|Global Market Update|

In the spring, skiers from around the world come to Mount Washington for its celebrated backcountry snow. Tuckerman’s Ravine is legendary—its 50-degree pitches and rugged beauty combine to give mountaineers some of the best spring skiing anywhere. And the only cost is the challenge of carrying your own equipment into the bowl and up its pitches. I’ve been going up to Tuck’s for over 15 years, but I’ve only skied there about 2/3rds of the time. The reason is risk. Mount Washington is a [...]

End the Fed (Easing)?

By | 2013-05-13T10:18:25+00:00 May 13th, 2013|Global Market Update|

This is the way the Fed ends its easing. Not with a bang but with a whimper. With apologies to T.S. Eliot, the Fed doesn’t have to end its innovative asset-purchase program with grand announcements and immense bond sales. It could, of course. It could declare the end of quantitative easing tomorrow, and begin selling tens of billions of Treasuries every day to reduce rapidly its $3 trillion balance sheet. Such an approach would overwhelm the markets. There isn’t enough liquidity available to buy [...]

A Pension Problem

By | 2013-05-10T08:51:48+00:00 May 10th, 2013|Global Market Update|

Why are pensions always underfunded? It’s easy to understand the underfunding of public pensions. Why tax today what you can put off until tomorrow? In New Hampshire the Concord politicians had a unique fix for the State’s underfunding problem: make the Towns pay. Property tax rates are going up to help fund the State pension system. But why are corporate and union pensions always in trouble? Yes, we had a couple of crashes in the last 13 years, but the markets are at record [...]

Commencement Economy

By | 2013-05-09T09:52:20+00:00 May 9th, 2013|Global Market Update|

What can we learn from college graduations? Around the country millions of students will finish college this year, and they and their families will endure interminable lectures by commencement speakers that are variations on the theme, “To thine own self be true.” (Of course, these Honorary Doctors don’t seem to realize that when Shakespeare coined that phrase, in Hamlet, he was mocking the old windbag who mouthed this truism. Hamlet’s quest to be true to himself resulted in his own death and the deaths [...]

Topping Point?

By | 2013-05-08T10:01:52+00:00 May 8th, 2013|Global Market Update|

The market is hitting record levels. Should we be worried? Record levels on the S&P 500 remind people of October 2007 and August 2000. Folks get a gut-clenching sense of déjà vu that they’ve seen this movie before, and it isn’t a feel-good flic, it’s more like Halloween Part 3. They keep waiting for Jason to jump out from behind that tree in his hockey mask. But this isn’t a movie, even if there seems to be a laugh track around every corner. The [...]

Tribal Games

By | 2013-05-07T08:47:56+00:00 May 7th, 2013|Global Market Update|

Should Indian tribes be able to sell tax-free bonds to finance development? That’s what’s being pushed in Congress right now. They want the House Ways and Means Committee to allow them to sell bonds to finance golf courses, hotels, and other enterprises. At present, tribes can only issue tax-free bonds to fund essential government functions, like roads and sewers. States can issue bonds to support businesses, so why not Indian tribes? One reason is bankruptcy. Municipalities and other government entities have a clear bankruptcy [...]

Jobbing Markets

By | 2013-05-06T10:01:39+00:00 May 6th, 2013|Global Market Update|

With the market hitting records, what could go right? This market has advanced against a lot of skepticism. China is slowing down, the payroll tax hike will slow consumer spending, the sequester will cut government employment, national politics are dysfunctional, the states are bankrupt—there has been plenty of gloom to go around. Topping it all has been our stuck-in-the-mud economy. Month in, month out employment has grown by around 170 thousand jobs per month. At this rate, employment will recover to its previous high [...]

Risk and Return (Part 5)

By | 2013-05-03T09:33:24+00:00 May 3rd, 2013|Global Market Update|

So how can bond investors produce enough income? One of the most dangerous practices in bond market investing is “reaching for yield,” going outside of your normal parameters in order to produce the income that you need. But extraordinary times call for extraordinary measures, and when circumstances change people need to adapt. Certainly, the last 5 years have been extraordinary, with the Fed holding its target rate below the inflation rate. Most folks thought that rates would have returned to normal by now. But [...]