Bohring into the Future?

By | 2013-07-31T09:37:00+00:00 July 31st, 2013|Global Market Update|

“Prediction is very difficult, especially if it’s about the future.” – Niels Bohr The quote by the Nobel Laureate went through my mind as I read about the various economic forecasts by Fed governors and Regional Bank Presidents over the years. A couple Wall Street Journal reporters tabulated 700 predictions between 2009 and 2012, scoring them on how accurate they’ve been. The officials most cautious on the economic outlook were the most accurate. But what’s interesting isn’t so much who was right, but what [...]

Summers’ Day?

By | 2017-07-17T12:34:38+00:00 July 30th, 2013|Global Market Update|

Why are folks so worked up over Ben Bernanke’s successor? We’ve seen extensive stories in every major news publication over the past week. First, Yellen is a shoe-in. Then she’s favored due to her gender. No, it’s the other way. Then Summers is the front-runner. Then he isn’t. It’s enough to make you cry “Volker!” The Federal Reserve Board Chair is a very powerful person. Monetary policy matters. Getting it wrong arguably led to the Great Depression in the ‘30s and the Great Inflation [...]

Cash over a Barrel

By | 2013-07-29T11:06:04+00:00 July 29th, 2013|Global Market Update|

Why do we have payday lenders? Payday lenders provide short-term, unsecured loans, sometimes linked to a paycheck, sometimes not. The amounts are usually fairly small--$100 to $300—although they can go higher. The service is popular: over 10 million people used payday loans last year. The fees, though nominally small, can add up. For a $100 two-week advance, a payday lender might charge $15 up front. A borrower that does this 26 times over the course of a year will pay $390—almost four times the [...]

SACked?

By | 2013-07-26T11:01:53+00:00 July 26th, 2013|Global Market Update|

Is the hedge fund industry doomed? The indictment of SAC Capital and administrative action against its founder, Steven Cohen sure could make you think that. Cohen’s company is accused of systematically using inside information to defraud the markets, and Cohen is charged with failing to supervise them. If the charges are proven, SAC is out of business, most of Cohen’s wealth is confiscated, and he will never manage money again. But Cohen’s firm was unique. It isn’t really an investment firm, it’s a trading [...]

Overhauled?

By | 2013-07-25T10:32:31+00:00 July 25th, 2013|Global Market Update|

Can Detroit turn around? Amid all the hoopla and controversy over whether the city inflated its pension obligations as a negotiating tactic and who actually has jurisdiction over their bankruptcy filing, the substantive question remains: what can they do to revive the city? At the heart of Detroit’s problem is its population decline. The number of residents peaked in 1950 at 1.8 million. In the 2010 census, it was 700 thousand. And where did they go? For the most part, they moved to the [...]

Rights and Responsibilities

By | 2017-07-17T12:34:38+00:00 July 24th, 2013|Global Market Update|

Are public pensions a contract or a right? That’s what we’re soon going to find out. Detroit’s bankruptcy filing puts the city’s retirement obligations front-and-center. Among the $20 billion in debt cited in their petition was $9 billion in retiree obligations--$3 billion in pensions and $6 billion in health care coverage. Leave aside for the moment how these numbers were calculated; they were likely inflated to make the bankruptcy filing more tenable. What can be done with these liabilities? In most states and with [...]

Euro / Dollars

By | 2013-07-23T10:42:51+00:00 July 23rd, 2013|Global Market Update|

Why is the Euro so strong? A couple years ago there were widespread expectations of a Euro-zone breakup. Greece was facing ejection, and when small nations like Estonia joined the Euro, the biggest question was, “Why?” Many observers expected the Euro exchange rate to go to parity with the Dollar, or lower. But that never happened. In spite of Europe’s entering a second recession a year ago or so, the currency has been remarkably stable. At its weakest, it was about $1.20. Now it’s [...]

Ben Bernanke, Jedi Knight

By | 2013-07-22T10:14:14+00:00 July 22nd, 2013|Global Market Update|

Do or do not. There is no try. That’s what I thought as I listened to Ben Bernanke discuss reducing the Fed’s asset purchases, then “clarify” his remarks, then testify before Congress that the Fed will remain accommodative. Prior to the Fed’s competing mandates—stable inflation, full employment, financial stability—comes one operational priority: clear communication. In the face of Fed uncertainty, investors have been known to panic. But Bernanke’s mind trick seems to have worked. After falling 10%, the US equity market has rallied to [...]

Motown Going Down?

By | 2013-07-19T10:12:23+00:00 July 19th, 2013|Global Market Update|

Detroit just filed for bankruptcy. Who knew? When I’m looking into a new credit, the first place I look in the financial statements is the auditor’s opinion. Auditing is an under-appreciated art. You have to be detective and diplomat. It can be incredibly tedious until it’s not. And sometimes the audit reveals some real gems. Like the school district in Maine that couldn’t find $230 thousand in cash. Or the New Jersey law that requires their cities and towns to report their finances contrary [...]

Organization, Smorganization?

By | 2017-07-17T12:34:38+00:00 July 18th, 2013|Global Market Update|

Organization matters. That was my thought when I read about investor Eddie Lambert and Sears. In 2002 Kmart went through bankruptcy. In 2003 Lambert recapitalized the firm and took it over. In 2005 they bought Sears and began to consolidate the two retailers. Some org charts look like hierarchies, some like bicycle wheels. Sears’ now looks like China’s Warring States Period: 40 autonomous businesses competing for attention and marketing. The theory is that competition brings out the best in us, and that markets in [...]