Egypt Burning

By |2013-08-16T09:35:00+00:00August 16th, 2013|Global Market Update|

Violence is escalating in Egypt. What does it mean? Hundreds are dead and thousands are injured in the latest round of fighting. Muhammad Morsi has been deposed by the military, and protests by his followers have been violently suppressed. Western countries are trying to balance realpolitik with human rights. Do they rebuke the military leaders and cut off aid, or do they engage with the regime and risk losing standing with the rest of the world? A winner in this no-win situation is Ayman [...]

Growing Capital?

By |2017-07-17T12:34:37+00:00August 15th, 2013|Global Market Update|

What is capital? Strictly speaking, capital is the stuff that businesses use to make money. Factories have machinery and robots to fabricate their goods; builders have tools and trucks to construct with; service organizations invest in people and processes to provide legal or financial or personal services. Capital is what makes an economy grow, and access to capital--physical or intellectual--is what allows people and nations to become wealthy. So it's encouraging when we see analysts call for a capital spending boom. During the recession [...]

Facebook Nation?

By |2013-08-14T09:28:05+00:00August 14th, 2013|Global Market Update|

Is Facebook everywhere? Every day, over 120 million Americans check their Facebook pages. Of those, around 100 million do it on a smart-phone. That's a lot of friending, liking, and posting. And it's a lot of data that Facebook is collecting. Because when you "like" something--just touching the button--you're telling Facebook's marketers that they might be able to sell you something. Facebook now offers customization on a massive scale. It's like TV, but with ads that know whether you're a parent with young children, [...]

European Revival?

By |2013-08-13T10:07:56+00:00August 13th, 2013|Global Market Update|

Is Europe coming out of its funk? For the past year and a half, the Euro-zone has been in recession. It started in late 2011, as the financial turmoil of the prior two years came home to roost. Banking sector problems, government austerity, and currency turmoil led the area's decline. Unemployment has stabilized after rising significantly. Exports to the US, UK, and China are picking up, and industrial production--a leading economic indicator--is rising. There's still a pretty strong north-south split in the, though. In [...]

Economists and Investors

By |2013-08-12T04:32:20+00:00August 12th, 2013|Global Market Update|

Why do investors listen to economists? The short answer is, it improves their opinion of meteorologists. The long answer is, the market depends on earnings, earnings depend on revenues, and revenues depend on the economy. So, a strong economy should lead to strong earnings and a strong equity market, and vice-versa. Except when it doesn't. Good economic news can become bad market news when filtered through the Federal Reserve. A stronger economy means higher interest rates which means a higher discount rate applied to [...]

Farmer in the Dell

By |2013-08-09T09:25:55+00:00August 9th, 2013|Global Market Update|

Where is Dell going? In the ‘90s Dell was the darling of the PC revolution. By taking orders over the phone and sourcing parts in bulk, Michael Dell was able to provide custom-built desktop computers at cheaper prices than the off-the-shelf competition. The company expanded rapidly, as more and more everyday processes became automated. The development of the internet turbocharged this movement. But Dell’s approach didn’t work well with laptops, much less tablets. Now Dell’s model seems a quaint artifact of another age. His [...]

The Bigger They Come … ?

By |2013-08-08T10:51:56+00:00August 8th, 2013|Global Market Update|

Do big buildings predict a bust? That’s the idea behind the Skyscraper Index, which posits that when a country build’s the world’s tallest building, an economic crisis isn’t far away. Some people are worried that the building of Sky City in China predicts an upcoming economic and market collapse. The first example of this idea comes from the beginning of the 20th century, with the Singer Building in New York, a 612-foot structure, whose completion came close on the heels of the Panic of [...]

Detroit Turnaround?

By |2017-07-17T12:34:38+00:00August 7th, 2013|Global Market Update|

Can Detroit turn around? As city officials, unions, creditors, and their lawyers meet to figure out what to do with Detroit’s $18 billion in liabilities—an astounding $25 thousand per person—it’s worth asking what can be done to change things. What can the city do to reverse decades of suburbanization and de-gentrification that has resulted in a central city that’s simply too small for its contracted obligations? It’s tempting to say that the situation is hopeless: that a decaying city-center simply can’t compete with greener [...]

Truckin’ …

By |2017-07-17T12:34:38+00:00August 6th, 2013|Global Market Update|

Does automation have a cost? A recent op-ed in the Wall Street Journal asked, “Daddy, what’s a truck driver?” The article cited advancements in computer software and processing power to posit a future where truck drivers would be curiosities of the past, akin to rotary phones and CB radios. It describes a remote mine in Australia today, where six automated heavy-duty mining trucks sporting engines with 2600 horsepower and 25 million lines of software code run 24/7 using advanced guidance systems and monitored by [...]

The Complexity of Simplicity

By |2013-08-05T10:25:41+00:00August 5th, 2013|Global Market Update|

It wasn’t supposed to be this way. In 2008 Lehman failed, in part because the company was massively leveraged. They had borrowed over 30 times their net equity. When the real estate market tanked, investors were worried that Lehman would owe more than their assets were worth, and rushed to get their cash out. This “run-on-the-bank” led to Lehman’s failure—a major link in the Financial Crisis which caused our Great Recession. So regulators focused on the leverage ratio—how many assets a bank has compared [...]