William Shakespeare: Security Analyst

By | 2013-09-30T10:25:58+00:00 September 30th, 2013|Global Market Update|

You know the story: The grand prize is hidden behind doors number one, two or three. Pick the right door, and you’re rich. Pick the wrong door, and you get a booby prize. The stage from “Let’s Make a Deal?” No, it’s the casket scene from Shakespeare’s Merchant of Venice. The heroin, Portia, must wed; her suitors are required to choose one of three chests. The chests are made of gold, silver, or lead, and each has a small riddle outside. If the suitor [...]

Shakespeare: Risk Manager

By | 2013-09-27T09:21:45+00:00 September 27th, 2013|Global Market Update|

Why diversify? Mark Twain once famously claimed that the best way to invest is to put all your eggs in one basket -- and watch that basket! And there’s a lot of insight there. Concentrating your energy and your attention is a good way to grow a business or develop yourself professionally. It’s a reasonable approach to managing risks you can control. But diversification is the way to manage risks that you can’t control. The economy, weather, government shutdowns—there’s not much you or I [...]

Elections Uber Alles (Part Zwei)

By | 2013-09-24T09:43:07+00:00 September 24th, 2013|Global Market Update|

Maybe they’ll care now? On Sunday Germany’s electorate gave Angela Merkel a stunning victory, increasing her party’s share of the vote from 33.8% to 41.5%. It’s the best result for the Christian Democrats since 1990, when Helmut Kohl won a third term. In fact, she almost won an outright majority in the Bundesrat, Germany’s lower house. Now she has to form a coalition. The CDU’s current partner, however, is not available. The Free Democrats’ share fell from 14.6% four years ago to 4.7% now—not [...]

Our Wages, Our Selves

By | 2013-09-23T09:45:11+00:00 September 23rd, 2013|Global Market Update|

Why don’t wages fall during a recession? That’s the question a lot of economists ask when there’s a downturn. After all, the theory goes, if employers cut wages, their profits would go up they wouldn’t have to fire people. And if workers didn’t like the wage cuts, the recession would make it difficult for them to find a job elsewhere. A researcher from Yale went out and interviewed over 300 employers, labor leaders, unemployment counselors, and business consultants and asked just this question. The [...]

Hamlet at the Fed?

By | 2013-09-20T09:47:57+00:00 September 20th, 2013|Global Market Update|

Is the Fed having difficulty making up its mind? When the Fed announced that they would put off changing their asset purchase plans, I wondered if Ben Bernanke was playing Hamlet: “To taper or not to taper, that is the question.” All along, he and the other governors have been uncertain as to what they might or might not do, because the economy is uncertain. It reminds me of Shakespeare’s great play, where the hero learns that his uncle had murdered his father in [...]

Taper, Schmaper

By | 2013-09-19T09:54:30+00:00 September 19th, 2013|Global Market Update|

What is the Federal Reserve doing? In its statement yesterday, the Fed noted that they decided to wait for more economic data before tapering their asset purchase program. In his press conference afterwards, Chairman Bernanke blamed tightening financial conditions and a soft labor market—along with a shot at the Federal Budget sequester—for delaying the taper process. He counseled patience—patience with the Fed, patience with the economy, patience with the process—to markets that have been itching to move. The reaction was anything but. Bond yields [...]

Thank You For Not Smoking?

By | 2013-09-18T13:11:18+00:00 September 18th, 2013|Uncategorized|

Does anyone smoke anymore? The ‘90s were a decade of tech booms and S&L busts. Of budget surpluses and Monica Lewinski. And tobacco litigation. 46 states sued the major tobacco companies, claiming that smoking raised Medicare costs. Rather than fight it out, the parties agreed to settle. The states dropped their lawsuit, and the tobacco companies agreed to pay over $200 billion to the states over the next 25 years—the largest civil settlement ever. Many states didn’t just wait for the payments; instead, they [...]

Exceptional Reflections

By | 2013-09-17T09:59:54+00:00 September 17th, 2013|Global Market Update|

Is America exceptional? Last week’s spectacle of Russia’s President writing an op-ed in the New York Times chiding Americans was surreal. Especially when he all but quoted the Declaration of Independence to admonish us for considering America as exceptional. What’s going on? Apart from the irony of seeing our former Cold War antagonist lecture Americans on American values, does he have a point? Is it truly dangerous to encourage people to see themselves as exceptional? I would submit that it depends on what the [...]

Lehman Lessons (Part 4)

By | 2013-09-16T10:35:06+00:00 September 16th, 2013|Global Market Update|

After five years, what have investors learned from Lehman? Lehman's bankruptcy and the pricking of the housing bubble created chaos, disruption, and market opportunities on a scale that hasn't been seen in the markets for decades. Indeed, not since 1974, with double-digit inflation at home and foreign policy failures abroad had the market been so cheap. The bear market of the '70s offered its own lessons to investors--inflation matters, price matters, government policies can change--which were incorporated into the bull market of the '80s. [...]

13 September, 2013 10:04

By | 2013-09-13T10:04:56+00:00 September 13th, 2013|Global Market Update|

Lehman Lessons (Part 3) What are the lessons of Lehman's failure? It's important to look at the failure in context--in the context of the economy at that time, and also in relation to other financial institutions. Bear Stearns had been bought by JP Morgan in a Fed-engineered takeover in March; mortgage giants Fannie Mae and Freddie Mac were put into a Federal conservatorship the week before. On Friday, September 12th, 2008 many market participants thought the same fate awaited Lehman. The stock might be [...]