Back in the Black

By | 2013-11-27T10:25:48+00:00 November 27th, 2013|Global Market Update|

Is Black Friday a good deal? Everybody loves a deal. And Black Friday is the biggest deal-day of the year. With door-busters being touted at Wal-Mart and Target and JC Penney and everywhere, many consumers are already starting to camp out. But is this just retail theater? The common assumption is that retailers stock up on lots of goods in October and then mark down the ones that don’t sell. But that’s not the way it works. That $25 sweater probably cost the retailer [...]

Good and Bad

By | 2017-07-17T12:34:36+00:00 November 26th, 2013|Global Market Update|

Why do good people do bad things? Recently we’ve been treated to a spate of bad behavior by otherwise successful, sensible individuals. A couple of Credit Suisse mortgage traders intentionally mis-marked their portfolios as the housing market crumbled around them. LIBOR traders systematically manufactured false readings of this key global index in order to help their firms’ derivatives desks. And then there’s Rajat Gupta, the former Chief Executive of McKinsey & Co., who served on the Goldman Sachs Board of Directors. Gupta was convicted [...]

50 Years Ago …

By | 2017-07-17T12:34:36+00:00 November 25th, 2013|Global Market Update|

50 years ago I was a little boy watching a funeral on TV. The grown-ups were hushed. The images from Washington, DC played to a nationwide audience. 50 years ago there wasn’t a conspiracy industry. There wasn’t a Sixth Floor Museum, dedicated to an assassination. Three presidents prior to Kennedy had been shot, and the crime had been pursued. The Cold War was real, and ever-present. Duck-and-cover drills were part an ordinary elementary school day. 50 years ago the stock market was in the [...]

Dow 16,000!

By | 2013-11-22T09:35:31+00:00 November 22nd, 2013|Global Market Update|

How is this going to end? With the Dow hitting milestones and the economy looking like it’s strengthening, investors are partying like it’s 1999. The Senate looks likely to confirm Janet Yellen, a confirmed policy dove. She’ll likely keep the punch-bowl filled and interest rates low, so investors can keep on keeping on. But every thousand-point climb makes some investors that much more nervous. They remember the euphoria when the Dow first hit 10,000 shortly before the internet bubble burst, and the way it [...]

Fed Up?

By | 2013-11-21T11:04:05+00:00 November 21st, 2013|Global Market Update|

Charles Plosser is worried. The Philadelphia Fed President is a member of the Federal Reserve Open Market Committee. As such he helps set monetary policy. In addition to the seven members of the Board of Governors, the Open Market Committee includes the nine regional bank Presidents, five of whom vote on policy in any particular year. Next year Plosser becomes a voting member, along with Richard Fisher of Dallas, and the Presidents of the Cleveland and Minneapolis Fed. Plosser and Fisher are policy hawks, [...]

The $13 Billion Question

By | 2013-11-20T10:46:01+00:00 November 20th, 2013|Global Market Update|

How do you lose $13 billion? JP Morgan recently agreed to a civil settlement worth $13 billion. The numbers stagger the imagination. That’s more than the market cap of most business. What did they do to earn such a fine? At issue was a 2006 decision by JP Morgan managers to accept mortgages from Greenpoint Mortgage, despite their substandard nature, and bundle them into mortgage-backed securities that JP Morgan sold—without warning investors that some of their collateral was substandard. Well, “substandard” is generous: these [...]

Shelling Out?

By | 2017-07-17T12:34:36+00:00 November 19th, 2013|Global Market Update|

Is fracking the future? That’s been the assumption of the energy market for a while. Hydraulic fracturing has been the drilling method of choice since 2010. While the technology has been available since the 1950s, it gained widespread currency after the oil-price run-up in the mid-2000s.Now it’s being used to extract oil, gas, and even uranium from previously inaccessible deposits. Because fracking has become so widespread, it has been estimated that the US will become the world’s top oil producer by 2015. So people [...]

Private Lives

By | 2017-07-17T12:34:36+00:00 November 18th, 2013|Global Market Update|

Are the smartest folks in the room changing their minds? For years, Private Equity has been the holy grail of investing. With superior accountability, accountancy, business planning, and investor access, investors (who could afford it) loved what private equity could do for their portfolios. The appeal is clear: if a company’s CEO behaves badly in the morning, he’s out by the afternoon. If you question the company’s accounting, you can bring in your own accountants. A company can be run for cash or market [...]

Beyond Excel

By | 2013-11-15T11:29:57+00:00 November 15th, 2013|Global Market Update|

Why is finance so dumb? In the era of smartphones and 3-D printing, financial analysis is stuck in the ‘80s. The principal tool of the analyst is the spreadsheet—something that Lotus 1-2-3 popularized in 1983. While our PCs can access cloud-based massively parallel computing, our spreadsheets still have the same machine-code A1 cell-structure. The most advanced Excel function is a macro. So finance hasn’t moved past summing up columns and rows. Big data and XBRL should make real-time analysis of corporate financials possible, but [...]

Questions, Questions, Questions

By | 2013-11-14T11:46:52+00:00 November 14th, 2013|Global Market Update|

Janet Yellen is answering Senator’s questions this week. Here are a few that I would love to ask: 1. Is there any limit to the Fed’s balance sheet? Before the crisis the Fed owned about $900 billion in securities. In five years that has more than quadrupled to $3.8 trillion. Has anyone ever done this before? How big is too big? 2. Is the Fed’s supervisory role compromised by its monetary mandate? Might bank regulators be tempted to go easy at the wrong time? [...]