Scientific (Employment) Method

By |2014-01-31T11:21:16-04:00January 31st, 2014|Global Market Update|

Does the world need more science majors? That’s what a lot of people think. And as a science major myself, the husband of a science major, and the father of three science majors (so far), I certainly believe in the utility and importance of studying science in college. It helps young people develop many important skills. But some proposals to provide special encouragement for kids to study science seem misguided, like college-loan forgiveness or differential tuition rates. That will lead institutions to just game [...]

Moving the Standards

By |2019-02-20T13:04:47-04:00January 30th, 2014|Global Market Update|

Sent: Friday, September 11, 2009 5:26 PM Subject: Global Market Update 9-14-09 Are your investments suitable? Or ideal? That's the question being asked these days in Congress. Because in the shake-up of financial regulations, Congress is reviewing how investors get advice. Most stockbrokers are governed by a suitability standard. This requires that brokers offer advice that is appropriate for investors considering their situation. But if the broker knows of a similar investment that generates less income for him, he's under no obligation to offer [...]

Classical Investing (Part 8)

By |2019-02-20T13:04:47-04:00January 30th, 2014|Global Market Update|

Sent: Tuesday, May 19, 2009 5:39 PM Subject: Global Market Update 5-19-09 Is virtue boring? In Jane Austin's Sense and Sensibility Marianne Dashwood falls for the debonair Mr. Willoughby, while the staid Colonel Brandon watches from the side. Eventually, the mercurial Willoughby breaks Marianne's heart, and the patient Colonel Brandon helps her pick up the pieces of her life. Austen's point seems clear: sensible decisions often seem unimaginative and dull, while romantic adventure seems exciting. But with excitement can come risk, and often we [...]

Of Bookies and Brokers

By |2014-01-30T11:26:30-04:00January 30th, 2014|Global Market Update|

Is investing just gambling? On the face of it, there are a lot of similarities. People have money left over after buying all the goods and services they need or want, and they use that money to express an opinion. In the investing world, they buy stocks or bonds—or some derivative, like ETFs or mutual funds. In the gambling world, they go to a casino or buy a ticket at the racetrack or take a position on a sports team. Now, most sports betting [...]

Emerging Issues

By |2014-01-29T11:06:10-04:00January 29th, 2014|Global Market Update|

It’s the end of January and global markets are shifting. In the US and Europe, the stock markets have pulled back 2-3% after a very strong 2013. But emerging markets are down almost 10% after last year’s lackluster returns. What’s going on? When the Fed announced last June that they were ready to slow the expansion of their balance sheet, emerging markets balked. They had grown accustomed to massive cash-flows from the developed world. With the Fed signaling that the era of ultra-easy money [...]

The Road To Where?

By |2014-01-28T09:40:10-04:00January 28th, 2014|Global Market Update|

Why do good intentions so often fail? It happens all-too-often. A new approach to poverty is announced, there’s excitement, there’s publicity, tens—no, hundreds of millions of dollars are raised, and it’s declared that the end of poverty is in sight. Such hope! Such vision! But when plans hit the ground, things are more complicated, systems collide with systems, and often people end up worse than they were before any of this help ever arrived. Some development experts went to Africa looking for “quick wins”: [...]

27 January, 2014 11:27

By |2017-07-17T12:34:23-04:00January 27th, 2014|Global Market Update|

Microsoft’s Muddle Why is it so hard to fill this job? In August Steve Ballmer announced that he would resign as Microsoft’s Chief Executive. Since then the stock has rallied 20%, mainly on hopes that a new CEO could turn things around. During his time as CEO, sales tripled and earnings rose 16% per year. But the company missed all the major innovations: search, social, and mobile, while issuing disastrous Windows updates. So the stock has languished. Only after his resignation was released did [...]

Confidence in Confidence?

By |2014-01-24T10:23:36-04:00January 24th, 2014|Global Market Update|

Are people overconfident? Studies published over the years demonstrate that people overestimate their abilities and potential for reaching their goals. Julie Andrews illustrated this 55 years ago when she sang “I have confidence.” The ironic point the song makes is that her (over)confidence is misplaced. She had very little reason to expect everything to “turn out fine” given the circumstances she was facing. It’s easy to see how people are overconfident today. Just ask a room full of people to raise their hands if [...]

Debt Dynamics

By |2017-07-17T12:34:23-04:00January 23rd, 2014|Global Market Update|

What are we going to do with all our debt? Since 1950 private debt as a percentage of the economy has grown from 50% to about 160% of the world’s 22 most advanced economies. The ratio had been steadily advancing for years, but accelerated between 1998 and 2008, when it grew from 100% to 170%. It has retreated modestly since the financial crisis, as corporations and consumers have delevered. This is a global phenomenon; no single government is responsible. The debt has grown as [...]

Great Manager Theory?

By |2014-01-22T11:25:19-04:00January 22nd, 2014|Global Market Update|

Do managers matter? That’s what I wondered when I read that Mohamed El-Erian, CEO and co-CIO of the Pacific Investment Management Company—PIMCO—is resigning. PIMCO is the largest bond manager in the world, and one of the most successful asset managers of all time, with almost $2 trillion in assets. Their flagship total return bond mutual fund has over $200 billion. Some have linked El-Erian’s resignation to the $40 billion in outflows from the bond fund last year, or the difficulty that PIMCO has had [...]