Did Credit Suisse have a James Bond complex? Consider this business model. In order examine your finances, you have to: 1) leave the country; 2) call your banker in Switzerland; 3) fly to Switzerland; 4) meet your banker in a nondescript white room; 5) view your statements—in person only; 6) verbally instruct your banker what to do; 7) receive any money from the account in cash; 8) tell your banker to destroy all written records; 9) return home. I’m not making this up. This [...]
What do you think about Bitcoin? The crypto-currency has been in the news a lot, lately. What started as a way for math-geeks to keep score with one another has developed into a significant item for payments and money transfer. Bitcoins are pieces of computer code that can be stored offline and are—to this point—impossible to replicate. They can be “mined” by solving very difficult math problems, and once created can’t be destroyed. There is no central repository of who owns which bitcoin, although [...]
What good is privacy? The Fed lost a lot of privacy when the microphones were turned on and their meetings were recorded. When Congress found out in 1993, they wanted the transcripts released two months after the meeting. Transcripts and videotapes. The Fed threatened to destroy its tapes; Congress proposed a bill requiring disclosure. The Fed broke the impasse by stating clearly—right after their meeting—what their monetary policy was. Before 1994 the Fed engaged in market actions—repos, T-Bill purchases, Note purchases—and Fed-watchers divined what [...]
How would you like to be recorded? In 1993 the Fed found out that their meetings were being taped. In fact, they had been recorded since March of 1936. But only the Chairman knew about the taping, which began in the ‘70s. Presumably the Governors who saw little microphones embedded in the conference room table thought they were there to amplify the speakers’ voices in the big room. Little did they think they were speaking for posterity. When it became known that there were [...]
What did we learn from the Fed’s transcript? On Friday the Federal reserve released its transcripts of Open Market Committee meetings that took place in 2008. These are word-for-word records of the debates, announcements, research findings, jokes, and worries that each of the Fed Presidents and Governors had during the greatest Financial Crisis in over seventy years. The eight meetings and five conference calls generated almost 1500 pages of recorded conversations among policymakers that will be examined for years to determine whether the Fed [...]
So how do you get a competitive edge? The answer is simple: you already have one. Everyone has something they’re good at. Whether it’s understanding how a store’s layout might be confusing or knowing what kind of computer games kids are playing, everyone has some kind of expertise. As we go about our lives, we all have favorite activities, favorite stores, favorite brands we use. We become experts on motorcycles, camping gear, or farm equipment. Suppose you work in a hospital; you likely have [...]
Everyone’s looking for an edge. How can you be sure that you have one? There are three paths to performance: working harder, working smarter, and working calmer. Working harder is simple: do more research and apply what you know to what you own. It’s simple but not easy. It requires more reading, phone calls, meetings, and everything. It’s physically exhausting. Working smarter requires a deeper understanding of the way the world works. Competing this way requires you to consider how and why people behave [...]
It’s not so easy. Picking growth companies that can benefit from social or technological trends isn’t like going to the grocery store and buying a gallon of milk. A case in point is Amazon. That company would seem to epitomize a growth stock. They’ve expanded from selling books online to selling pretty much everything; they’ve designed and delivered a powerful e-reader that’s re-making the publishing industry; and their web-site hosts hundreds of other companies that want to pursue e-commerce. Their sales have increased from [...]
How do you pick winning stocks? That’s the question that many ask. Security selection is a key way to add value to a portfolio, one of the three approaches mentioned yesterday. Critical to finding winning securities is having a way to identify them. One common approach is the value method. This looks at a company’s financial statements and compares them with its market value. If the company is cheap enough, it’s a buy. An example is the A&P chain store. After going public in [...]
Investment is like sports. Performance can be measured, and compared with others. It’s important. One percentage point of excess return over 20 years can add 25% or more to a portfolio. The market’s return is just an average of every investor, weighted by size. For someone to beat the market, someone else has to get less than the market. It’s like a running race: each competitor has his or her individual time, but each contributes to the course average. How you do relative to [...]