The Investor’s Dilemma

By | 2014-04-30T10:17:48+00:00 April 30th, 2014|Global Market Update|

Why is investing so hard? Investing should be simple: spend less than you earn, and sock away the extra. But we get in our own way. First there’s the lure of excess spending. People’s lifestyles are determined more by their peer-group rather than their financial goals. That’s why young athletes with seven-figure incomes end up bankrupt just a few years later. Then there’s predatory financial products: lottery tickets, overly-complex structures, high-fee mutual funds. These confidence games are designed to turn your savings into someone [...]

Too Much Information?

By | 2014-04-29T09:40:33+00:00 April 29th, 2014|Global Market Update|

Is Big Data the future? It seems that everyone is talking about Big Data. Big Data refers to data sets so large and complex that normal database management tools aren’t powerful enough to handle them. Because so many people are using the internet in so many diverse ways there are billions and trillions of gigabytes out there to be studied. The hope is that all this information can be crunched in such a way so that researchers can spot trends, prevent diseases, fight crime, [...]

European (dis)Integration?

By | 2014-04-28T10:49:47+00:00 April 28th, 2014|Global Market Update|

What good is the European Union? The conventional wisdom is that the European countries that are part of the European Union have done better economically, but by how much? The Euro crisis made that question pretty important. The countries that had traditionally devalued their currencies to compete—Italy, Spain, Portugal—couldn’t do so anymore. So their exports—and their economies—suffered. If the benefits aren’t worth the cost, the Euro won’t survive. So what is the advantage? Several researchers have looked into the question. They found that EU [...]

Hard and Soft

By | 2017-07-17T12:34:19+00:00 April 25th, 2014|Global Market Update|

Hardware makes it possible. Software brings it. That’s what I thought when I read about the robotics innovations that are poised to change our lives: drones, driverless cars, virtual assistants. These technologies are build around things we already know pretty well—the car, the helicopter, and the PDA. But by adding sophisticated software, they are about to make a big difference in the world. Take driverless cars. I had a driver once, and loved it. I had broken both of my elbows in a bicycle [...]

Trading Partners

By | 2014-09-11T13:33:48+00:00 April 24th, 2014|Global Market Update|

Don’t look now, but global trade is accelerating. In the first quarter, the volume of goods imported and exported surpassed the high previously recorded in early 2008. Trading volume continues to increase, especially exports from emerging Asia to the rest of the world. Japanese trade fell, even before the earthquake-tsunami-nuclear disasters. In the US, imports rose and exports fell, which will drag on first quarter GDP. Nevertheless, economic activity is strengthening around the world, and what goes around comes around. Industrial production seems to [...]

The Dream Factories

By | 2014-04-24T10:07:10+00:00 April 24th, 2014|Global Market Update|

Why do people start companies? At the heart of capitalism is the small start-up—the new project founded on an idea and some hustle that creates something new out of nothing. If the idea catches on, the founders can become quite wealthy. If the idea falters, the founders learn what doesn’t work and move on. Many entrepreneurs fail in their first few tries. It’s an expensive tuition. That’s because there are far more things that don’t work than do. It’s like science: knowledge grows by [...]

Money Market Mischief

By | 2014-04-23T09:59:34+00:00 April 23rd, 2014|Global Market Update|

Are money funds too big to reform? At the heart of the Financial Crisis were money market funds. When Lehman filed for bankruptcy in September of 2008, one of its creditors was The Reserve Primary Fund, an independent money fund with $125 billion in assets. Because it held almost $800 million in Lehman debt, it was forced to mark down its stable Net Asset Value, causing investors to take a loss. Financial chaos ensued. Over $500 billion fled the $13 trillion money market sector. [...]

The Dragon and the Bear

By | 2017-07-17T12:34:19+00:00 April 22nd, 2014|Global Market Update|

Could China reconcile with Russia? The crisis in Crimea and Ukraine seems to have had little impact on the markets. Germany, the European economy most closely affected by what happens in Russia, has seen its stock market hover near its all-time highs. German newspapers have more coverage of Edward Snowden and the NSA revelations than they do of the military upheaval close to their borders. The markets seem to have concluded that Ukraine is not that important. But the confrontation may have implications with [...]

Wishing Upon a Star?

By | 2014-04-21T11:00:00+00:00 April 21st, 2014|Global Market Update|

Be careful what you wish for. Years ago the organic food movement was a fringe activity. You could find organic food at a few health-food stores and farmer’s markets, but not very easily. Now almost every supermarket has an organic food section, and entire chains, like Whole Foods, are devoted to the concept. Organic food sales now comprise over 4% of total food sales in the US, doubling every 10 years or so. Not so long ago, index funds were the province of finance [...]

Being Smart

By | 2014-04-18T10:06:03+00:00 April 18th, 2014|Global Market Update|

Is smart beta the future? Beta is a measure of risk. If a stock has a beta of one, it goes up and down by the same percentage, day-to-day, as the market does. Investment portfolios have a beta component, which corresponds to their general exposure to a broad market average, like the S&P 500. By definition, if you own an index of the entire market, your beta is one. Smart beta is a rules-based approach that reduces costs by limiting investment discretion. It is [...]