Bubble, Bubble, Toil, and …

By |2014-04-17T10:15:41+00:00April 17th, 2014|Global Market Update|

Is the stock market becoming bubble-icious? The S&P 500 is up 50% since the middle of 2012. The price-earnings ratio has risen from 14 to 17 times trailing 12-month earnings, according to Bloomberg. And speculative IPOs for companies like Twitter and Candy Crush seem to be multiplying. Are we headed back to the giddy heights of the 2000 tech-bubble? Consider some facts: in the first quarter of 2000 there were 123 IPOs. Their average first-day returns were an eye-popping 96 percent. In the first [...]

Managing for Life

By |2017-07-17T12:34:19+00:00April 16th, 2014|Global Market Update|

We’ve heard about finding quality investments. But what about finding quality in your life? Investment quality involves a combination of security and growth, of stability and volatility. It means being exposed to various parts of the economy so that a problem in one area doesn’t threaten your financial future, and so can participate when there is growth in another area. We don’t know the future. Diversification is the complement humility pays to uncertainty. It’s that way in life as well. A balanced life combines [...]

The Quality is Right (Part 4)

By |2017-07-17T12:34:19+00:00April 15th, 2014|Global Market Update|

What is marketplace quality? Marketplace quality is related to market share. It’s how much people want to use your product. Your market share may be small because you’re just starting out, or you have limited supplies, or you’re pursuing a limited niche. But market quality measures how much your position in the marketplace is dictated by something other than a low price. Among food stores, Whole Foods is trying to have a quality image that allows it to charge a higher price. In electronics, [...]

The Quality is Right (Part 3)

By |2014-04-14T10:05:51+00:00April 14th, 2014|Global Market Update|

Where does financial value come from? Answering this question is kind of like answering your kids when they ask where babies come from. Most people think that the market performs some kind of magic, taking competition, innovation, and resources and shaking them together, laying the results out under the sunshine of disclosure, and slowly, gradually, value emerges. But it doesn’t work that way. Skilled managers run a business for profit. They look minimize their costs, try to hire talented staff, and look for ways [...]

The Quality is Right (Part 2)

By |2014-04-11T10:57:01+00:00April 11th, 2014|Global Market Update|

Would you rather bet on a horse, or a jockey? A smart race-track operator would say, “both.” The horse’s name is the main event, but who the jockey is matters. A good rider can get a lot more out of a horse than people expect. It’s that way with a company’s management. Good managers can inspire their staff, transform their marketplace, and get more value of corporate assets than anyone thought possible. Bad managers act like poison in the well: anyone who comes near [...]

The Quality is Right

By |2014-04-10T09:42:16+00:00April 10th, 2014|Global Market Update|

Which is more important: price, or quality? There’s an old saying in business: quality is remembered long after price is forgotten. This quote is frequently attributed to Aldo Gucci, the founder of the Italian fashion company, but it had been a business maxim long before he was around. It presents an aspect of marketplace wisdom that still rings true: people will often forget how much they paid, the how a product performs is in their face all the time. The same can be said [...]

The Tragedy of Expertise

By |2014-04-09T09:23:42+00:00April 9th, 2014|Global Market Update|

What is Vail doing? Vail Resorts is a diversified ski-resort operator. They own four ski resorts in Colorado, three in the Lake Tahoe area, and one in Utah. They also own luxury resort hotels. Vail was opened in 1962 by a former 10th Mountain Division ski trooper, who saw what European skiing was like and thought the sport could be popular over here if developed properly. Vail was successful and skiing took off in the US. But the ski business is difficult. Several operating [...]

Advising Ourselves (Part 4)

By |2014-04-08T09:04:38+00:00April 8th, 2014|Global Market Update|

When do stock tips work? Investment advice works best when people treat their investments like a business. If you are investing, you’re really acquiring future sources of cash. Some—like most bonds—come with contractual payments and a final date. Others—like tech stocks—come with a vague promise to begin returning cash to shareholders when the business matures. All of them, even government bonds, depend on the economy. If you were running a business, you wouldn’t tune in to a general business show for specific advice. There [...]

Advising Ourselves (Part 3)

By |2014-04-07T10:46:55+00:00April 7th, 2014|Global Market Update|

What’s wrong with stock tips? Stock recommendations rarely work out. Part of the reason is because they need to fit into an overall plan. But people who give investment advice (“5 stocks that could double!”) rarely give the nuance and conditions that might make the advice less applicable. What are the risk factors? What is the time horizon? How will the advice get updated? What is the benchmark? Gurus and pundits usually don’t have much skin in the game. The rules of journalism require [...]

Advising Ourselves (Part 2)

By |2014-04-04T09:03:33+00:00April 4th, 2014|Global Market Update|

Everyone wants a tip. What’s the best way to invest? Profitable investing starts with a plan. It starts with investors reviewing their goals, their fears, how much time they have, how much access to their money they need, and other circumstances. No one plans to fail, but many people fail to plan. And if you don’t know where you’re going, any road will do. But once you have a plan, what do you do? Investing is a prospective activity. The results depend on things [...]