What’s notable about 2014?
2014 was a year of War and Peace. First, there were the personalities: Activists Bill Ackman and Carl Icahn declared a truce in their long fight over Herbalife; Amazon’s Bezos and Hachette books buried the hatchet over e-book pricing; Warren Buffett and Coca-Cola’s chief smoothed things over after the CEO’s bonus was cut in half. It needed to be: Buffett owns 10% of Coke, and the company hasn’t done so well. But hundreds of millions in bonus bucks couldn’t put Humpty together again at PIMCO. The Bond King—Bill Gross—lost his heir—Mohammed el-Erian—and then lost his Kingdom when he was pushed out.
Continue reading 2014 — War and Peace
Why is it so hard to save?
Source: US Dept of Interior
We often hear that there is a retirement crisis in this country. People don’t save enough today to fund their retirement tomorrow. And with the national savings rate somewhere around 5%, that seems pretty accurate. After all, if you save 5% of your salary for 40 years—and just put it in the bank—by the time you retire you’ll have only two times your salary socked away. If you spend 5% of your savings every year in retirement, you’ll only replace 10% of your final salary.
Continue reading Saving the Dream
What did people get wrong in 2014?
By far the most popular wrong-headed call last year was on interest rates. In late 2013 almost all market-watchers predicted that a stronger US economy and more restrictive Federal Reserve would lead to rising bond yields. Boy, was that a mistake. A year ago 10-year Treasury Notes yielded almost 3%. Now they yield 2 1/4%. So while the stock market in the US has grown by 15% this year, treasuries have risen 5%, corporates 7%, and muni bonds returned almost 9%.
Continue reading Getting it Right
Is the NSA using a new surveillance technology?
Researchers at the University of Minnesota recently documented that ultra-low frequency listening devices have been monitoring communications and other activities around the world for decades. Located at the North Pole, these sensors appear to be focused on moral activities. In other words, they know when we’ve been bad or good.
Continue reading How Does He Know?
What is Uber?
Uber is part of the “sharing economy.” It’s an app-based livery service. Folks ask for a ride on their smartphones, and drivers pick them up and drop them off where they ask. Uber drivers are like taxi drivers, except they’re independent. They can share their car—or not, however they wish. The price of the ride is set by an algorithm that takes into account how many people want rides, how many drivers are available, and how long the ride will be. Everything is visible on the app, and it’s a lot cheaper than a taxi.
Continue reading Sharing Uber Alles?
Why are oil prices falling?
Source: Arab News
The short answer is, because Saudi Arabia wants them to. A recent Wall Street Journal article notes that the Saudi oil minister, Ali al-Naimi, is concerned that North American shale oil producers are gaining market share at the Kingdom’s expense. Back in September oil was priced at $90 / barrel, at the low end of its recent price range. Naimi went on vacation, removing Saudi Arabia from a public debate over how OPEC should respond.
Continue reading A Christmas Present from the Saudis
Why does software need to be updated all the time?
I recently went through another update on my iPhone and it was excruciating. After it was done—and you never know how long that will take—it wouldn’t synch properly with my computer. It would sit connected by its little white cord and stay on the step six of six forever, never finishing. After trying all the interim options—checking message boards, rebooting the phone, rebooting my computer—I succumbed to the inevitable, and restored my iPhone from its backup.
Continue reading Getting Updated
Could Russia become a failed state?
Source: Socialist Organizer
Almost a century ago the Russian people rose against their leaders. The feckless Romanoff dynasty had presided over a brutal conflict with Germany, mass poverty at home, and brutal repression of dissent. An economic and political crisis forced the Czar to abdicate and a power struggle ensued, ending with the Bolshevist takeover in October 1917. Are there parallels to today?
Continue reading Pass/Fail Test?
Could falling oil prices delay the Fed’s rate hike?
Source: Federal Reserve
Among economists the current consensus is that the Fed will begin to raise interest rates sometime in mid-2015. There’s discussion about their official statement which explains that they expect to maintain the current rate regime for a “considerable time” following the end of their asset-purchase program, which ran out in October. A change in the statement would continue to prepare the markets for higher rates—something the Fed wants to do. Gone are the days of Alan Greenspan’s creative obfuscation. Now the Fed wants to gradually guide the markets’ expectations. The best surprise is no surprise.
Continue reading The Wages of an Oil Bust?
What’s happening in Russia?
At 1 am today the Russian Central Bank raised its deposit rate from 10.5% to 17%. Emergency interest rate hikes announced in the middle of the night are not a sign of strength. Their goal is to stop the collapse of the Ruble, which has fallen from 35 to almost 70 to the dollar. A collapsing currency, international sanctions, and plunging oil prices are overwhelming their economy. It’s reminiscent of the collapse of 1998, when Russia defaulted on its debt and devalued its currency. But their economy has almost tripled in size since then.
Continue reading Russian Winter?