Fed To Markets: Never Mind

By |2017-07-17T12:22:10-04:00January 29th, 2016|Global Market Update|

Fed To Markets: Never Mind Photo: NBC Television. Source: Wikipedia When I read the latest policy statement coming out of the Fed on Wednesday, I was reminded of how the character Emily Litella from Saturday Night Live would always close our her commentary: “Never mind.” This is a critical time for the Fed. Their very legitimacy has been called into question. So they’ve been trying to guide the markets, to make sure we aren’t blindsided by a sudden action. Some Fed Ph.D. must have [...]

Outcomes and Incomes

By |2017-07-17T12:22:10-04:00January 28th, 2016|Global Market Update|

Incomes and Outcomes Are you interested in scoring? Or winning? Photo: Gabor. Source: Morguefile Traditionally, companies are organized around their products. Proctor and Gamble sell shampoo; GM builds cars; Disney makes movies. But what people really want is to get a job done. They don’t want a car as much as they want transportation; they don’t want to make a phone call, they want to communicate. Understanding the difference can be life-changing. 20 year ago Cordis Corporation was a bit player in angioplasty devices. [...]

Show Us The Money

By |2017-07-17T12:22:10-04:00January 27th, 2016|Global Market Update|

Why don’t people trust bankers? Source: Gallup In a survey of how people rate the honesty of folks in different lines of work, medical professionals came out on top; members of Congress and car dealers were on the bottom. Bankers, lawyers, and journalists were pretty much in the middle. Confidence in financial professionals took a big hit after the latest financial crisis and Madoff scandal, as it did after the S&L crisis of the early ‘90s. Few people have experienced real losses when it [...]

A Fourth Industrial Revolution

By |2017-07-17T12:22:10-04:00January 26th, 2016|Global Market Update|

Are we in the midst of a new industrial revolution—a wave of creative destruction? Photo: K.Connors. Source: Morguefile Beyond the daily blather about oil prices, China, quarterly earnings, and Presidential politics, new technologies are changing the way we live, work, and relate. It’s impossible to walk down the street without seeing over half the people staring at their smart-phones. “Walking-while-texting” is a major safety hazard. Some have called this the fourth industrial revolution. The first industrial revolution was based on steam power, the second [...]

Standing on Principals

By |2017-07-17T12:22:10-04:00January 25th, 2016|Global Market Update|

Do we have too many principals? Principal-Agent Illustration. Source: Wikipedia. 40 years ago we didn’t. That’s when several researchers described the “agency problem,” where principals own the assets, but agents make the decisions. This can lead to conflicts, like when executives decide commercial air travel is too inconvenient, so they buy a corporate jet instead. Who decides whether the jet is a productivity tool or a luxury? When executives use corporate resources for cushy perks, it’s bad for shareholders and bad for the economy. [...]

The Impossible Trinity

By |2017-07-17T12:22:11-04:00January 22nd, 2016|Global Market Update|

The Impossible Trinity Is China attempting the impossible? Temple of Heaven. Source: Photo Everywhere This week the Chinese monetary authorities announced that they were dropping their Dollar peg. Instead, they want to tie their currency to a basket of global currencies—presumably the Euro and Yen. Good luck with that. Currency pegs work until they don’t. The Dollar peg worked for the Chinese as long as the Dollar was falling. But the greenback started rising against the Euro and the Yen in 2011, and really [...]

Five Year Old Finance

By |2017-07-17T12:22:11-04:00January 21st, 2016|Global Market Update|

Five-Year Old Finance Can we learn about finance from toddlers? Photo: Dedulo Photos. Source: Morguefile In 1972 a Stanford psychologist studied self-control in youngsters. He put a marshmallow in front of a child and told the kids that if they could wait 15 minutes, they could have two. Of the 600 children in the study, about a third were able to earn the second marshmallow. In two follow-up studies, those who waited had significantly better results in school and higher test scores, even decades [...]

Going Really Negative

By |2017-07-17T12:22:11-04:00January 20th, 2016|Global Market Update|

We’ve seen negative interest rates. Are negative prices next? Negative 2-year European Government Interest Rates. Source: Bloomberg In Europe, the central bank charges members to leave deposits on reserve. That, and the central bank’s policy of purchasing government debt, has driven short-term interest rates into negative territory. Negative interest rates make a lot of economic and finance theories blow up, but their major effect is to push banks to lend more. In some European countries, consumers can even see their mortgage rates go negative. [...]

Irrational Political Economy

By |2017-07-17T12:22:11-04:00January 19th, 2016|Global Market Update|

Are voters rational? Direct Democracy in Switzerland. Source: Wikipedia. It’s primary season in my home in New Hampshire right now, and it’s impossible to get through dinner without receiving a phone call from a political polling organization. Every candidate is trying to get a feel for the state, where our opinions and moods lie, and what we think is important. Some see this whole process as irrational, a leftover artifact of a bygone era, where uninformed voters select self-interested politicians who manipulate and deceive [...]

Ecologists and Engineers

By |2017-07-17T12:22:11-04:00January 15th, 2016|Global Market Update|

Are you an ecologist or an engineer? Source: Wikipedia An ecologist looks at a river or mountain or a forest and says, “What a fascinating community. How do all the creatures and systems interact?” An engineer looks at the same vista and thinks, “We can build a bridge here. We could improve the river’s flow, or make the conditions less harsh.” Engineering and ecology aren’t so much opposed, as they look at the world in totally different ways. America was built by engineers—men and [...]