The Oldest Arrangement?

By | 2017-07-17T12:21:56+00:00 May 31st, 2016|Global Market Update|

How do people deal with their student debt? Source: St. Louis Fed Student debt is soaring. The cost of college is skyrocketing, but in our knowledge-based economy, education is more important than ever to financial success. Some people think a college degree is little more than signaling: the degree on your resume tells a prospective employer that you are intelligent and hard-working. But for someone looking for work, that’s beside the point. If you don’t have a diploma, many potential employers won’t even bother [...]

The Triumph of Engineering

By | 2017-07-17T12:21:56+00:00 May 27th, 2016|Global Market Update|

How did Google beat Yahoo? Source: Bloomberg Ten years ago we didn’t know what would happen. Google had just gone public, while Yahoo had been around a while. Both companies had a core search engine, and both were set on expanding their services. Now Google is a $500 billion behemoth, while Yahoo is about to be relegated to the dustbin of history. How did Google win the competition for hearts, minds, and clicks? A lot has to do with the way they engineered their [...]

Failing Upwards

By | 2017-07-17T12:21:56+00:00 May 26th, 2016|Global Market Update|

What drives US markets? Source: Bloomberg Over the years the stock market in the US has generated significant real returns – better than most other markets around the world. Since 1994, US equity markets have returned 5.4% above inflation, while the rest of the world has averaged only 2.3%. Why? One reason has to do with the way we treat failure. The US has a very liberal bankruptcy regime. When companies can’t pay their debts, we allow them to stay payments to their creditors [...]

Euro Futures

By | 2017-07-17T12:21:56+00:00 May 25th, 2016|Global Market Update|

Is the Eurozone dying? Photo: Dave Meier. Source: Picography It’s certainly facing tough times. Economically moribund, most Euro government bonds carry negative interest rates. Countries on the economic periphery still face crushing debt service. Unemployment remains above 10% -- the same level it was shortly after the Great Recession. And soon Britain will vote to leave the EU. Who can blame them? Who wants to tie their economic future to a 20-ton anchor? But bad as things are right now, they were significantly worse [...]

Small Futures?

By | 2017-07-17T12:21:56+00:00 May 24th, 2016|Global Market Update|

Are we all doomed? Photo: Alton Thompson. Source: Wikipedia A recent report by McKinsey and Co. discussed the long-term prospects for the stock and bond markets. Their contention was that after an era of stellar performance, returns are likely to be significantly lower over the next 20 years. Source: McKinsey & Co There’s nothing dramatically ground-breaking about these projections. After all, twenty years ago 10-year US Treasury Notes yielded 7%. Now they yield 1.8%. 10-year German bunds yielded 6.5%. Now they yield 0.2%. In [...]

Alpine Meadows

By | 2017-07-17T12:21:57+00:00 May 23rd, 2016|Global Market Update|

What comes to mind when you think of the Alps? Photo: Kevin Connors. Source: Morguefile Maybe it’s clear mountain lakes and crystal blue skies. Maybe it’s sun and snow and skiing. Or maybe it’s money? A map of Europe scaled by per-capita GDP reveals an interesting tendency: the areas with the most mountainous topography tend to have higher incomes. Northern Italy, western Austria, southern Germany, and Switzerland are all significantly richer than other regions. This holds true despite differences in taxation, culture, transport, and [...]

Book ‘Em

By | 2017-07-17T12:21:57+00:00 May 20th, 2016|Global Market Update|

Why do we love old books? Photo: Diane Hope. Source: Morguefile There’s something romantic to “old book smell.” It’s a kind of earthy, musty aroma of old leather and paper. Maybe the smell invokes trips to the library when you were a child. It’s quite attractive to many people. There are even high-end perfumes that try to mimic it. Paper products release distinctive odors as they break down, notably lignin, which produces a vanilla-like scent as it decomposes. Various presses use different sources of [...]

Getting Going

By | 2017-07-17T12:21:57+00:00 May 19th, 2016|Global Market Update|

How do you get started investing? Photo: Tyler Main. Source: USMC I got involved with investing via a different route. I had studied computer modeling in college in the early ‘80s. While looking for a job, I met with a bank manager who had a computer model for the bank’s earnings and balance sheet, but didn’t have anyone that could run the model. Tentatively, he hired me to implement the computer simulation. I got the analytic software to work much faster than expected, so [...]

Brexit Blues

By | 2017-07-17T12:21:57+00:00 May 18th, 2016|Global Market Update|

What is “Brexit”? River Thames. Source: Wikipedia “Brexit” refers to the potential withdrawal of the UK from the European Union. They’re voting on the possibility on June 23rd of this year. The UK isn’t part of the Euro – the British Pound is still their currency. But it is part of the EU, and has been part of that or its predecessor, the EEC, since 1973. Membership in the EU has certain pluses and minuses. It improves trade, makes investment easier, and reduces the [...]

Stock Market Values (Part 4)

By | 2017-07-17T12:21:57+00:00 May 17th, 2016|Global Market Update|

How do you value a company when there are no earnings? Photo: Mary R Vogt. Source: Morguefile Is it just a case of irrational exuberance? Not necessarily. Traditional discounted cash flow analysis is a useful tool when it comes to evaluating financial assets, but it has its limitations. One aspect of investing that DCF analysis ignores is management’s flexibility. They can delay bringing a product to market, or expand its production to meet an unexpected surge in demand, or shift how their facilities are [...]