Consider the Alternatives (Part 2)

By |2017-07-17T12:21:45-04:00August 31st, 2016|Global Market Update|

What are the different types of alternative investments? Muskovy Duck. Photo: Matt Lemmon. Source: Animal Photos Alternative investments can be split into two types of assets: different ways to manage, and different types of assets. I’ve written before how all wealth really depends on the economy. A huge pile of gold or a robotic factory that churns out flying cars are both worthless if they’re stranded on Mars. Alternatives are just different ways to tie in to the economy’s wealth. Within management-alternatives are private [...]

Consider the Alternatives (Part 1)

By |2017-07-17T12:21:45-04:00August 30th, 2016|Global Market Update|

What are alternative investments? Duck-billed platypus, an egg-laying mammal. Photo: Klaus. Source: Wikipedia Alternative investments are assets that don’t fit into the normal asset-class categories of stocks, bonds, or cash. They include private equity, hedge funds, managed futures, collectables, commodities, and so on. They’re related to the standard asset types, but they have a slightly different twist. So physical gold is an alternative investment, while gold mining company stocks are not. Real estate is an alternative investment; Real estate investment trusts that trade on [...]

Unhealthy Economics

By |2017-07-17T12:21:45-04:00August 29th, 2016|Global Market Update|

Should the market try to be fair, or efficient, or both? Photo: James Hellman, MD. Source: Wikipedia Life isn’t fair. We know this. But something inside us recoils when a drug-maker buys the rights to a product that used to cost about $50, then raises the price to $600 over the course of 9 years, even though nothing has changed other than the market has gotten bigger. In 2007, Mylan Pharaceuticals bought the rights to make and market the epipen, a device that injects [...]

The Elusive Steady-State

By |2017-07-17T12:21:45-04:00August 26th, 2016|Global Market Update|

Will the economy ever get back to normal? Source: Wikipedia Everyone wants the economy to normalize—normal interest rates, normal economic growth, normal inflation. The Fed is talking about that issue this week in Jackson Hole, Wyoming. But we never seem to get there. Something always seems to come up. Ten years ago, the economy crashed during the financial crisis. Five years ago we had a Euro crisis and fears of “Grexit.” Now “Brexit” and the most bizarre presidential contest in memory are roiling expectations. [...]

The Ups and Downs of Index Investing

By |2017-07-17T12:21:46-04:00August 25th, 2016|Global Market Update|

What are market indexes? Source: The Reformed Broker A market index is just a group of securities. With 7000 investable stocks in the US, there are 2 7000 possible combinations. But actually, with different weighting schemes, there are more. This means there are now more indices out there than there are large-cap stocks. With index-based Exchange Traded Funds (ETFs) widely available, index investing has come to resemble particle physics, with quantum creation and destruction, spooky entanglement, and a fund’s success often predicated on its [...]

The Tyranny of Norms

By |2017-07-17T12:21:46-04:00August 24th, 2016|Global Market Update|

Will the economy ever get back to normal? Source: New York Fed Fed officials keep telling us what they want. But that’s not their job. The Fed was established to support the banking system—to serve as bankers to the bankers. Part of that job involves managing bank reserves, the money supply, and short-term interest rates. The 1978 Humphrey-Hawkins legislation specifically instructed the Fed to pursue two goals: full employment and price stability. This is sometimes called the Fed’s “dual mandate.” So it is understandable [...]

Reforming Money, Tightening Money

By |2017-07-17T12:21:46-04:00August 23rd, 2016|Global Market Update|

Are money markets doing the Fed’s job? Photo: Jon Sullivan. Source: Public Domain Images The Fed is in Jackson Hole this week, discussing how to design a monetary policy framework that enhances the global economy. Luminaries from all over the world will be there—from other global central bank leaders to politicians to academics. On Friday, Janet Yellen will speak, and she is expected to offer some hints as to how she—and by extension, the rest of the Fed—sees the economy, and where Fed policy [...]

Risk, Return, and Investment Fads

By |2017-07-17T12:21:46-04:00August 22nd, 2016|Global Market Update|

Do low-risk stocks have higher returns? Photo: Chamomile. Source: Morguefile That’s what a lot of people are thinking. It’s kind of counter-intuitive. After all, it’s always been taught that in order to get returns, you have to take some risk. Bonds are more risky than bank deposits, but they pay more. Long-term bonds are more risky than short-term bonds. Stocks are more risky than bonds—their prices are more volatile, and if a company goes bust, stock investors usually don’t get anything back. For example, [...]

The Upside of Debt

By |2017-07-17T12:21:46-04:00August 19th, 2016|Global Market Update|

Is all this borrowing good for us? Source: St. Louis Fed A growing level of debt in an economy can be a good thing. By borrowing money to pay for capital, we can become more productive and everyone prospers. Think of the US borrowing massive amounts of money to build the interstate highway system in the ‘50s and ‘60s. The important thing to remember is that the return on investment has to be higher than the cost of the borrowing. That’s why today’s persistently [...]

Lucky or Good?

By |2017-07-17T12:21:47-04:00August 18th, 2016|Global Market Update|

Was it skill or was it luck? Official Finish Cam. Source: BBC It was one of the most exciting finishes ever. Two top rowers battled for first place down the 2000 meter course. Damir Martin of Croatia led most of the way. Towards the end, Mahe Drysdale of New Zealand—a former gold medalist—closed the gap. In the final seconds, Martin seemed to hold Drysdale off as they crossed the finish. But it was too close to call. The officials had to examine the finish [...]