Long Term Investing

By |2017-07-17T12:21:51+00:00August 17th, 2016|Global Market Update|

Are you a long term investor? “The Persistency of Memory” by Salvadore Dali. Source: Museum of Modern Art Everyone claims to be. When the market is high, they claim that they’re not worried about a few small fluctuations. But if stocks fall 5%, you’d think we just declared war on the Republic of Freedonia. Everyone wants to get out—but only for as long as the market is down. Then they’re long-term investors again. The problem comes because we don’t think about what we have. [...]

Bankers to Bankers

By |2017-07-17T12:21:51+00:00August 16th, 2016|Global Market Update|

What do central banks do? Eccles Building in Washington, DC. Source: Wikipedia The Federal Reserve was formed in 1914 as a way to stabilize the banking system. The late 19th century had been plagued by a series of financial panics and stock market crashes, topped off by the Panic of 1907. This was headed off by J.P. Morgan and a consortium of bankers, who set themselves up as lenders of last resort to banks that were in trouble. Newspapers at the time repeatedly reported [...]

How Preferred is Preferred?

By |2017-07-17T12:21:51+00:00August 15th, 2016|Global Market Update|

What are preferred stocks? “Preferred Stock Cologne” by Coty. Source: 99perfume Preferred stocks are hybrid securities that fit between equity and bonds in a firm’s capital structure. Most of the time, if a company goes through bankruptcy, the preferred shares get wiped out. During the financial crisis, the owners of the preferred shares of Fannie Mae and Washington Mutual got nothing for their shares, while the bondholders received 100 cents on the dollar. So in what sense are they preferred? They are preferred as [...]

Shadows and Substance

By |2017-07-17T12:21:51+00:00August 12th, 2016|Global Market Update|

Where can we get good information on corporate sustainability? Illustration: Milo Winter, 1919. Public Domain. Source: Fables of Aesop. When it comes to financial analysis, most investors use a combination of quantitative and qualitative information, based on market reporting and financial disclosures: price, volume, 10-Ks, earnings calls, and so forth. With so much available over the internet, it’s never been easier to compare Apple’s results to those of Huawei Technologies, the Chinese smart-phone maker. Both companies are multi-billion dollar enterprises employing hundreds of thousands [...]

Buy, Sell, or Jump?

By |2017-07-17T12:21:51+00:00August 11th, 2016|Global Market Update|

Is the market on the edge of a cliff? Photo: Mercy from Wikimedia Commons: Source: Wikipedia That’s what a lot of smart people are saying. They cite our political mess, our slow-growth economy, negative interest rates in Europe and Japan, rising corporate leverage, and accounting tricks and they figure a crash must be coming. So, with the stock market flirting with record highs and bond yields near record lows, is it time to sell everything? The short answer is, probably not. It’s almost never [...]

Fee, Fie, Foe, Factors?

By |2017-07-17T12:21:51+00:00August 10th, 2016|Global Market Update|

What is factor investing? Public Domain: Source: Wikipedia Factor investing is just a new way to talk about stock-picking. Thirty years ago Gene Fama and Ken French discussed what goes into stock market returns, and why stocks gradually go up. They came up with three major elements: the equity market itself, the size of the companies, and their market valuation relative to their accounting valuation. The market captures economic growth and put it into a company’s share price. That is, when the economy grows, [...]

The 60-Billion Dollar Mystery

By |2017-07-17T12:21:51+00:00August 9th, 2016|Global Market Update|

There’s a mystery lurking in Silicon Valley. Source: Open Clipart Over the past decade and a half the tech industry has quietly added over $60 billion onto its collective balance sheet. Where did that money come from? And where did it all go? The money is hiding in plain sight, on a balance sheet line called “goodwill.” Goodwill is created when a company pays a premium for another company. It’s a way to lump all the “good” items together that make an acquisition worth [...]

Mixed Money Messages

By |2019-02-20T13:04:44+00:00August 8th, 2016|Global Market Update|

Where does money come from? Source: Morguefile Money is a funny thing. Most people around the world look at yen and euros and dollars and say that that’s money. But banknotes are only a small fraction of the money in the world. Most money exists in the form of bank deposits. When we buy a house or a car or pay our credit card bill, we just instruct our banks to make ledger entries transferring some of our account to someone else. When a [...]