Chinese Fortunes

By | 2017-07-17T12:21:41+00:00 September 30th, 2016|Global Market Update|

What’s happening in China? Forbidden City in Beijing. Photo: Saad Aktar. Source: Wikimedia Anyone who wants to understand the global economy needs to have a sense of what’s happening in China. China has the second largest economy in the world--almost 2/3rds the size of the US. Last year they grew more than the US and Europe combined. They’re essentially tied with Canada as our largest merchandise trading partner, providing 15% of our imports and exports--$300 billion worth. So what happens in China affects the [...]

Truth-Telling and Fools

By | 2017-07-17T12:21:42+00:00 September 29th, 2016|Global Market Update|

Who tells you the truth? King Lear and his Fool. Artist: Ary Scheffer. Source: Folger Library No one wants to hear bad news. That’s why accountants and finance professionals are often so unpopular. A leader may have grand visions for the future filled with growth and opportunity—but his finance people tell him he doesn’t have the money to pay for it. Good leaders listen to counsel; bad leaders shoot the messenger, surrounding themselves with toadies and sycophants. Eventually, these leaders overreach. They try to [...]

Names, Brands, and Reputation

By | 2017-07-17T12:21:42+00:00 September 28th, 2016|Global Market Update|

What’s in a name? Souce: Worditout.com That’s what Juliet asks in the famous “balcony scene” in Romeo and Juliet. She had fallen in love with Romeo, but Romeo had the wrong family name. Tragically, they couldn’t escape their families’ heritage of violence and vendettas. On the other side of the coin, companies put billions of dollars annually into creating names and brands that we can trust. Retailers like Amazon and Target, health care companies like Johnson & Johnson or Pfizer, and global firms like [...]

Investments, Risk, and Return

By | 2017-07-17T12:21:42+00:00 September 27th, 2016|Global Market Update|

What is risk? Base jumpers. Photo: Christophe Michot. Souce: Wikipedia In 1952 Harry Markowitz changed the world. By combining different assets he proved that a diversified portfolio would have a lower variance. His mathematical formula used the variance of asset prices around an average as a proxy for risk. It made sense at the time: the more asset prices jump around, the more nervous people get. Markowitz’s work was ground-breaking. Never before had risk been so clearly linked to return, nor had its reduction [...]

Carbon Dreams

By | 2017-07-17T12:21:42+00:00 September 26th, 2016|Global Market Update|

Are we bound to a “wheel of fire”? Photo: Gerd Altman. Source: Pixabay For millennia, people have burned things when they wanted or needed energy. Campfires and fireplaces give us heat; ovens and stoves cook our food; steam power, piston engines, and turbines help us get from place to place. Except for nuclear energy, most of our power comes from converting carbon into CO2. But theories of climate change and global warming threaten to revise this. If increasing concentrations of CO2 in the atmosphere [...]

Incomes and Outcomes

By | 2017-07-17T12:21:42+00:00 September 23rd, 2016|Global Market Update|

What can investors do about low rates? Source: St. Louis Fed Low interest rate around the world are challenging investors and savers everywhere. And it isn’t just households: state and local pension funds—once fully funded—are now underfunded by almost $2 trillion. With expected returns so low, governments and employees are being called upon to increase their contributions to make up for the shortfall. The resulting strain on public budgets has led to credit-rating cuts in places as diverse as New Jersey, Kentucky, and Chicago. [...]

Dissent and Dysfunction?

By | 2017-07-17T12:21:42+00:00 September 22nd, 2016|Global Market Update|

Does the Federal Reserve need to do some team-building? Federal Reserve “Dot Plot.” Source: Federal Reserve As expected, the Fed did not increase their interest rate target. Instead, they decided to wait for further progress in the economy. In her prepared remarks, Janet Yellen emphasized that their decision doesn’t reflect a lack of confidence in the economy. Rather, she noted, the pace of hiring in the labor market seems to have slowed, and inflation is still running below 2%. In their projections for economic [...]

True Grit?

By | 2017-07-17T12:21:42+00:00 September 21st, 2016|Global Market Update|

What makes an investor successful? Photo: Paul Warrander. Source: Wikipedia People can argue about whether success is due to luck or skill. But often it seems to come from somewhere else. Notably, a person’s performance in many areas come from a special blend of passion and persistence—grit. Every year, Roxbury Preparatory Academy in Boston has a Pi Recitation Contest: 6th, 7th, and 8th-grade students stand at the front of the room and recite from memory as many digits of the number pi as they [...]

World Wide Cash

By | 2017-07-17T12:21:43+00:00 September 20th, 2016|Global Market Update|

Why do firms hold so much cash overseas? Source: Capital Economics As the global economy has grown, cash held overseas by US firms has grown at a rapid pace. US companies now hold over $2.5 trillion. The recent flap over Apple’s $14.5 billion fine by the European Commission brings into high relief the fact that the US has the highest corporate tax rates in the world, and claims a share of anything a US company does—if it brings those profits back home. So if [...]

Getting Personal in the Gig Economy

By | 2017-07-17T12:21:43+00:00 September 19th, 2016|Economics|

Getting Personal in the Gig Economy     What is the “gig economy” doing to us? Photo: Elisa Riva. Source: Pixabay More and more people today are independent contractors—about a third of the US economy. Apps like Uber and Airbnb make it even easier to work for yourself. Uber makes it possible for folks with a set of wheels and some extra time to make money on their schedule, when they want to. Airbnb allows people to rent out their extra room or vacation [...]