Politics and Investing

By | 2017-07-17T12:21:38+00:00 October 31st, 2016|Global Market Update|

Should politics impact our investing? Source: Wikipedia Many folks are concerned about the upcoming presidential election. The two major party candidates elicit strong reactions. Three quarters of those surveyed think it will have a big impact on their personal finances. And many folks are pulling out of the market in response to their fears of a Clinton or Trump presidency. Is this a good idea? It’s helpful to look at a little history. During the dot-com busty from 2000 to 2003 the Nasdaq index [...]

No Safety in Numbers

By | 2017-07-17T12:21:38+00:00 October 28th, 2016|Global Market Update|

When are sovereign bonds no longer safe? Global Yield Curves, 10-28-16. Source: Bloomberg For decades people have invested in stocks for growth and in bonds for safety. But the global financial crisis and its economic aftermath have changed that. Now sovereign bonds around the world have extremely low yields. 30-year bonds in the US yield just over 2.5%, and that’s the highest yield anywhere. You can get higher yields in emerging markets, but those come with currency, credit, and inflation risk. There have been [...]

Rags-to-Where?

By | 2017-07-17T12:21:39+00:00 October 27th, 2016|Global Market Update|

We all love rags-to-riches stories. Seabiscuit with trainer Tom Smith. Public Domain. Source: Wikipedia Like the story of Seabiscuit—a short horse with an old trainer and a history of injury—we’re captivated by the turnaround. The Apple Computer that Steve Jobs brings back from near bankruptcy, so he can introduce the iMac, iPod , iPad, and iPhone. Apple has been so successful that almost every active manager is now under-weight the stock. Or a plucky emerging market company, like Infosys, that markets its outsourcing services [...]

Trust, Trusts, and Family

By | 2017-07-17T12:21:39+00:00 October 26th, 2016|Global Market Update|

Trust, Trusts, and Family Who do you trust? King Lear and his daughters, by Benjamin West (1793). Source: Folger Shakespeare Library When people make an estate plan, they need to decide what to do with their money. One of the most important decisions is choosing a trustee. Because a trustee will control the assets, usually for a long time. So making the right choice will have far-reaching consequences. Shakespeare writes about this kind of decision in King Lear. At the beginning of the play, [...]

Pennies from Dividends

By | 2017-07-17T12:21:39+00:00 October 25th, 2016|Global Market Update|

What good are dividends? Public Domain. Source: PD Photo It’s a good question. Dividends can limit a company’s options, forcing them to cough up cash that could be used to run the business. If they money flows out of the company, they might have to increase their borrowings. Ford paid a big special dividend in 2000—they called it their “Value Enhancement Plan.” Management probably wished they still had that cash a few years later during the financial crisis. You’d expect that paying dividends would [...]

Trade is Hard

By | 2017-07-17T12:21:39+00:00 October 24th, 2016|Global Market Update|

Why is free trade so hard to understand? Source: Moeconomics Blog The idea is simple: when everyone does what they do best, we’re all better off. Like a Mark Zuckerberg giving up coding to run Facebook. He knows how to code, by all reports he’s a good coder. But it wasn’t a productive use of his time. His time was better spent acting as Facebook’s CEO—managing his sector leaders, understanding where the business is moving, working out financial issues. So he gave up coding, [...]

Great Expectations

By | 2017-07-17T12:21:39+00:00 October 21st, 2016|Global Market Update|

Is the market suffering from a case of mistaken identity? Public Domain. Scene from “Great Expectations.” Source: Wikipedia In Charles Dickens’ novel “Great Expectations,” his main character Pip is a poor orphan who suddenly starts to receive money from an unknown source. He thinks his mysterious benefactor is the cold and eccentric Miss Havisham. Miss Havisham is wealthy but mysterious, and she had taken Pip on as a companion for herself and her adopted daughter, Estella. In reality, though, Pip’s money was coming from [...]

Dreamers and Doers

By | 2017-07-17T12:21:39+00:00 October 20th, 2016|Global Market Update|

Why do people start new companies? “Wisteria” by Claude Monet. Source: Claudemonetgallery.org At the heart of capitalism is the start-up—a new project founded on an idea and some hustle that creates a business out of nothing. If the idea catches on, the founders can make a lot of money. If it flops, the founders learn what doesn’t work and move on. Many folks fail in their first attempts. It’s a costly tuition. That’s because there are so many ways for things to go wrong: [...]

Right Track / Wrong Track / Off Track

By | 2017-07-17T12:21:40+00:00 October 19th, 2016|Global Market Update|

What makes some companies thrive while others struggle? Photo: Lexcelsior. Source: Animal Photos We see lots of examples in the marketplace: Facebook created the dominant digital social network, while other platforms—MySpace, Friendster—never took off. Costco has grown as a discount club while Wal-Mart struggled. Johnson & Johnson has succeeded across a range of health-care businesses, while others faltered—brought down by scandals or shrinking markets. What’s the difference? It comes down to management. Successful companies need visionary leadership—leaders that create a sense of community where [...]

Molasses?

By | 2017-07-17T12:21:40+00:00 October 18th, 2016|Global Market Update|

Why is the economy growing so slowly? Source: St. Louis Fed Since the Great Recession, the economy has never gotten back into high gear. We’ve always seemed to be teetering on the edge of another downturn. Quarterly economic growth has averaged 2%, while a normal recovery is usually above 3.5%. Why? First, the workforce is changing. We are now entering the period where baby-boomers are beginning to retire. Like most things the boomers have gotten involved with, they are transforming retirement. Their family finances [...]