Style and Substance

By | 2017-07-17T12:21:27+00:00 March 31st, 2017|Global Market Update|

Was the stock market rally just based on sentiment? Chrysler Tower with Ravenswood power plant in the background. Photo: Eric Drost. Source: Wikipedia After our presidential election, global equity markets rose about 10%. The common explanation was that a pro-growth agenda could help the economy get out of its doldrums and reaccelerate. This would support profits and the stock market. With the failure of Congress’s repeal-and-replace attempt with healthcare legislation and other policy initiatives seemingly stalled, shouldn’t the markets fall back to where they [...]

Bonded Returns

By | 2017-07-17T12:21:27+00:00 March 30th, 2017|Global Market Update|

What good are bonds? Source: Credit Suisse Since the beginning of the 20th century, stocks have returned almost 10% per year while bonds have returned about half that. Because of compounding, though, a dollar invested in equities from 1900 forward would now be worth more than 140 times what a dollar invested in bonds would. And this is only reasonable. The best you can do when you buy a typical bond is get your money back, with a little bit of interest. But some [...]

Commuting Costs

By | 2017-07-17T12:21:27+00:00 March 29th, 2017|Global Market Update|

Is commuting worth it? Traffic jam in Germany. Source: Wikipedia I have a pretty easy commute. Living and working in New Hampshire, winter storms affect my driving more than other drivers. But it hasn’t always been that way. For a while I worked in Boston, racing along I-95 to then take a commuter train to work downtown. And for a short time I lived in Brooklyn and commuted to Queens along the Brooklyn-Queens Expressway, “the world’s longest parking lot.” When people live and work [...]

The Fickle Finger of Fraud

By | 2017-07-17T12:21:27+00:00 March 28th, 2017|Global Market Update|

How do you smell a rat? Charles Ponzi, author of the first Ponzi scheme. Source: Boston Public Library Detecting financial fraud can be challenging. We know there are lots of people who want our money. It takes decades, sometimes a lifetime, to build a nest egg. It’s important to safeguard it. But in the real world people lie, cheat, and steal. Financial products are especially prone to distortion and deception, with complex legal provisions and mind-bending mathematical formulas. How can we protect ourselves? First, [...]

Time for Value?

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

Are stocks expensive now? Photo: Victor Hancek. Source: Picjumbo That depends on what you mean by expensive. Unlike rare art, fine wine, and gold, stocks have an intrinsic value. They represent ownership in an enterprise that can potentially generate earnings and dividends for investors. This leads us to the fundamental paradox of investing: 100% of what we know about a company is based on the past, but 100% of a company’s value is based on a forecast of the future: future sales, future earnings, [...]

Moral Marketing

By | 2017-07-17T12:21:27+00:00 March 24th, 2017|Global Market Update|

Are companies selling, or preaching? Source: Coca-Cola Company In 1971 Coke produced their “Hilltop” ad, where 500 young people sing about furnishing a home with love, and buying the world a Coke. The ad cost over $250 thousand to produce, a staggering amount at the time. The multi-racial chorus hold bottles of Coke labeled in English, Arabic, Hindi, and Afrikaans. The message is clear: if we can just have a Coke together, the world could be a more harmonious place. The ad went viral. [...]

Dangerous Toys

By | 2017-07-17T12:21:27+00:00 March 23rd, 2017|Global Market Update|

Dangerous Toys “Your masters let you play with dangerous toys.” Ancient Greek toy horse. Photo: Sharon Mollerus. Source: Wikipedia That’s a line from a work of science fiction written over seventy years ago – before star-fighters and warp drives. Two characters confront one another for the first time, and one believes that the other doesn’t know what he’s talking about. They do end up cooperating, though, and the forces they harness are incredibly powerful. That’s the way I often feel about academic finance. Researchers [...]

Activist Investing

By | 2017-07-17T12:21:27+00:00 March 22nd, 2017|Global Market Update|

What are activist shareholders? Photo: Taryn. Source: Wikipedia An activist is someone who buys a stake in a company to make a change. Their goals can be financial, social, or governance-driven. They might want to increase dividends, reduce managements’ salaries, or divest from particular countries or activities. 30 years ago these folks were often called corporate raiders, forcing management to take action or buy them out, often at a fat premium to the current stock price. This sort of “greenmail” seemed deeply unfair. More [...]

Mom, Kant, and Mutual Funds

By | 2017-07-17T12:21:27+00:00 March 21st, 2017|Global Market Update|

What if everyone did that? Immanuel Kant Postage Stamp, 1974. Source: Wikipedia That’s the question my mother would often ask me when I started on some hare-brained teenage-boy adventure, like taking the summer to canoe down the Mississippi River to the Gulf of Mexico, or letting my friends in the exit doors of a local movie theater. The question is a good one, and it comes from a solid philosophical foundation. 230 years ago Immanuel Kant outlined the basis for what could be considered [...]

TV Land

By | 2017-07-17T12:21:27+00:00 March 20th, 2017|Global Market Update|

How do you spend your leisure time? Source: Photoeverywhere.co.uk Leisure time is increasingly important. The time we spend working has declined over the past decade, and the time spent in leisure activities has increased. But what do we do? Increasingly, we watch TV. Millennials don’t watch as much as older folks – and they may watch TV on their phones – but watching TV constitutes the lion’s share of our down-time. Every year, the Census Bureau surveys a representative sample of American households to [...]