Financially (in)Secure?

By | 2017-10-31T05:16:24+00:00 October 31st, 2017|Global Market Update|

Is securitization good or bad? Photo: Kerstin Riemer. Source: Pixabay Securitization is a five-dollar word that leaves people scratching their heads. It’s been alternately described as the greatest financial innovation since double-entry accounting or as the worst banking product since the centralized call-center. Securitization is actually pretty simple: it takes ordinary bank loans and bundles them up into securities that can be sold to investors. It’s been around for over 150 years. During the California Gold Rush, the railroads boomed. Everyone was moving west. [...]

Back to Average

By | 2017-10-27T07:03:16+00:00 October 27th, 2017|Global Market Update|

Is moderation coming back? Public Domain. Source: Carpictures In the ‘50s and ‘60s, there were all kinds of car models out there: muscle cars, coupes, sedans, and bizarre models with big tail fins and wide front ends. But ever since the ‘80s, designs seem to have converged. When you drive down the highway, you see SUVs, pickups, and generic sedans, all with soft corners and rounded fronts and rears. The desire for higher gas mileage and better crash performance, along with access to wind [...]

It’s Cash Flow

By | 2017-10-26T07:27:52+00:00 October 26th, 2017|Global Market Update|

What drives the stock market? Dow Jones Industrial Average, log scale. Source: Bloomberg In the short run, stock market returns are driven by buyers and sellers. More buyers than sellers drive prices up; more sellers than buyers push prices down. In the long run, though, the market is determined by how much cash companies give to their shareholders. This is the heart of any firm’s valuation. When companies pay dividends or buy back shares, they are distributing cash to their owners. It’s the present [...]

The Difficulty of New Ideas

By | 2017-10-25T07:11:05+00:00 October 25th, 2017|Global Market Update|

Why is it so hard to do something new? Source: Coface.ch Anyone who has tried to introduce a genuinely new idea knows how difficult it is. Counterparties default, it’s hard to obtain funding, and in much of the world, it’s hard to start a new business. People are skeptical of something different. When Alexander Graham Bell’s brought his newfangled telephone to the President of Western Union, he dismissed it as “practically worthless.” In 1995 Newsweek printed an article that predicted internet-based commerce would be [...]

Ahead of the Pack?

By | 2017-10-24T07:17:31+00:00 October 24th, 2017|Global Market Update|

Ahead of the Pack? Do annual returns mean anything? Photo: Jade. Source: Morgufile College endowments have reported their annual returns for fiscal 2017, which ended on June 30th. In contrast to 2016, when schools struggled to break even, returns were quite strong. Grinnell College, in Iowa, had an 18.8% return – driven by a large allocation to public-market equities. Harvard, whose massive $37 billion endowment dwarfs most other schools, lagged the pack at 8.1%. But do annual returns mean anything? Part of the reason [...]

Torsken Kroner Nå!

By | 2017-10-23T08:19:09+00:00 October 23rd, 2017|Global Market Update|

Who says bankers can’t have fun? KLM : Source: NRK News Norway’s central bank is issuing new currency notes, with advanced security features. In the process, they updated the pictures on the front and back. In the past, these notes pictured artists, authors, and scientists. The new notes will feature scenes from the sea: lighthouses, ships, and fish. To promote the new notes, the Central Bank produced a lighthearted video: a take-two version of a popular song from the ‘80s, “The Cod is Coming.” [...]

Steady-State Economics?

By | 2017-10-20T06:02:35+00:00 October 20th, 2017|Global Market Update|

Everyone’s waiting for the economy to get back to normal. But what if normal doesn’t exist? Illustration: Kyle Forinash: Source: Wikipedia Ten years ago, the wheels came off the bus. Housing prices fell, and levered financial institutions began to blow up: first Bear Stearns, then Fannie Mae and AIG, and you know the rest. Since that time, we’ve had the Euro crisis, the immigration crisis, the collapse and recovery of oil prices, retail armageddon, the rise of nationalistic populism, and other disruptions. Our slow-growth, [...]

The Death of Dreams

By | 2017-10-19T07:03:18+00:00 October 19th, 2017|Global Market Update|

When is an asset class not an investment? Cemetery in Armenia. Photo: Arantz. Source: Wikipedia Assets come in three flavors: true investments, speculations, and gambling. The difference can subtle be subtle, but real. Investments have their own internal cash flow, and you look at the nature of the asset itself to determine whether you want to commit your cash. By that measure, stocks, bonds, and real estate are investments. Price is what you pay, value is what you get. Speculations are instruments that have [...]

Reflections

By | 2017-10-18T07:35:39+00:00 October 18th, 2017|Global Market Update|

What have we learned from the last 10 years? S&P 500, log scale. Source: Bloomberg In October 2007 the stock market was reaching new highs – levels it did not reach again for another six years. We had begun to hear troubling news about foreign hedge funds and sub-prime mortgages, but those noises seemed like distant thunder on a summer day: of concern to those caught in the downpour, but local, isolated problems. Little did we know that the rumbling was actually the heavy [...]

Moving the World

By | 2017-10-17T08:24:21+00:00 October 17th, 2017|Global Market Update|

Archimedes was right. Source: Wikipedia. “Give me a lever and a place to stand and I shall move the earth.” That’s what Archimedes said when describing the advantage that leverage gives. Force times distance on one side of the fulcrum equals force times distance on the other side. That’s how you can lift a hundred pound weight with only five pounds of push – if the distance on one side is twenty times that of the other. Of course, this only works if the [...]