Making the Grade

By | 2017-12-13T05:45:03+00:00 December 13th, 2017|Global Market Update|

Can investors learn something from test-taking strategies? Public Domain. Source: US Navy It may be close to the end of the year, but it’s also college application season. A lot of high-school seniors are filling out the Common App, writing and re-writing essays, and anxiously awaiting their latest test scores. And there’s a test-taking technique that kids use to improve how they do on standardized tests that can help investors. It’s called elimination. When they come to a question where they haven’t got a [...]

Gold, Lead, and Collateral

By | 2017-12-12T06:19:55+00:00 December 12th, 2017|Global Market Update|

Collateral dominates structure. Page from Alchemy treatise, c. 1300. Source: Wikipedia That’s an investor’s way of saying that you can’t turn lead into gold. It’s been an investment theme of mine for as long as I’ve been managing money. I started my investment career trading bonds in the mid-‘80s. Mortgage-Backed Securities were a new thing. Investors were starting to learn about prepayment risk, as interest rates fell and borrowers refinanced their double-digit mortgages. All those full-faith-and-credit Ginnie Maes were paying off early, and investors [...]

Race Against the Machines

By | 2017-12-11T08:02:53+00:00 December 11th, 2017|Global Market Update|

Does automation destroy jobs? Sabots from Brittany. Photo: Thesupermat. Source: Wikipedia The concern that new technology will put people out of work has been around at least since 18th-century French peasants threw their wooden shoes, or “sabots,” into industrial machines to destroy them – thus becoming the first “saboteurs.” In the early days of the industrial revolution the Luddites in England broke weaving equipment out of fear that the new contraptions would destroy their jobs. At one point, the British had more soldiers fighting [...]

Trading Bears and Kitties

By | 2017-12-08T07:01:58+00:00 December 8th, 2017|Global Market Update|

Remember “Beanie Babies”? Photo: Jonny Connormah. Source: Wikipedia My kids went gaga over Beanie Babies in the ‘90s. The cute plush toys are filled with plastic pellets rather than conventional stuffing, which game them a more flexible feel. People began collecting them, then trading them like financial assets – the way some people treat baseball cards. At one point, Beanie Babies accounted for 10% of Ebay’s sales, and more than half of all American households had at least one at home. This collectible craze [...]

Flying by Instruments

By | 2017-12-07T07:15:53+00:00 December 7th, 2017|Global Market Update|

How much should we trust our gut? Photo: Adrian Pingstone; Source: Wikipedia Every pilot receives some instrument training. This makes sense. There’s always a chance you can get caught by unexpected weather. Getting tossed around by turbulence when there’s no visibility outside is disorienting. You feel like you’re moving when you’re stable, you think up is down, and vice-versa. The first rule that’s drilled into everyone getting instrument training is to trust the instruments. Our senses can and do deceive us. The fluid in [...]

Flat and Flatter

By | 2017-12-06T06:30:34+00:00 December 6th, 2017|Global Market Update|

What does a flat yield curve mean? Photo: Billy Hathorn; Source: Wikipedia 130 years ago the English schoolmaster Edwin Abbot wrote the novella “Flatland” about a two-dimensional world inhabited by geometric shapes. There’s no depth in Flatland, only height and width. It seems like investors today are entering a “flatland” of their own. Normally, long-term bonds yield significantly more than short-term bonds. We call this the “yield curve,” because it curves downwards. A year ago, 10-year US Treasury bonds yielded almost 2% more than [...]

The Roots of Innovation

By | 2017-12-05T08:21:28+00:00 December 5th, 2017|Global Market Update|

The apple doesn’t fall far from the tree. Photo Source: Pixabay That’s the lesson from a new study about innovation, inventions, and incentives. The children of inventors are far more likely to become inventors themselves. Income, education, and geography also matter. But it’s the home environment that has the biggest impact. Some researchers studied 1.7 million patent office applications and 1.2 million tax returns, asking why some people innovate and others don’t. If one of your parents holds a patent, you’re nine times more [...]

Winners and Losers

By | 2017-12-04T07:15:08+00:00 December 4th, 2017|Global Market Update|

Who wins and loses from tax reform? Photo: Derek Lilly. Source: Morguefile Most of the comments on tax reform center on what happens to individuals – the personal exemption, the mortgage interest or medical expense deduction, and so on. That’s understandable: people want to know how different versions will directly affect them. And the bill’s depends on each taxpayer’s personal situation But the point of the pending legislation is corporate tax reform – to find ways to lower our corporate tax rate. It’s widely [...]

Gifts Around the Tree

By | 2017-12-01T05:40:47+00:00 December 1st, 2017|Global Market Update|

Why do we give gifts? Photo: Kevin Kay. Source: Wikipedia The Native Americans had “potlatch.” Pacific Islanders had “Aropa.” Techies today have open-source software. And most people exchange gifts around the holidays. But is gift-giving rational? A lot of economists say no. They look at the all the fruit cakes sent-but-never-eaten or the ugly ties or sweaters politely acknowledged and then discarded. Theses economists see nothing but a waste of money. One study estimates that as much as a third of the money spent [...]