Order, Decay, and Competition

By |2018-08-30T12:11:01+00:00August 30th, 2018|Global Market Update|

History was never over. Berlin wall, November 1989. Source: Department of Defense In early 1989 Francis Fukuyama gave a talk and wrote a paper with the provocative title, “The End of History.” In this seminal paper he argues that with the collapse of Soviet-style communism, liberal democratic capitalism had no meaningful ideological competitor on the world stage. Smaller countries like North Korea or Vietnam might call themselves communist, but the internal contradictions of a centrally planned economy were fatal to its long-term viability. A [...]

The Future that Happened?

By |2018-08-29T08:56:59+00:00August 29th, 2018|Global Market Update|

Will demographics doom China? Traffic in Beijing. Source: Wikimedia. People use to worry about overpopulation. You still see the bumper stickers: “Two’s Company, 7 Billion’s a Crowd.” But not so much anymore. Global population growth has slowed dramatically. Urban lifestyles, better health care, and birth control have dramatically reduced population growth just about everywhere. In the 1960’s, the world’s population was growing at over 2% per year. Now the growth rate is just over 1%, and it’s likely to keep falling to just above [...]

Good News, Bad News, Motivated News

By |2018-08-28T07:12:27+00:00August 28th, 2018|Global Market Update|

Is lower unemployment good news? Photo: Lee Haywood. Source: Flikr.CC-BY-2.0 It is if you’re unemployed. But it’s bad news if you’re trying to hire workers and expand your business. The same can be said about inflation: higher prices are good if you’re a producer, but bad news if you’re a consumer on a fixed income. Economic news isn’t necessarily good or bad. It just is. It’s hard for economists and market observers to avoid value judgements. The biggest danger is confirmation bias: seeing evidence [...]

Successful Failure

By |2018-08-27T07:09:14+00:00August 27th, 2018|Global Market Update|

We like to celebrate market winners. But what it really allows is failure. Illustration: Naobim. Source: Pixabay Centuries ago, if you couldn’t pay your debts, you were thrown into debtor’s prison where you wrote letters imploring family and friends to bail you out. In ancient Rome, if you pledged yourself as loan collateral and couldn’t pay the loan, you became your creditor’s slave. Colonial Virginia was settled by thousands of indentured (i.e. indebted) servants working off their debts via labor. In the US we [...]

Navigating by the Stars

By |2018-08-27T05:45:53+00:00August 27th, 2018|Global Market Update|

Where is the Fed taking our economy? Public Domain. Source: NASA In a widely-anticipated speech at the Fed’s annual conclave in Jackson Hole, Wyoming, Chairman Jerome Powell discussed how he and the Fed Board of Governors see their role as policy-makers in a dynamic economy. He described the economy as having three natural rates: the natural rate of unemployment, the natural rate of inflation, and the natural rate of interest above inflation: u-star, pi-star, and r-star. These three “stars” remain fairly steady in any [...]

Season of Growth

By |2018-08-23T06:54:57+00:00August 23rd, 2018|Global Market Update|

What makes an economy grow? Source: USDA People often assume it’s natural for economies to have steady, long-term growth, but there’s no law of nature that requires this. In fact, when we look at nature world we see cycles of growth and decline. Gardens sprout in the spring, bear fruit in the summer, and die back in the fall. Populations of rabbits and deer grow until they’re everywhere and then collapse. Rivers go into flood, then slow to a trickle. Only with human activity [...]

Holding On

By |2018-08-22T06:05:23+00:00August 22nd, 2018|Global Market Update|

Are you a long-term investor? Illustration: Gerd Altman. Source: Pixabay Everybody says they are. When the market is high, they claim that they’re not worried about a few small fluctuations. But if stocks fall 5%, you’d think we just declared war. They everyone wants to get out, but only until the market heads back up. Then they’re long-term investors again. We don’t think about what we own, we only think about what we’ve gained or lost. For example, when folks get a quarterly investment [...]

Rolling the Dice?

By |2018-08-21T07:46:22+00:00August 21st, 2018|Global Market Update|

How do we manage risk in our lives? CC0 1.0 Public Domain. Source: Pxhere The first step is to acknowledge that risk is omnipresent and it’s not our friend. Oblivious investors are their own worst enemies. The Financial Crisis came about in part because real-estate and bond investors thought the world had fundamentally changed to have a lower risk profile. They became complacent and bought complex debt instruments in larger amounts than ever before. They borrowed money to purchase these investments, hoping to enhance [...]

Talking Turkey

By |2018-08-21T07:43:02+00:00August 21st, 2018|Global Market Update|

What’s happening in Turkey? Wild turkey chicks. Photo: D. Gordon, E. Robinson. Source: Wikimedia Turkey’s balance of payments is collapsing. Their economy is slipping, the currency is falling, and borrowers can’t pay their Dollar and Euro-denominated debts, because the Turkish Lira they have in the bank is worth fewer and fewer dollars every day. Turkey’s economy had been weak when a domestic political crisis and a diplomatic row with the United States created a crisis of confidence. Currency traders – always testing the markets [...]

Looking Under the Surface

By |2018-08-20T05:33:52+00:00August 20th, 2018|Global Market Update|

How do you find hidden risks? Archeological dig. Public Domain. Source: Wikimedia Good investing is like good building. You can’t really judge the quality of the work unless you look under the surface. A few years ago, we remodeled our kitchen. It was an adventure. There was plumbing underneath our flooring. Yes, seriously. When we pulled up the floorboards, plumbing came up with it. That was fun. Later, other areas had brought up to code: electrical, insulation, windows. We found that our quirky house [...]