Shakespeare and Tax Reform

By | 2018-01-19T07:02:04+00:00 January 19th, 2018|Global Market Update|

What we call things is important. Photo: Victor Hanacek. Source: Picjumbo How items are defined can have real-world implications on how they’re treated. Consider the latest changes in the tax code. Individuals can now only deduct up to $10,000 of the State and local taxes they pay. So high-income people in high-tax states like New York, California, and Vermont could end up paying more on their Federal income taxes than they would if they lived in a low-tax state like Florida or Texas. Naturally, [...]

The Beauty of Simplicity

By | 2018-01-18T06:50:48+00:00 January 18th, 2018|Global Market Update|

Simple rules beat complex algorithms. “Sunrise Over the Eastern Sea” by Fujishima Takeji. Source: Google Cultural Institute There’s something deeply relaxing about great art. It draws us into the artist’s vision, and communicates a world view without tying us up in endless speculations. The greatest works of art seem to accomplish this effortlessly: the Mona Lisa’s inscrutable smile; the Sistine Chapel’s celebration of the classical beauty of our human frame; Monet’s lilies in their reflecting pool. They call us to deeper reflection, ourselves. How [...]

Efficient Market Thinking

By | 2018-01-17T07:28:37+00:00 January 17th, 2018|Global Market Update|

Are markets efficient? Photo: Ralf Roletschek. Source: Wikimedia Commons. CC-BY-SA 3.0 When I was studying finance, one of the most hotly debated notions was the Efficient Market Hypothesis. It’s like salsa: in comes in mild, medium, and strong forms, and everyone has an opinion – they like it, they hate it, they base multi-billion dollar businesses on it. At its heart, the Efficient Market Hypothesis says that markets incorporate information into their pricing mechanism. It’s hard to argue about that. But it gets more [...]

Mercantilist Mistakes

By | 2018-01-16T07:34:14+00:00 January 16th, 2018|Global Market Update|

What is mercantilism? Spanis seaport by Claude Lorrain. Source: Wikimedia Mercantilism is a national economic policy designed to maximize the accumulation of currency reserves through trade. It promotes government regulation of an economy to augment a nation’s economic power at the expense of rival national powers. When politicians complain about a nation’s trade balance, they’re looking at the world with mercantilist glasses. Mercantilism becomes more popular when a country suffers from repeated shortages. If a country doesn’t have enough iron for its growing railroad [...]

Winner and (Lesser) Winners

By | 2018-01-12T07:59:22+00:00 January 12th, 2018|Global Market Update|

What is the corporate impact of tax reform? Public Domain. Source: Wikimedia The new tax law is on the books, and most people will be looking at their paychecks to see how the new rates will affect them personally. But the biggest impact of the law will be on corporate taxes. After all, going into 2017 there was a broad consensus that our highest-in-the-world corporate tax rates needed to be reformed, with a lower statutory rate and a broader base. That happened with this [...]

Juggling AIoT

By | 2018-01-11T07:04:16+00:00 January 11th, 2018|Global Market Update|

What is Artificial Intelligence of Things? Photo: Xavier Caré. Source: Wikimedia Commons. CC-BY-SA 4.0 We know what artificial intelligence is. That’s when computer algorithms can beat us at checkers or chess, or help manage freight train traffic through Chicago. And people understand the internet of things, where a smart-thermostat talks to a motion sensor at home and turns down a room’s heat if there’s nobody in there. But what is the AI of things? There are lots of practical uses for AI. It’s not [...]

The Confidence Gambit

By | 2018-01-10T06:18:35+00:00 January 10th, 2018|Global Market Update|

Are people overconfident? Consumer Confidence Survey. Source: St. Louis Fed It’s an important question. Studies published over the years demonstrate that most people overestimate their abilities and their potential for reaching their goals. Julie Andrews illustrated this 60 years ago in the movie “The Sound of Music” when she sings “I have confidence.” The song makes an ironic point: her character’s confidence was wildly misplaced. She had very little reason to expect everything to “turn out fine” given the challenge she was facing and [...]

The Future of Investing

By | 2018-01-09T07:01:48+00:00 January 9th, 2018|Global Market Update|

Is active management doomed? Illustration from Dante’s Inferno by Gustav Dore. Source: Wikipedia In 1991 William Sharpe posited that active investment management would inevitably underperform passive management. He made two observations: 1). The returns on all active portfolios, in aggregate, would be equal to those of all passive portfolios; and 2). The higher fees that active managers charge would doom their portfolios, in aggregate, to underperformance. Sharpe’s observations have been cited as if they were a geometric proof: irrefutable and self-evident. Luminaries such as [...]

Deep Korean Kimchee

By | 2018-01-08T07:46:30+00:00 January 8th, 2018|Global Market Update|

How did Korea get to this impasse? North Korean military parade, 2015. Photo: Uwe Brodrecht. Source: Wikipedia After the Korean War, North Korea was far more developed than the south. They had most of the chemical and power plants, and they received a lot of financial aid from the Soviets. In 1960 South Korean per capita income was about $70 per year. A quarter of their economy came from the sex industry servicing the US military presence. In 1961 Park Chung-Hee seized power in [...]

It’s the People

By | 2018-01-05T07:24:03+00:00 January 5th, 2018|Global Market Update|

Why does US healthcare cost so much? Photo: Norbert Kaiser. Source: Wikimedia People complain about healthcare costs all the time. And it’s shocking when you look at what a routine medical procedure costs, whether your Medicare pays, or your insurance company pays, or you’re on your own. And compared with other countries, the US is in a league of its own. We devote about 17% of our total economy on health care, while other wealthy countries spend around 12%. Why do we spend so [...]