Pulling Away the Football

By | 2017-10-05T10:59:31+00:00 October 4th, 2017|Global Market Update|

Poor Charlie Brown.     Source: Wikipedia That’s what I thought when I read that hedge funds have gotten massively short the 30-year US Treasury bond. When traders “short” a security, they expect the price to go down. When they short bonds, they think interest rates will rise. At her September press conference, Janet Yellen signaled that the Fed will continue to raise rates, despite stubbornly low inflation. Higher rates equal lower bond prices. So what’s the problem? The problem is that the market [...]

Of Butterflies and Hurricanes

By | 2017-10-03T07:46:24+00:00 October 3rd, 2017|Global Market Update|

What is the butterfly effect? Photo: © 2016 Jee & Rani Nature Photography. Source: Wikipedia The Butterfly Effect is the notion from chaos theory where small changes in initial conditions can result in large differences in the outcome. The term was coined when a mathematician and weather scientist was describing a tornado, and noted that the flapping of a butterfly’s wings a week before might seem to change the path of the storm. In deterministic computer simulations, rounding some of the initial conditions can [...]

Growth at an Educational Price

By | 2017-10-02T08:33:38+00:00 October 2nd, 2017|Global Market Update|

Why is labor’s share of income going down? Source: Bureau of Labor Statistics For the past 50 years, labor’s share of our national income has been declining. This has had profound effects on inequality, taxes, and the structure of our economy. Labor’s share is the percentage of national income that goes to workers as compensation. It’s a pretty simple calculation: employee compensation (wages and benefits) divided by economic output. It’s been falling since the ‘50s, and quite steeply for the last 15 years. It’s [...]

Collective Losses

By | 2017-09-29T07:16:35+00:00 September 29th, 2017|Global Market Update|

Are people just selfish? Soviet propaganda poster from the 1930s. Source: Eurasianet That’s the question I asked when looking back at the some of the big collectivization movements in the 20th century. After the Communist Revolution in Russia, the central government set food prices too low. Peasants in the countryside chose to consume their produce rather than sell it, and there were food shortages in the cities. The government’s response was to collectivize the farms – giving farmers a small share of a larger, [...]

Setting a Higher Standard

By | 2017-09-28T05:52:44+00:00 September 28th, 2017|Global Market Update|

Setting a Higher Standard How can we raise the bar? Photo: Doug Tengdin Cheaters cheat. That’s the lesson from Wells Fargo’s fraudulent accounts, the NFL’s “Deflate-gate,” VW’s emissions scandal, the fraudulent mortgages at the heart of the Financial Crisis, and a whole host of other scandals. In the early ‘90s GM had a special chip in its Cadillacs that shut off their emissions controls when the air conditioner was on. Since we don’t usually run the a/c when getting our cars tested, the got [...]

Allocations Aweigh

By | 2017-09-27T07:10:24+00:00 September 27th, 2017|Global Market Update|

What’s the right asset allocation? Public Domain. Source: Wikipedia In simple terms, asset allocation is the process of deciding where to invest your money. Not who to have manage it – like Vanguard or an advisor – but what to have your money invested in: stocks, bonds, real estate, bank deposits, commodities. Your asset depends on a couple of basic questions: what do you need the money for, when will you need it, what other resources you have, and other specific issues, like your [...]

In Europe We Trust?

By | 2017-09-22T07:20:40+00:00 September 22nd, 2017|Global Market Update|

Why didn’t Europe fall apart? Horace Vernet, “The Battle of the Barricades.” Public Domain. Source: Wikipedia In 1848, revolution swept across Europe. Governments fell in Italy, France, Germany, Denmark, Hungary, Poland, and elsewhere. In all, over 50 countries were affected. The uprisings were led by shaky ad hoc coalitions of reformers, intellectuals, and workers, which didn’t hold together for very long. They were often violently put down, but resulted in lasting social changes, even if the political order was only temporarily overturned. This history [...]

Northern Light

By | 2017-09-21T06:13:49+00:00 September 21st, 2017|Global Market Update|

Do we still live in a material world? Photo: Brocken Inaglory. Source: Wikipedia Not so much. Think about how we buy stuff: Americans are famous for “retail therapy.” When the going gets tough, the tough go shopping. That’s why we have so many malls. Only, with Amazon, we don’t need to go to the mall. There’s no need to schlep to the store: retail therapy is just a click away. Or think about lawyers: law firms used to need 1200 square feet of storage [...]

The End of the Exchange

By | 2017-09-20T06:21:00+00:00 September 20th, 2017|Global Market Update|

Are open exchanges over? Public Domain. Source: Wikipedia In Japan, around 1700, producers and consumers of rice decided they needed a place where they could exchange promises to buy or sell that year’s harvest. At the time, samurai were paid in rice, and they needed to know how much they were really being paid. This became the world’s first futures exchange, and it helped Japan’s economy grow, as their currency shifted from rice to coins to paper money. Chicago established futures exchanges in 1864 [...]

The Zip-Line Network

By | 2017-09-19T07:29:09+00:00 September 19th, 2017|Global Market Update|

What good is Facebook? Photo: Anthony7051. Source: Wikipedia Facebook is over 10 years old and claims more than 2 billion active users, posting pictures and updates about their activities and interests. It was originally based on a student directory, known as a facebook, because it combined personal photos with basic information for new students at college. Now people use it to connect with friends and family over time and distance. We love sharing our Facebook updates! But sharing got a New Jersey man in [...]