The (Greater) Wealth of Nations

By | 2017-08-17T07:06:58+00:00 August 17th, 2017|Global Market Update|

How can nations get richer? Source: US Mint Ever since Adam Smith and David Ricardo, the path to national wealth was assumed to be specialization. Scotland should spin wool, and Portugal should make wine, Smith argued. Then they should trade, and everyone will be better off. It’s possible to grow wine grapes in Scotland, but the cost of doing so – in labor and materials – would make a Scottish winery far less productive than one in Portugal. Ricardo expanded this notion to relative [...]

Class Consciousness

By | 2017-08-01T10:00:53+00:00 August 1st, 2017|Global Market Update|

What is an asset class? Photo: Alvimann. Source: Morguefile We all know that it pays to be diversified – to spread your investments around. But you need to spread them among different types of investments. Someone who owns 50 tech stocks can hardly claim to have a diversified portfolio. The most basic investment unit is the asset class. But what is this? An asset class should be a stable group of economic investments that looks similar to each other, but that behaves differently from [...]

Public Issues, Private Issues

By | 2017-07-17T16:44:41+00:00 July 13th, 2017|Global Market Update|

What is private equity? Source: Wikipedia Private equity is an equity position in a company that isn’t publicly traded – that hasn’t been listed on a public stock exchange. For ordinary investors, there are two ways to invest in private equity. You can invest in a private equity fund, or you can give money to a friend or family member in exchange for a share of their business venture. Limited partners of Bain Capital’s Asia XI Fund are private equity investors, as are your [...]

Homeward Bound

By | 2017-07-17T12:21:23+00:00 April 6th, 2017|Global Market Update|

Is now a good time to start international investing? Photo: Victor Hancek. Source: Picjumbo Most investors have a home-bias in their portfolio. That is, they own a higher percentage of domestic stocks than a globally diversified portfolio would indicate. This is true for folks who tout indexing as well as for active managers who pick stocks. US-based investors prefer US stocks; UK investors prefer shares listed in London; Japan-based investors prefer Japanese stocks, and so on. There are several reasons behind this. Familiarity bias [...]

Timeless Investing Truths

By | 2017-07-17T12:21:28+00:00 February 17th, 2017|Global Market Update|

Why is investing so rewarding? Photo: Victor Hanacek. Source: Picjumbo Investing is fascinating. It’s not just the financial returns, significant as those may be. But investing is valuable in its own right. The profession is intellectually demanding, the competition is consistently stimulating, and the relationships with clients and colleagues are priceless. Here are some timeless truths about investing that have impressed me over the three decades I’ve been investing and the ten years I’ve been writing about it. First, be humble. You don’t know [...]

Incomes and Outcomes

By | 2017-07-17T12:21:42+00:00 September 23rd, 2016|Global Market Update|

What can investors do about low rates? Source: St. Louis Fed Low interest rate around the world are challenging investors and savers everywhere. And it isn’t just households: state and local pension funds—once fully funded—are now underfunded by almost $2 trillion. With expected returns so low, governments and employees are being called upon to increase their contributions to make up for the shortfall. The resulting strain on public budgets has led to credit-rating cuts in places as diverse as New Jersey, Kentucky, and Chicago. [...]

Consider the Alternatives (Conclusion)

By | 2017-07-17T12:21:44+00:00 September 6th, 2016|Global Market Update|

Consider the Alternatives (Conclusion) So should alternative investments be part of your investment portfolio? Ocean wave. Photo: Jon Sullivan. Source: PD Photo Every investor is different, with different needs, hopes, and limitations. So it would be wrong to make a blanket statement about an entire investment approach. But with that caveat, there are a few enduring principles to consider. First, be aware of what you are paying in fees. Most alternative structures cost a lot—and not just because the managers are greedy. Administration can [...]

On Tips and Tipping (Part 2)

By | 2017-07-17T12:21:53+00:00 July 21st, 2016|Global Market Update|

On Tips and Tipping (Part 2) Everyone wants a tip. What’s the best way to make money? Photo: Nick Stanley. Source: Life of Pix Profitable investing starts with a plan. It starts with investors reviewing their goals, their fears, how much time they have, how much access to their money they need, and other circumstances. No one plans to fail, but many people fail to plan. And if you don’t know where you’re going, any road will do. But once you have a plan, [...]

Humpty-Dumpty Investing

By | 2017-07-17T12:21:54+00:00 July 15th, 2016|Global Market Update|

Investing has gotten really weird. Illustration from “Through the Looking Glass.” Source: Ebbemunk In today’s world the best performing assets are bonds. Bonds that have historically low interest rates continue to defy expectations. Ten years ago, bond guru Bill Gross famously declared that the great, multi-decade bond bull market was over. Since that prediction, long-term US Treasuries have returned 9% per year, while a cap-weighted index of global equities has returned about half that. And so far this year, bonds have zoomed up over [...]

The Triumph of Engineering

By | 2017-07-17T12:21:56+00:00 May 27th, 2016|Global Market Update|

How did Google beat Yahoo? Source: Bloomberg Ten years ago we didn’t know what would happen. Google had just gone public, while Yahoo had been around a while. Both companies had a core search engine, and both were set on expanding their services. Now Google is a $500 billion behemoth, while Yahoo is about to be relegated to the dustbin of history. How did Google win the competition for hearts, minds, and clicks? A lot has to do with the way they engineered their [...]