Odysseus: The Resourceful Investor

By | 2014-06-27T09:56:57+00:00 June 27th, 2014|Global Market Update|

Investors need to be resourceful. Whether it’s reading a set of financial statements or watching the Federal Reserve Chair talk about the economy, investors need to use all their wits to understand what’s going on. There are myriad difficulties and distractions that would keep us from accomplishing our goals. We have to think clearly and creatively. The Greek hero Odysseus faced the same problem. After the Trojan war, each of the leaders headed back home. Odysseus faced one of the longer journeys, as his [...]

Christmas Economics

By | 2013-12-19T10:00:30+00:00 December 19th, 2013|Global Market Update|

Does America run on Christmas? Christmas is the retail event of the year. Stores begin stocking up in September, finalizing marketing plans in October, and the period from Thanksgiving to Christmas is one nonstop retail rush to electronics stores and grocery stores and clothing stores and big-box retailers. It’s common knowledge that 70% of America’s economy is driven by consumer demand, and that about half the economy is related to retail and wholesale trade. With anywhere from a third to a half of all [...]

Double Trouble?

By | 2013-12-02T11:25:39+00:00 December 2nd, 2013|Global Market Update|

Should we double the minimum wage? That’s what entrepreneur Ron Unz thinks. He proposes to increase the minimum wage in California $12 an hour. Some other folks want to increase it to $15 per hour. They claim that higher wages will lead to higher spending, and this will stimulate the economy. In addition, companies like Wal-Mart or McDonalds can afford it. Wal-Mart’s net profits were $17 billion last year; McDonalds made $5.5 billion. But those companies’ biggest expense is labor; if the minimum wage [...]

Eugene Fama, Nobel Laureate

By | 2013-10-15T10:48:18+00:00 October 15th, 2013|Global Market Update|

Gene Fama won the Nobel Prize in Economics. This is important? Fama is one of my heroes. He has been associated with the idea of efficient markets for years, but his true accomplishment is even more significant. The Efficient Market Hypothesis posits that markets discount information, and that the more public the information, the more completely it is reflected in stock prices. As an undergraduate around 1950 Fama worked for a stock forecasting service and found that predicting prices was really hard. He hit [...]

Past And Future

By | 2013-08-20T10:21:55+00:00 August 20th, 2013|Global Market Update|

Why is economic growth so hard to predict? When you look at an economics textbook, it looks so clear: supply and demand each have their functions, and the two lines meet somewhere on a price/quantity graph. Economists call this the equilibrium condition. It's like physics--an object at rest tends to remain at rest, right? Only it doesn't. Prices and quantities are always changing, and nothing seems to be at rest. In classical physics, cause and effect are clear: you have a past, a present, [...]

Growing Capital?

By | 2017-07-17T12:34:37+00:00 August 15th, 2013|Global Market Update|

What is capital? Strictly speaking, capital is the stuff that businesses use to make money. Factories have machinery and robots to fabricate their goods; builders have tools and trucks to construct with; service organizations invest in people and processes to provide legal or financial or personal services. Capital is what makes an economy grow, and access to capital--physical or intellectual--is what allows people and nations to become wealthy. So it's encouraging when we see analysts call for a capital spending boom. During the recession [...]

Economists and Investors

By | 2013-08-12T04:32:20+00:00 August 12th, 2013|Global Market Update|

Why do investors listen to economists? The short answer is, it improves their opinion of meteorologists. The long answer is, the market depends on earnings, earnings depend on revenues, and revenues depend on the economy. So, a strong economy should lead to strong earnings and a strong equity market, and vice-versa. Except when it doesn't. Good economic news can become bad market news when filtered through the Federal Reserve. A stronger economy means higher interest rates which means a higher discount rate applied to [...]

Upshifting?

By | 2013-07-08T10:09:59+00:00 July 8th, 2013|Global Market Update|

What’s happening with the economy? Friday’s employment report contained some good news. Not only did the economy create almost 200 thousand jobs last month, but April and May were both revised higher as well, for a total pick-up of some 300 thousand jobs. And the leading elements of the job report were higher as well: temporary jobs went up, hours worked increased, and average hourly earnings were higher. Both the household survey and the establishment report indicate that the job market is getting healthier. [...]

Data Feudalism

By | 2013-06-12T10:06:14+00:00 June 12th, 2013|Global Market Update|

Are we technological serfs? In the Middle Ages, the nobility had a lot of privileges but very few responsibilities, especially towards their serfs. If they wanted to change crops, the serfs had to plant them. If they wanted to go to war, the serfs had to take shelter—they couldn’t just leave. The serfs weren’t slaves, but they were tied to the land. In exchange, the serfs got security, so raiders wouldn’t make off with all the food just after the harvest. In the tech [...]

Getting Schooled

By | 2013-04-19T09:03:18+00:00 April 19th, 2013|Global Market Update|

Are massive student loans restraining economic growth? That’s what a new study by the New York Fed seems to show. College loans have grown dramatically in the past few years. Some 43% of adults under 25 now have student debt, up from 25% a decade ago. And the average debt--$20 thousand—is double what it was. That seems to be getting in the way of other kinds of borrowing, now. It used to be that folks with college loans were more likely to have mortgages [...]