A Mature Harvest

By |2018-10-18T06:49:46+00:00October 18th, 2018|Global Market Update|

Why are recessions so hard to predict? Photo: Bruno Glätsch. Source: Pixabay We observe the weather, we feel the seasons. The grapes are swelling on the vine. We know when it’s time to pick apples and gather the harvest. When we walk outside, we know that winter is on its way. Why is it so difficult to see the seasons of economic growth, to know when an economic “hard frost” is coming? Seasons are regular, economies are irregular. The weather for certain days may [...]

Interval Training

By |2018-08-03T08:19:09+00:00August 3rd, 2018|Global Market Update|

Stress plus rest equals growth. Facebook stock price. Source: Bloomberg app. That’s what I thought about when I heard the latest Facebook numbers. Stock analysts saw them as an unmitigated disaster: year-over-year revenues were “only” up 42%, after growing 60% just a couple years ago. But more important was the fact that expenses were up 50% and accelerating. Wall Street said to Facebook’s management, “You can’t keep doing this.” No one can grow expenses faster than revenues indefinitely; eventually they run out of margin. [...]

Up, Up, and Away?

By |2018-07-25T07:07:45+00:00July 25th, 2018|Global Market Update|

Earnings are awesome. Photo: Eric Ward. Source: Wikimedia That’s the message the market has been saying for the past two years, ever since oil prices recovered from their slump in 2016 and we avoided another debt-driven financial crisis. There were concerns back then that all the new fracking-led oil drilling was funded by junk bonds – bonds that would go into default when new rigs couldn’t sell their oil profitably. At one point, there was so much excess capacity that some drillers had to [...]

Wide or Narrow, New or Used?

By |2018-07-24T08:37:13+00:00July 24th, 2018|Global Market Update|

Boeing is building a new type of aircraft. Airbus is responding. Whose approach is better? Airbus A380, the largest airliner in the world. Photo: Maarten Visser. Source: Wikimedia Thirty years ago, Airbus engineers began to secretly develop a new-concept airplane, an ultra-high-capacity airliner that could challenge the dominance of the Boeing 747. Fifteen years later, they began to build the A380, a twin-deck airframe that could carry over 800 passengers almost 10,000 miles. Airbus broke tradition and skipped a few numbers to name it [...]

Investing by Starlight

By |2018-04-17T06:50:01+00:00April 17th, 2018|Global Market Update|

Every decade or so, a new investment star is born. Van Gogh’s “Starry Night.” Source: MOMA In the ‘60s it was growth stocks. In the ‘70s it was gold. In the ‘80s we all turned Japanese. The ‘90s had the Nasdaq. The ‘00s saw China’s growth. And now we have the data giants. Each one of these markets rallied some 10-fold during its heyday. What’s next? One approach is to look for the asset that no one wants. In the early ‘80s Japan just [...]

Uneven Growth

By |2018-03-27T08:31:11+00:00March 27th, 2018|Global Market Update|

What do you do when your portfolio becomes lopsided? Photo: Alan Murray-Rust. Source: Geograph That’s the challenge that a lot of investors are facing. Facebook and Amazon and the other growth darlings have done so well for so long that they now represent an oversized position in many portfolios. It’s a simple matter of mathematics: If a holding in a 20-stock portfolio doubles in a single year while the rest of the portfolio remains stable, it’s weighting in the portfolio roughly doubles. If that [...]

An Economy with a View?

By |2018-03-23T10:57:11+00:00March 23rd, 2018|Global Market Update|

It’s not working. Italian Riviera at Moneglia. Photo: Fiore dod. Source: Wikimedia For the past 10 years incomes have diverged dramatically within the Euro-zone. Germany has done pretty well, most other countries have muddled along, and incomes in Italy have fallen. Per capita GDP in Italy is now 5% lower than it was in 2000. By contrast, the entire Euro-zone is 12% higher and Germany is 20% higher. This isn’t what Italians thought they were signing up for when they joined Europe’s common currency. [...]

Starting Seeds

By |2018-03-22T06:01:56+00:00March 22nd, 2018|Global Market Update|

It’s cold outside. So why are we thinking about gardening? Photo: Rasbak. Source: Wikimedia Outside we’re on the edge of another nor’easter, to be followed by more cold temperatures. Welcome to March in New Hampshire! Folks who have been here a while know that while this March has been pretty stormy, it will pass. And pretty soon, we’ll be looking at warmer temperatures and muddy roads. So right now, many long-term residents are thinking about their gardens: ordering seeds, getting out the grow-lights, and [...]

The Adaptive Imperative

By |2018-02-08T06:00:27+00:00February 8th, 2018|Global Market Update|

Why is it so hard to beat the market? Photo: Marcin Chady. Source: Wikimedia One reason is because markets are adaptive. They adjust to expectations. Sometimes we get concerned about a market melt-up. That’s where prices adjust so quickly to expected good news that there isn’t time to take advantage of the improved outlook. Then, the overpriced market sows the seeds of its own correction: new deals are put together that don’t make any economic sense. Eventually, these shares fall, pulling the rest of [...]

China Futures

By |2017-12-14T07:27:09+00:00December 14th, 2017|Global Market Update|

What’s happening in China? Pudong Skyline. Photo: Pjt56. Source: Wikipedia China is the second largest single economy in the world and over half the size of the US economy. It’s home to some of the largest – and fastest growing – tech companies: Tencent, Alibaba, Baidu, and others. And of course, over 1.4 billion people live there, the most populous nation on the planet. They import and export over $3.7 trillion of products every year. China’s growth over the past 30 years has been [...]