The Adaptive Imperative

By | 2018-02-08T06:00:27+00:00 February 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+00:00 December 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 [...]

Getting to Growth

By | 2017-08-25T07:32:38+00:00 August 25th, 2017|Global Market Update|

Are there problems in the US economy? Source: St. Louis Fed Sure there are. Exhibit one is the rate of economic growth. Any way you measure it, real economic growth has slowed significantly over the past 30 years. The economy is a lot less volatile than it was in the ‘60s, and ‘70s, but the rate of economic expansion has gradually gotten slow and slower. The economy used to grow faster; now it’s growing more slowly. Whether we’re exporting jobs in order to buy [...]

Investors from Mars and Venus

By | 2017-07-17T12:21:18+00:00 June 7th, 2017|Global Market Update|

Can we ever understand one another? Photo: Amshudhagar. Source: Wikipedia In 1959 English novelist C.P. Snow gave a lecture on “The Two Cultures,” bemoaning the lack of understanding between literary intellectuals and scientists, between science and the humanities. At the time, folks were worried that scientists had never read Shakespeare or Dickens, and that the Atomic Age would usher in a technocratic tyranny, along the lines of Huxley’s “Brave New World.” But to these humanities scholars Snow asked, “Can you describe the Second Law [...]

Pennies from Dividends

By | 2017-07-17T12:21:39+00:00 October 25th, 2016|Global Market Update|

What good are dividends? Public Domain. Source: PD Photo It’s a good question. Dividends can limit a company’s options, forcing them to cough up cash that could be used to run the business. If they money flows out of the company, they might have to increase their borrowings. Ford paid a big special dividend in 2000—they called it their “Value Enhancement Plan.” Management probably wished they still had that cash a few years later during the financial crisis. You’d expect that paying dividends would [...]


By | 2017-07-17T12:21:40+00:00 October 18th, 2016|Global Market Update|

Why is the economy growing so slowly? Source: St. Louis Fed Since the Great Recession, the economy has never gotten back into high gear. We’ve always seemed to be teetering on the edge of another downturn. Quarterly economic growth has averaged 2%, while a normal recovery is usually above 3.5%. Why? First, the workforce is changing. We are now entering the period where baby-boomers are beginning to retire. Like most things the boomers have gotten involved with, they are transforming retirement. Their family finances [...]

Chinese Fortunes

By | 2017-07-17T12:21:41+00:00 September 30th, 2016|Global Market Update|

What’s happening in China? Forbidden City in Beijing. Photo: Saad Aktar. Source: Wikimedia Anyone who wants to understand the global economy needs to have a sense of what’s happening in China. China has the second largest economy in the world--almost 2/3rds the size of the US. Last year they grew more than the US and Europe combined. They’re essentially tied with Canada as our largest merchandise trading partner, providing 15% of our imports and exports--$300 billion worth. So what happens in China affects the [...]

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. [...]

The Political Roots of Prosperity

By | 2017-07-17T12:21:43+00:00 September 16th, 2016|Global Market Update|

Why do some economies grow faster than others? Photo: Paul Anderson. Source: Morguefile In his recent book, “The Origins of Political Order,” Francis Fukuyama argues that democracy is a stool that stands on three legs: a stable society, political accountability, and the rule of law. Without any one of these elements, democracy is not possible. A stable society means it is safe to come and go. Political accountability provides a way to discipline leaders. And the rule of law means that the law is [...]

The Elusive Steady-State

By | 2017-07-17T12:21:45+00:00 August 26th, 2016|Global Market Update|

Will the economy ever get back to normal? Source: Wikipedia Everyone wants the economy to normalize—normal interest rates, normal economic growth, normal inflation. The Fed is talking about that issue this week in Jackson Hole, Wyoming. But we never seem to get there. Something always seems to come up. Ten years ago, the economy crashed during the financial crisis. Five years ago we had a Euro crisis and fears of “Grexit.” Now “Brexit” and the most bizarre presidential contest in memory are roiling expectations. [...]