Healthy Competition (Part 2)

By | 2017-08-15T06:52:28+00:00 August 15th, 2017|Global Market Update|

What is a “wolf tree”? Photo: Michael Gaige. Source: American Forests A wolf tree is a large forest tree with a wide-spreading crown. We often find them in the middle of a dense woods, and they seem to contradict the notion of “crown shyness.” There’s nothing shy about these giants. They appear to push everyone else out of the way. But that’s an illusion. They’re older than the stand around them, sometimes by several centuries. They have gnarled and broken limbs, and the forest [...]

The (In)Effectual Fed?

By | 2017-07-31T07:40:57+00:00 July 31st, 2017|Global Market Update|

What good is the Fed? Federal Open Market Committee. Public Domain. Source: Federal Reserve The conventional wisdom is that the Fed controls the economy in the short run by controlling short-term interest rates. But folks didn’t always think this way. In the ‘60s and ‘70s Keynesian economists thought that interest rates only had a tiny effect on spending, and therefore a minimal impact on the economy. Then came Paul Volker. He made ending inflation the goal of Fed policy, and he did this by [...]

Rumors of War

By | 2017-07-17T12:21:18+00:00 May 31st, 2017|Global Market Update|

What happens when an irresistible force meets an immovable object? Map: US Army. Source: Wikipedia That’s an old philosophical question. The answer, of course, is that no force is really irresistible and no object is truly immovable. But when they seem that way, spectacular conflict can be the result. That was the case during the 5th century BC in Greece. Sparta had been the dominant power in Greece. They had a militant, military culture built around their army. Athens was a rising power. It [...]

The Merchants of Venice

By | 2017-07-17T12:21:20+00:00 April 27th, 2017|Global Market Update|

How do we know what a company is worth? Photo: X. Source: Pixabay We want to base our investments on facts, not feelings. One reason Apple is worth more than GM, even though GM has twice as many employees, is that Apple earns more – five times more – than the car giant. Both companies have iconic brands with global scale. But Apple is far more profitable . But how do we know this? We know it because of double-entry accounting: debits, credits, income, [...]

No Safety in Numbers

By | 2017-07-17T12:21:38+00:00 October 28th, 2016|Global Market Update|

When are sovereign bonds no longer safe? Global Yield Curves, 10-28-16. Source: Bloomberg For decades people have invested in stocks for growth and in bonds for safety. But the global financial crisis and its economic aftermath have changed that. Now sovereign bonds around the world have extremely low yields. 30-year bonds in the US yield just over 2.5%, and that’s the highest yield anywhere. You can get higher yields in emerging markets, but those come with currency, credit, and inflation risk. There have been [...]

Mixed Money Messages

By | 2017-07-17T12:21:52+00:00 August 8th, 2016|Uncategorized|

Where does money come from? Source: Morguefile Money is a funny thing. Most people around the world look at yen and euros and dollars and say that that’s money. But banknotes are only a small fraction of the money in the world. Most money exists in the form of bank deposits. When we buy a house or a car or pay our credit card bill, we just instruct our banks to make ledger entries transferring some of our account to someone else. When a [...]

Finding Our Way

By | 2017-07-17T12:22:39+00:00 September 4th, 2015|Global Market Update|

It’s obvious. Photo: George Bosela. Source: Morguefile That’s the way everything looks in hindsight. When we look at a chart of the stock market in the late ‘90s, it’s “obvious” that tech stocks were in a bubble and that everything was overpriced. When we look at early 2009, it’s “obvious” that everything was on sale, and that great companies were on sale. When you look at the past year, it’s “obvious” that the market had lost momentum and was due for a significant correction. [...]

Germany Uber Alles?

By | 2017-07-17T12:23:01+00:00 March 16th, 2015|Global Market Update|

The German stock market is making new highs. But what is Germany, really? Source: National Geographic For many people, Germany calls up images of the Bavarian castles or the Rhine. For others it’s Oktoberfest and lederhosen, or the Autobahn, or cathedrals. Still others get their images from old war movies. […]

CPI: The First Hundred Years

By | 2017-07-17T12:34:18+00:00 May 2nd, 2014|Global Market Update|

Happy Birthday, CPI! The Consumer Price Index turned 100 last year. While the CPI was first published in 1921, at that time they made data available going back to 1913. The Bureau of Labor Statistics has measured 100 years of price data through war and peace, boom and bust, lassez-faire and managed economies. Source: http://conversableeconomist.blogspot.com/ Over the past century there have been three major periods of high inflation: World War I, World War II, and the peacetime inflation of the late-‘70s and early-‘80s. Wartime [...]

Where Are We?

By | 2013-12-31T11:05:33+00:00 December 31st, 2013|Global Market Update|

As 2013 ends, how is the economy doing? There are many ways to answer that question, but one the clearest is to compare employment, economic activity, and the market. Since the Financial Crisis, both the market and the economy have recovered and hit record levels, while employment is still below its 2007 peak. This gap—sometimes call the output gap—is a big source of concern for economists and analysts. The economy is now producing $850 billion more in inflation-adjusted output with 2 million fewer workers [...]