Competitive Drive, Competitive Pressures

By | 2018-05-29T07:48:03+00:00 May 29th, 2018|Global Market Update|

Is competition always good? Photo: David Iliff. License: CC-BY-SA 3.0. Source: Wikimedia Competition has been touted as “good for what ails us.” Competitive markets spur innovation, lower prices, and better customer service. Upset with your cell phone provider? Encourage competition: another provider that wants to win your business by providing better cell coverage, better customer service, or charging lower prices. The economist Milton Friedman attributed many of our social problems to a lack of competition in the public sphere: in schools, roads, on the [...]

Go with the Flow

By | 2018-05-21T07:03:01+00:00 May 21st, 2018|Global Market Update|

What is “free cash flow”? Photo: Redmark. Source: Wikipedia Free cash flow is an accounting term that measures how much cash a company can generate from its business after taking out capital expenditures – money spent for new computers or new buildings or new delivery vehicles. It’s the cash that’s left over after you spend what you need to keep the business going and growing. It’s important: it allows companies to pursue new opportunities without relying on the kindness of their bankers, or the [...]

A Better Idea?

By | 2018-04-27T06:55:26+00:00 April 27th, 2018|Global Market Update|

There really are no sacred cows. Model T Roadster, 1910. Source: Wikimedia That’s what I thought when I read that Ford was pretty much abandoning auto production in the US. Actually, that’s not quite accurate. My first thought was, “Is this really happening? Is this ‘fake news’? Did some random feed take over my search engine?” But it’s true: Ford will stop producing most sedans by 2022 – the Fiesta, Fusion, Taurus, and crossover C-Max. They didn’t announce plans for the Lincoln Continental or [...]

The Power of Presence

By | 2018-04-26T06:44:26+00:00 April 26th, 2018|Global Market Update|

Why is economic growth so geographically clustered? Economic map of the US. Source: WeForum.org, Bureau of Economic Analysis Almost 20% of the US economy is concentrated in the Boston-Washington corridor. Another 10% comes from California, between San Francisco and San Diego. In an era of teleconferencing and Skype, where almost everyone has continual access to web-based presentations, virtual reality, and equivalent of the Library of Alexandria, why is economic growth so clustered? One explanation is the power of presence and the importance of capital. [...]

The Highs and the Lows

By | 2018-04-20T07:42:25+00:00 April 20th, 2018|Global Market Update|

Quality is destiny. Joe Kittinger’s 100,000 foot jump. Source: US Air Force Aldo Gucci, the Italian fashion king, is supposed to have said, “Quality is remembered long after price is forgotten.” People may forget how much they paid, but how a product performs is in their face every day. That cheap suit doesn’t look thrifty, it just looks cheap. The same can be said of investments. How much you pay for your investments matters a lot. The price you pay is a big factor [...]

Moving the World

By | 2017-10-17T08:24:21+00:00 October 17th, 2017|Global Market Update|

Archimedes was right. Source: Wikipedia. “Give me a lever and a place to stand and I shall move the earth.” That’s what Archimedes said when describing the advantage that leverage gives. Force times distance on one side of the fulcrum equals force times distance on the other side. That’s how you can lift a hundred pound weight with only five pounds of push – if the distance on one side is twenty times that of the other. Of course, this only works if the [...]

PC David and Goliath

By | 2017-07-17T16:47:00+00:00 July 7th, 2017|Global Market Update|

Remember Compaq? Photo: Tiziano Garuti. Source: Wikipedia The PC maker was founded in 1982. It went from start-up to $1 billion in sales in only five years. It tripled that number in four more years, becoming the third-largest PC-maker – a leading producer of a revolutionary product. Compaq made a “luggable” computer – a PC that weighed 25 pounds or so. You could “lug” it from place to place, unlike desktops, which needed a lot more time to set up. It was one of [...]

Cubs Win! Cubs Win!

By | 2017-07-17T12:21:38+00:00 November 3rd, 2016|Global Market Update|

What can investors learn from this year’s world series? Source: Wikipedia First, my condolences to all the Cleveland Indians’ fans. I know what it’s like to see a championship slip away. I’ve rooted for the Twins, Cubs, and Red Sox. From Bill Buckner’s dropped grounder to Sandy Koufax’s complete game shutout in 1965 (on two days’ rest!), I’ve felt that sinking feeling when a victory is so close, but so far away. Nevertheless, there are some larger lessons for investors from this year’s Fall [...]

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 [...]

Right Track / Wrong Track / Off Track

By | 2017-07-17T12:21:40+00:00 October 19th, 2016|Global Market Update|

What makes some companies thrive while others struggle? Photo: Lexcelsior. Source: Animal Photos We see lots of examples in the marketplace: Facebook created the dominant digital social network, while other platforms—MySpace, Friendster—never took off. Costco has grown as a discount club while Wal-Mart struggled. Johnson & Johnson has succeeded across a range of health-care businesses, while others faltered—brought down by scandals or shrinking markets. What’s the difference? It comes down to management. Successful companies need visionary leadership—leaders that create a sense of community where [...]