Real Returns, Real Differences

By | 2018-05-15T06:29:25+00:00 May 15th, 2018|Global Market Update|

Why have US stocks done so well? NY City by Night. Photo: Paul Barcellos, Jr. Source: Wikimedia Since 1900, US stocks have grown 6.4% per year, on average, after inflation. 2% of that has been capital gain, and over 4% has been dividends and reinvested dividends. A dollar invested in 1900 would have grown to be more than $1,400 today. By comparison, a dollar invested in the UK in 1900 would have only grown to about $500 today – a 5 1/2 % real [...]

It’s Cash Flow

By | 2017-10-26T07:27:52+00:00 October 26th, 2017|Global Market Update|

What drives the stock market? Dow Jones Industrial Average, log scale. Source: Bloomberg In the short run, stock market returns are driven by buyers and sellers. More buyers than sellers drive prices up; more sellers than buyers push prices down. In the long run, though, the market is determined by how much cash companies give to their shareholders. This is the heart of any firm’s valuation. When companies pay dividends or buy back shares, they are distributing cash to their owners. It’s the present [...]

A Durable Future (Part 2)

By | 2017-07-17T16:48:08+00:00 July 5th, 2017|Global Market Update|

Do durable assets create durable returns? Jason and the Golden Fleece, c. 340 BCE. Source: Wikipedia Gold and silver are often touted as “alternative” investments. That is, their returns aren’t highly correlated with other, more typical, investments. So they have the potential to diversify an investment portfolio while providing return in their own right. Gold and silver served as a monetary standard for millennia. Are they useful investments? It’s hard to evaluate the long-term returns of a monetary base. The price of gold was [...]

A Durable Future (Part 1)

By | 2017-07-17T16:48:42+00:00 July 3rd, 2017|Global Market Update -- A Durable Future (Part 1)|

Do durable assets make sense as investments? Gold Roman Aureus. Source: Wikipedia Some things have been around a long time: silver and gold were currencies and a store of value for millennia; fine jewelry has always been a sign of status; and housing and land are always in demand—everyone has to live and world somewhere. But do they make sense in an investment portfolio? A little perspective is important. People get very emotional about real investments. We’re naturally attached to our homes. And how [...]

On Capital and Fairness

By | 2014-05-19T10:57:51+00:00 May 19th, 2014|Global Market Update|

“That’s not fair!” That’s our instinctive reaction when we see people without skill, talent, or hard work get ahead, seemingly at the expense of everyone else. It’s why we root for the gritty underdog in sports contests. And it’s why Thomas Piketty’s recent critique of growing inequality in our economy strikes a chord. Piketty looked the real net worth of 65-74 year olds in 1990 and 2010 (from a Fed survey) and found that it had grown by 2.8% per year over these three [...]