Of Chaos and Control

By |2018-04-05T07:10:45+00:00April 5th, 2018|Global Market Update|

How do you deal with chaos in the market? Photo: Raj Vitthalpura. Source: Free Range Stock Photos It’s easy to freak out when you see how volatile the market has been, lately. One day the market is down 3%, the next it’s up. Yesterday the Dow was down over 500 points in the morning. Traders were freaking out over the prospects of a trade war. By the afternoon, folks had calmed down and the average was up a couple hundred points. How do you [...]

Fed Obsessions

By |2018-03-09T07:14:23+00:00March 9th, 2018|Global Market Update|

What effect does the Fed have? Poster from 1880s. Source: Wikimedia For years we’ve obsessed about the Federal Reserve. Whether we picture the Chair as a heroic figure fighting off the forces of darkness and doom, or see the Fed as the center of a global conspiracy to enact vicious cycles of ruin, or view Fed staff and officers as primarily technocrats overseeing the country’s banking and monetary system, the Fed is at the center of a lot of our thinking. And a lot [...]

Risk, Uncertainty, and Balance

By |2018-03-02T07:31:03+00:00March 2nd, 2018|Global Market Update|

The Era of Low Volatility is Over. Photo: NOAA. Source: Wikimedia That’s what I thought when I looked at last month’s returns. Equity markets around the world were down around 5% last month, led by economic stalwarts like Johnson & Johnson and Samsung Electronics. Growth-oriented companies, like Amazon and Microsoft, still keep chugging along. But the market’s unbroken string of monthly advances – with barely a pause to admire the scenery – ended in February. A series of scary stories has spooked market participants. [...]

Markets, Matter, and Risk

By |2018-02-06T07:39:25+00:00February 6th, 2018|Global Market Update|

Risk is conserved. S&P 500 member returns, 2-6-18. Source: Finviz That’s what I thought as I looked at the recent sell-off. Ever since the recovery of the oil patch in March of 2016, the markets have seemed like a one-way, upward bet. Normal volatility has been suppressed. For decades, the market returns averaged 8%, with 15% variance. That is, most returns were spread between 22% and negative 7%. While the average was pretty reliable, any particular year could happen to fall between really positive [...]

A Diverse Picture

By |2017-07-17T12:21:18+00:00June 5th, 2017|Global Market Update|

What’s happening in the world? “Convergence” by Jackson Pollack. Source: Albright-Knox Art Gallery Chaos. At least, what appears to be chaos. England just saw its third terrorist strike in three months. I had to double-check the dateline on the news article I was reading this weekend to be sure it wasn’t from last March. The details of the story seemed so similar. Donald Trump pulled out of the Paris climate agreement, a move supported by conservatives by widely panned by many others, including political, [...]

“With or Without You”?

By |2017-07-17T12:21:55+00:00June 28th, 2016|Global Market Update|

Now what? U2 Performing “With or Without You.” Source: Wikipedia The short answer is, volatility will increase. But it doesn’t take the deductive powers of Sherlock or Mycroft Holmes to figure that one out. It’s cold comfort to investors who have lost money to know that most other investors did as well. And comments about this taking us back to the days of the Maastricht Treaty of 1992 aren’t helpful. This isn’t 1992, and Brexit isn’t taking us back there. But the “lookback” commentary [...]

Stock Market Values (Part 4)

By |2017-07-17T12:21:57+00:00May 17th, 2016|Global Market Update|

How do you value a company when there are no earnings? Photo: Mary R Vogt. Source: Morguefile Is it just a case of irrational exuberance? Not necessarily. Traditional discounted cash flow analysis is a useful tool when it comes to evaluating financial assets, but it has its limitations. One aspect of investing that DCF analysis ignores is management’s flexibility. They can delay bringing a product to market, or expand its production to meet an unexpected surge in demand, or shift how their facilities are [...]

Time Management?

By |2017-07-17T12:22:25+00:00October 9th, 2015|Global Market Update|

Time Management? Time is our most precious resource. Source: Pixabay We can’t make more of it, it’s difficult to manage, and everyone wants some of yours. We can try to stretch time, to enjoy an event or experience for longer, but the clock ticks relentlessly forward: time waits for no one. When we’re investing, the length of time an investment can be held is the single most important factor to consider. Given enough time, risky investments become safe, and safe investments become risky. Over [...]

Boxing the Fed

By |2017-07-17T12:22:27+00:00September 11th, 2015|Global Market Update|

Has the Fed run itself into a corner? Source: Morguefile I used to play soccer in high school. I was a backfielder, or sweeper. Whenever the opposing team’s striker had a breakaway, our coach would shout “Box him! Box him” from the sidelines. He wanted me to cut off the other player’s angle to our goal—to “box him” into the corner—to reduce his options. I wonder if the markets have boxed the Fed. Several months ago, Janet Yellen noted that the Fed would be [...]

Of Risk and Return (Part 1)

By |2017-07-17T12:22:40+00:00August 18th, 2015|Global Market Update|

What is financial risk? Photo: Vanio Beatriz. Source: Wikipedia Risk is the chance that something bad will happen. When we invest, we don’t want bad things to happen to our money. So we try to avoid risky situations. The problem is, there’s no way to insure against all the risks we face with our money. There seems to be an infinite number of flavors of financial risk: credit risk, liquidity risk, inflation risk, longevity risk, shortfall risk, earnings risk, market risk, fraud risk. The [...]