Thank you, Mr. President, for the early Christmas present! As someone who had come to the reluctant conclusion that Congress was a failed institution that needed to be “repealed and replaced,” it was refreshing to witness the behavior of our Elected Children — after you tossed Syrian question to them. They actually acted like adults, imagine that? Watching the Senate Foreign Affairs Committee take testimony…
Republicans probably think these numbers are too low. Democrats probably think these numbers are too high. Because these numbers can be spun by politicians on both sides endlessly, they must be “in the ballpark.” So, here are the numbers: The economic nerds at the San Francisco Federal Reserve Bank have estimated that the economic cost of Washington’s indecisiveness and gridlock is about two million full-time…
I used to be a member of the World Future Society. One of the things I learned was that peering past tomorrow is not only difficult but was meant to be difficult. The greatest obstacle is our many unknown biases or prejudices, which keep us from being purely analytical. The most common bias is that of recency, i.e., whatever has been trending lately will continue…
When people think of fixed income, they usually think of bonds. They also think of bonds as “safe” investments. Bonds are NOT safe investments! The market value or worth of those bonds is NOT fixed. Only the interest payments from the bonds are fixed. The value of the bond is fixed only on the date of maturity. Here’s the math: If you buy a bond…
Did I mention that September is historically one of the two worst months for Wall Street? In addition to history working against us this year, there is now greatly increased violence in the Middle East, and bombardment of Syria is certain. Right after that, we have a budget battle and a dangerous debt ceiling battle in the U.S. And, who can forget the Greek debt…
Most people suspect that a financial advisor should be smarter than the average bear. Everybody believes a financial advisor certainly should not be dumber than the average bear. But, I ask you — would an average bear be dumb enough to have done this 8-mile obstacle course in Wintergreen on Sunday, August 25th? www.spartanrace.com . . . unless he won first place in his elderly…
Insurance giant Nationwide Financial just completed a survey of adults with $100 thousand or more in investible assets. Not surprisingly, 58% of the respondents were afraid of death. However, 83% are afraid of another financial crisis. In other words, more people are afraid of another financial crisis than they are of dying. There are so many ways to digest this nugget. The philosopher queen of…
Obviously, I study the thoughts of many. In no particular order, here are a few from today alone: 1. Best Long-Term Thinking: Roger Altman is Chairman of Evercore Partners and wrote in the current issue of “Time:” The U.S continues to enjoy built-in advantages that other nations lack: a growing population and the prospect of further immigration, big and flexible housing and stock markets, the…
The federal government could be shut down within six weeks! While the stock market is obviously pricing in the increasing uncertainty, where are the politicians? The Continuing Resolution that is currently funding the government expires September 30th. Shouldn’t somebody be hitting the panic button by now? It could be a false sense of security because the deficit has fallen so much this year already, from…
I don’t know if it is true but have always heard that the expression “sell on the rumors of war and buy when you hear the cannons,” originated after one of the Napoleonic Wars, when several investors made a huge fortune buying stock at the low point. The point of this old adage is that the stock market anticipates news. If the news is expected…
Most Registered Investment Advisors (RIAs) have a low regard for stockbrokers. RIAs understand Nobel-Prize-Winning Modern Portfolio Theory, which demonstrates higher returns can come from portfolios with lower risk, which is the “Holy Grail” of investing,. This happens when you invest a portfolio in different asset classes appropriately. By comparison, a stockbroker has a “hot stock” for you. Importantly, RIAs have a fiduciary responsibility to do…
My view of Wells Fargo is that, unlike Goldman Sachs, they have a large number of good and decent people trapped in a hopelessly hidebound giant, that is more focused on yesterday’s ideas than tomorrow’s. Still, because they are so giant and publish to so many readers, I do follow their thinking. In no particular order, here is the latest: 1. GDP will continue to…
Recently, I blogged about the Calvinistic roots of the Presbyterian Church and explained why that church is often considered “pro-business.” To my surprise, I received some criticism for that generalization and also learned that “pro-business” is not necessarily a compliment. Full Disclosure Time: The family church of the Flinchums was the venerable, old Indian Valley Presbyterian Church, so deep in the backwoods of rural Virginia…
Women make up over half of the population. They are almost two-thirds of the total labor force. But, only one-third of financial advisors are female . . . why? I went to Indianapolis recently to hear a lecture by Kathleen Burns Kingsbury, author of How to Give Financial Advice to Women. It was primarily geared to help male advisors deal with female clients. She had…
My favorite professor at Wharton was undoubtedly Dr. Jeremy Siegel. Although he has the demeanor of the stereotypical absent-minded professor, he has a laser-sharp mind, capable of piercing tall mountains of data. However, he has never seen a glass as half-empty . . . only half-full. His landmark book, Stocks For The Long Run, is required reading. In addition to the headline above, he reminds…
One of the longest-running debates among investment strategists is whether “growth” stocks or “value” stocks are best. This is called “style” investing. Which style is best? While there are long detailed definitions of the different styles, a shorthand distinction is that value stocks usually pay dividends while growth stocks usually do not. Importantly, there is a common misconception that growth stocks will grow faster than…
When enough people believe something will happen, that is often enough reason to make it happen. That is called a “self-fulfilling prophecy.” I am not a fan of technical analysis (using graphs and charts to find meaning) in the stock market. Comparing technical analysis to fundamental analysis is like comparing voodoo economics with classical economics. But, I know a great many investment strategists use technical…
If a Monarch butterfly flaps its wings in Mexico, how does it affect the weather in Virginia Beach? A group of bright young mathematicians, econometricians, and old-fashioned computer nerds from MIT started a little company called Hidden Levers which looks at the quantitative relationships between many, many things. Their goal is to predict the impact on individual portfolios from some exogenous shock, such as a credit…
Four times a year, corporations are required to state their earnings. This is called the “earnings season” or the “confession period.” Before the companies make their announcement, analysts at various investment firms predict what those earnings will be. The expectations of the analysts are usually priced into the current price of the company stock before the earnings announcement. If the corporation does better than analysts…
Despite their reputation, I think Goldman Sachs has an excellent research department. Here are some of their latest thoughts: 1. Our GDP growth rate of about 1.6% will double next year. (This would be huge!)2. Inflation is not on the horizon, due to slack labor and weak commodities. (Why wouldn’t it be affected by such strong GDP growth?)3. Fed tapering of QE will be announced…
Years ago, I was asked by my employer to consider a transfer to a newly-created hedge fund department, and I’m so glad I did not do so. After World War II, an Australian journalist in New York wanted to create an investment fund that was “hedged.” In other words, the fund would retain its value regardless of whatever the stock market did. This is sometimes…
If there is anything good about the soul-numbing hassle of air travel, it is the opportunity to catch up on your reading. On my trip last week, I read eight different trade journals on the market and was struck by the uniform “wall-of-worry.” It was depressing. Yes, the sky may be falling but is it falling today? While it sounds like Warren Buffett, I’m not…
The camaraderie that exists in the military is unlike any other. In particular, I miss the deep beer-soaked philosophical discussions with my fellow young, inexperienced, infantry lieutenants. Such discussions usually ended in one of two ways, i.e., hilarity or moroseness. Most often, we ended with the hilarity that everything we said or did was hysterically funny. Sometimes however, we became morose and reflected on the…
I keep returning to this graph. It bothers me! I do believe history is a good guide to the future — but only until it isn’t. History is less important in a society where the rate of change is increasing. But first, take a few minutes to study this graph: In the last 112 years, the Dow has fallen 30% or more thirteen times. This…
Today’s news carried a story about the benefit of working past normal retirement age. It cited a French study that each additional year of work decreased our probability of getting dementia by 3.2%. All I could say was . . . surprise, surprise? Recently, a good friend said I was becoming positively Calvinistic in my zeal for advocating work as good and healthy. He knows…
The London Interbank Offered Rate or LIBOR was designed to measure the cost of borrowing between banks in London when they borrowed overnight to cover minimum liquidity requirements. The rate would increase whenever the banking system had too little liquidity or too little cash-on-hand. It was an early-warning-system for the Bank of England that it might need to increase liquidity by increasing the money supply.…
My latest quarterly column for Inside Business on the economy and the stock market can be found at: http://insidebiz.com/news/q2-was-swoon-time-movement-away-bonds
There is an old expression on Wall Street that it is always “climbing a Wall of Worry.” We saw that last month when the stock market had a temper tantrum following Ben Bernanke’s press conference. Most such emotional outbursts are more annoying than instructive. But, there is something bothering me that I don’t think the market has focused on . . . yet. And, that…
Consumer confidence reached a six-year high in May before falling slightly in June. This is good news, but we always looks for some confirmation of economic data. One of Alan Greenspan’s favorite economic indicators was the Men’s Underwear Index (MUI). Because so few people ever see men’s underwear, replacing it is an expense that men readily defer when the economy is weak. Sales of men’s…
The Department of Labor issued their latest Jobs Report yesterday. Of the 130 economic reports issued each month, the stock market focuses most intently on this one. While the stock market is famous for over-reacting, it is most famous for over-reacting to this report. Yesterday, we learned that non-farm payrolls increased by 195 thousand in June, which was more than expected. Private sector jobs increased…
It may be the best advice my father ever gave me: Never discuss politics or religion! That was good advice, which has helped over the years. Sometimes, my love of economics would cause me to slip into a political discussion, but I’ve faithfully avoided any discussion of religion. It is simply too important and too private to discuss with mere mortals. In fact, I would…
When, in the course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the laws of nature and of nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes…
The second quarter of this year was the worst quarter gold has ever experienced, since markets began trading it many years ago. From over $1,900 per ounce a few years ago to less than $1,200 at quarter-end, what happened? The truth is seldom flip, and neither is this. First of all, since we measure the value of gold in dollars, the value of gold falls…