Monday , September 16 2019
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Tag Archives: Portfolio Management

War Gaming The Trade War

People respond to incentives. So do national governments. This is foundational to both economics and geopolitics. Carefully examining each side’s incentives can illuminate how a conflict will end. No one has infinite choices. They choose from limited options. That applies to the US-China trade war, which is right now one of our top economic issues. So let’s think through what the players really want, and what each can actually do. Outrageous or Flexible? To begin, let’s note that the US and...

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The Lunacy Of The Dow

I’ve been on Twitter (TWTR) quite a few times railing against the Dow Jones Industrial Average and its price-weighted calculation. And, of course, I am not alone. This index presents a distorted view of any given day’s events although most of the time its foibles are hidden in the performance of the rest of the market. Let’s look at today, September 11, 2019. I am writing at about 2:30 in the afternoon and the Dow itself is up roughly 137 points on the day. All of that gain, and I mean all of...

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2020 Will Be The Most Volatile Year In History

The last few weeks marked a turning point in the global economy. It’s more than the trade war. A sense of vulnerability is replacing the previous confidence—and with good reason. We are vulnerable, and we’ll be lucky to get through the 2020s without major damage. Let’s talk about the risks facing us in the next year or so and the economic environment in which we will face those risks. Supply Shocks Ahead In a recent Project Syndicate piece, NYU professor and economist Nouriel Roubini outlined...

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An Investor’s Desktop Guide To Trading – Part II

Read Part-1 Here Currently, it seems that nothing can derail the bull market. Trade wars, weakening economic growth, deteriorating earnings, and inverted yield curves have all been dismissed on “hopes” that a “trade deal” will come, and the Federal Reserve will cut rates. While the last two items may indeed extend the current cycle by a few months, they won’t change the dynamics of the former. Eventually, this cycle ends. Of that, there is little argument. It is the “when,” that is tirelessly...

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Globalization Hits A Brick Wall Named Trump

Until about 50 years ago, people paid attention to the area where they lived. They read local papers, shopped at local merchants, and socialized at local events. Technology ended all that. Now we get our news from the internet. We buy imported goods. We converse on social media with friends thousands of miles away. This “globalization” process changed the world, sometimes for the better but with significant side effects. Hence, today’s dissatisfaction. Now, technology is swinging the pendulum...

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Having Your Cake & Eating It Too

One of the more interesting aspects of our social and investment landscape is how little appetite many people have for bad news. Problems can be so messy and hard after all; who wants to deal with them? Boris Johnson catered to this reality in the UK when he said his policy on cake is “Pro having it, and pro eating it.” Why make difficult choices when they can be obviated with a rhetorical flourish? Not only do people not want to hear bad news, though, but often they work actively to ignore...

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No, Bonds Still Aren’t Overvalued!

Interest rates have plunged lately as concerns about a recession in the U.S. economy have risen. This has led many media commentators to suggest the bonds are now wildly overvalued. To wit: “When evaluating the desirability of government bonds as a long-term investment, it’s imperative to compare the prevailing yields of bonds with the earnings yields for stocks.”  While this is a common comparison, it is also wrong. Let’s compare the two: Earnings Yield: “Earnings yield” is the inverse of...

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Mauldin – Trump, You’ve Got It All Wrong

I’m going to start with a story. There is a drug produced in China that works well on strokes and numerous other less devastating medical issues. It is derived from pig pancreases or human urine. It isn’t approved in the US due to justifiable regulatory issues, but it is used in Europe as well as China. A small biotechnological firm in the US has the technology to synthesize this drug without using pancreases or urine. This would be safer and cheaper. The Chinese company agreed to pay the US...

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The Trade War Is Over & Nobody Won

“You break it, you own it.” Then-Secretary of State Colin Powell cited this Pottery Barn rule back in 2002. He was advising President George W. Bush of the consequences should an Iraq invasion go badly. In fact, Pottery Barn has no such rule. You can go in their stores and handle the merchandise all you wish. They see occasional breakage as a cost of doing business. But Powell still chose a good metaphor. Presidents aren’t just shopping for knickknacks when they make economic and foreign...

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America’s Debt Burden Will Fuel The Next Crisis

Just recently, Rex Nutting penned an opinion piece for MarketWatch entitled “Consumer Debt Is Not A Ticking Time Bomb.” His primary point is that low per-capita debt ratios and debt-to-dpi ratios show the consumer is quite healthy and won’t be the primary subject of the next crisis. To wit: “However, most Americans are better off now than they were 10-years ago, or even a few years ago. The finances of American households are strong.  But, that’s not what a lot of people think. More than a...

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