Market Updates

What Would Faust Do?

In the German legend from the 1500’s, Dr. Faust is said to have made a deal with Mephistopheles, the devil’s wing man, to trade in eternal life for all knowledge and worldly pleasures now. He is derided for having exchanged divine knowledge for human knowledge and comes to the ultimate conclusion according to Goethe’s retell of the story 200 years later that “I do now see that we can nothing know.” This seems particularly apt for the camp that has long awaited the inflationary pressures of what they call the “money printing” by the keepers of our currency. The thought here is that as … Read More

Risk On

We don’t hear risk on / risk off from the pundits on TV as much these days but risk is certainly on and the risk is coming from Capitol Hill. Much more is on the table than a budget battle between the GOP and Obama, the debt ceiling and Obamacare, etc. And now volatility in the stock markets have picked up. Two articles struck me when reading the FT this week. One talked about the dire implications of a US default. Yes, the Chinese and Japanese are making noise and as holders of about 1 $trillion in US debt each, they can and should. They’ve loaned us money to pay for our government that we … Read More

Lather, Rinse & Repeat

For the third year running the markets have run out of steam about the same time as the latest central bank intervention efforts expire. As we mentioned in our recent article The Long March, central banks have managed to avoid an outright depression at the expense of rapidly increasing debt levels. Herein is the primary problem. It appears that policy makers have no other options that they are comfortable with. That is to say other options exist, but are not deemed acceptable at this time. Thus more debt is created in an attempt to pay off the old debt. To compound the predicament, for the … Read More

Rule of Law and Societal Stability

Rule of Law is a general understanding and respect for a state of order.  Observance of law, generally in conjunction with democracy (or representative republic) has historically worked well for societies to create prosperity so long as the people feel represented and can execute change if needed.   Importantly, this is also a requirement for sustainable growth. Amy Chua, in her book World on Fire, presents a broad analysis of America’s export of raw capitalism and democracy when she states, “The belief in the possibility in the upward mobility has characterized America since inception.  No … Read More

The Long March

The funny thing about time is that it tends to move forward. With March 2012 finally behind us, a marked pause has emerged in global economic indicators. Perhaps this should be of no surprise. After $7,000,000,000,000 ($7 trillion, for those finding difficulty in counting the zeros) in central bank easing of various forms it may be ‘just about time’ for a respite. Recessions generally emerge about every three to four years – it has been three years since drastic actions were enacted to avert the normal course of economic cycles and arrest a deep economic contraction. So even with the … Read More

Opt Out

President Richard Nixon was a mastermind. He surrounded himself with people who, for both excellent and dreadful functions, were extraordinarily bright and perspicacious. In terms of management of the economy he dared to do what people thought would inevitably contribute to a decline in the USA – he audaciously removed the country from a gold standard (further background on the decision can be found in this article).  Notably, it was the next step that was perhaps his administration’s greatest stroke of genius. But first, let us recollect the accomplishments of step one. With an abandonment … Read More

New Global Investing – Part 2

Emerging Market Allocations For a USA based investor the available universe outside North America consists of three primary market categories; developed, emerging and frontier.  Many of these countries stock markets had terrible 2011 returns, especially in Europe with losses of -10% or more and many of the emerging markets off 20% to 30%. It is important to have an understanding of what capital markets are available.  It is equally important to understand that growth will not be uniform or consistent as countries strive to access capital.  Wealth will increasingly be created in parts of … Read More

Bernanke’s Playbook

At more than 2500 years old and just 24 words in length, the Pythagorean Theorem (a2+b2=c2) gracefully describes one of the basic spatial tools for calculating lengths and areas in construction and many other applications. Similarly, the US constitution with its 27 amendments establishes a government for freedom in just 7,818 words. On the other hand, the EU utilizes 26,911 words to regulate the sale of cabbage. Contending for ‘most inelegant’ might be the USA Internal Revenue Code which contains some 3,400,000 words – and growing. The point is that simple descriptions can carry more value … Read More

Thankfulness

As I reflect on a year dominated by travel designed to unveil whether or not our strategies were properly thought out, I am struck by an overwhelming feeling of thankfulness for the continued opportunity to serve my family, our clients, and community. Nearly a year ago (click for article) I stated that the period that we are moving through may give the appearance that any strategy may be unsound. Fortunately, our attention to historical precedent has kept us well positioned for the reality of these days. Thanks to each of you for your continued willingness to adhere to the course that we have … Read More

New Global Investing – Part 1

As American investors, there are two current large trends that we need to be mindful of when constructing portfolios.  These trends have shaped the last 10 years and will dominate the foreseeable future; the first is the western debt problem.  The second is the great emergence and creation of wealth taking place outside the west in places like Brazil, China, India, Turkey and even the Middle East. Long Bear Markets and Volatility In December of 1989, Japan’s equity benchmark, the Nikkei, hit 38,000.  In 1999 it traded around 19,000 and 10 years further along, in 2009 the Nikki traded at … Read More