Episodes
Monday Jun 24, 2024
Expansion on Broadway
Monday Jun 24, 2024
Monday Jun 24, 2024
The play, entitled “Steadily She Slows”, has, from a dramatic perspective, turned out to be a dud.
It started with such a promising prologue of pandemic, recession, recovery, political upheaval, war and inflation. However, it has since settled into a drawn-out, repetitious script, wherein the lead actor, consumption, hogs the center stage and the supporting cast, in the form of investment spending, government spending and trade, has very little impact on the plot. The promoters, on cable news shows and social media feeds, do their very best to gin up public interest by prophesying catastrophic collapse into recession or reignited and blazing inflation. But still the play drones on, unloved by all, except, of course, the investors, who are profiting handsomely from its extended run.
Monday Jun 17, 2024
Risks and Exposure
Monday Jun 17, 2024
Monday Jun 17, 2024
As a young lad growing up in South Dublin, I received certain geography lessons on where I could, or could not, safely roam. In particular, I was warned not to stray north of O’Connell Street. I remember debating my mother on the issue, once when I wanted to go to a movie at a theatre near Parnell Square. I can’t remember exactly what I said, but I probably claimed that bad things didn’t happen on the North Side quite as frequently as South Side mothers thought they did. But my mother held her ground on this occasion…someone might or might not get beaten up in Parnell Square that afternoon. But if her son wasn’t there, it wouldn’t be him.
After almost every speech, someone asks me about risks – what keeps me up at night. And today, with a soft-landing economy and the stock market near record highs, it does seem like a good time to review risks. But it’s important to recognize the most obvious point about market risk. The risk to you, as an investor, isn’t simply the danger of some negative event – it is the product of the probability of that event and your exposure to it. How you are positioned says a great deal about how worried you should be about any risk.
Monday Jun 10, 2024
The Wide and Foggy Road
Monday Jun 10, 2024
Monday Jun 10, 2024
Every three months, the 19 members of the Federal Reserve’s Federal Open Market Committee, of FOMC for short, aided, no doubt, by an army of econometric minions, work up new forecasts for key economic variables and their assessment of appropriate monetary policy. In recent days, as they have huddled in their offices engaged on this task, they’ve had much to be thankful for. The economic roller coaster triggered by the pandemic and the policy response, which manifested itself in wild swings in output, unemployment and inflation, has subsided. Moreover, the very narrow road by which they thought inflation could be subdued without triggering a recession, turned out to be not so narrow after all. The U.S. economy has maintained solid economic growth and a very tight labor market even as inflation has fallen towards their 2% objective.
Monday Jun 03, 2024
The Normalization of an Abnormal Job Market
Monday Jun 03, 2024
Monday Jun 03, 2024
For centuries, economists have extolled the almost magical properties of competitive markets. In the 1770s, Adam Smith wrote about an “invisible hand” by which individuals end up promoting the common good even though they only ever intended to do themselves a bit of good. In the 1970s, Milton Friedman spoke passionately of the virtues of a free-enterprise system in boosting innovation and productive activity. Such voices are quieter now and much of modern economic commentary is devoted to how to fix an economy when markets fail or how governments and central banks should seek to manipulate it. However, the U.S. economy in the wake of the pandemic should serve as a reminder of the power of simple economics. No matter how abnormal the starting point, an economy will, if sufficiently neglected by the government, tend towards balanced growth.
Tuesday May 28, 2024
The Causes and Consequences of Gloom and Doom
Tuesday May 28, 2024
Tuesday May 28, 2024
One of the most common plotlines in all of literature is when a protagonist, overestimating the gravity of a situation, responds with a series of unfortunate decisions. Perhaps the classic example of this is Romeo, not appreciating the difference between a sleeping Juliet and a dead Juliet, but the pattern has played out in innumerable stories.
When it comes to the state of the economy, it seems clear that Americans are harboring too negative a view. In the short run, this misapprehension may not lead to disaster. However, it could still imperil investment returns if it leads to political decisions that make a relatively healthy economy sick.
Monday May 13, 2024
The Investment Implications of the Federal Debt: An Update
Monday May 13, 2024
Monday May 13, 2024
The importance of any piece of economic information depends on your time horizon. For traders, the issue is how it will move markets today. For politicians, its relevance lies in how it could shape public opinion between now and the next election. However, for long-term investors, what really matters is how it will impact the economic and financial environment for decades to come. From this last viewpoint, there is no more important topic than the continued deterioration in the federal finances.
Information released in the last few days provides an updated perspective on this issue. However, before delving into this, let’s take a quick look at upcoming economic data.
Monday May 06, 2024
Commercial Real Estate: Macro Risk or Investment Opportunity?
Monday May 06, 2024
Monday May 06, 2024
The most common scavenger bird in the western United States is the turkey vulture, more commonly called the turkey buzzard. It is a marvel of evolution, with keen eyesight and an extraordinary sense of smell, allowing it to locate the recently deceased from miles away. Ungainly as it takes off with furious flapping, once in the air it is a majestic creature, soaring thousands of feet upwards on air thermals, with an out-spread V-shaped wing span of up to six feet. As it circles from a height, it surveys the landscape below and then plunges to feast on the remains of less fortunate creatures.
I don’t believe in reincarnation but, if I did, I would have to say the best real estate investors were probably turkey buzzards in a previous life. And never more so than today, when the real estate landscape is littered with the victims of the seismic changes wrought by the pandemic and a sudden return to normal interest rates, following 15 years of super-easy money.
Monday Apr 29, 2024
The Right Track
Monday Apr 29, 2024
Monday Apr 29, 2024
I have never been blessed with any skill in golf. However, I do have some imagination and so I can imagine a situation in which I am lining up a long and difficult putt. With well-justified humility, I wince as I strike the ball, knowing it will miss. However, even two or three seconds after sending it on its way, I realize that, surprisingly, I’m still not sure how it will miss – I can’t quite tell if it’s going to miss to the right or to the left. And so, of course, the ball trundles its zig-zaggy way up to the lip of the hole, pauses, and then topples in.
Last week’s GDP report ignited angst on both sides. Some worried that the economy was slowing too much, with recession in the offing. Others saw too much inflation, requiring an even more aggressive Fed campaign to squash it before it begins to reaccelerate in a serious way.
Monday Apr 22, 2024
The Causes and Consequences of More Volatile Bonds
Monday Apr 22, 2024
Monday Apr 22, 2024
Since the advent of modern financial markets, bonds have always had the reputation of being conservative – rather like an elderly family lawyer in a leather-bound chair frowning at more jumpy and excitable stocks. Bonds would never make you rich. However, they would provide you with a moderate, steady and dependable income.
This reputation was challenged in the 1970s and 1980s by Treasuries yielding more than 10%, in the wake of high inflation, and the explosive growth of the high-yield market. In the decades that followed, yields drifted down in parallel with inflation but investor excitement was maintained by a steady stream of capital gains as well as income. However, once monetary easing hit its peak in the days following the Great Financial Crisis, high-quality bond yields fell to levels that promised very little income and, at best, modest capital losses, assuming yields eventually recovered.
Monday Apr 15, 2024
The Dollar Dynasty
Monday Apr 15, 2024
Monday Apr 15, 2024
Growing up in New England, our sons had a privileged childhood as sports fans and particularly as football fans. Between 2001 and 2020, the New England Patriots, coached by Bill Belichick and with Tom Brady at quarterback, competed in nine super bowls and won six of them - a truly extraordinary performance in a league of 32 teams. It is all the more impressive because of the NFL’s efforts to make the league competitive. These include the salary cap, which forces all teams to spend roughly the same on their rosters, and the draft, which awards the top picks to the worst teams from the year before.
And yet the dynasty continued for almost two decades, with the Patriots winning many games that they should have lost due to their own confidence and their opponents doubts. And the supposedly eroding effects of low draft picks seemed to have little impact on the team, as relatively unknown players found a way to win.