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Guest post by Lane Miller, Martin Capital Management

To call Bitcoin a boondoggle is, admittedly, hyperbole. The crypto-currency has spurred a fascinating exploration into the relevance of “blockchain”[1] technology for reorganizing financial services.

A currency untethered from central bankers is precisely what proponents of gold have advocated for decades. Conveniently, computer code is far easier to transport than metal. The blockchain could sideline whole departments of global banks as financial settlement could be near-instantaneous and immutable. There are potential benefits to the progeny of the Bitcoin revolution. “Investing” in Bitcoin itself, however, is a very different matter.

Continue reading “The Bitcoin Boondoggle” →

Blaise Pascal, the brilliant seventeenth-century French philosopher and mathematician, became a devout Christian in his later years. As one of the original probability theorists, he rationally explained the pious life using mathematics rather than simple faith. He argued that if heaven and hell exist as discrete outcomes in the afterlife and that the probability of each was arbitrarily assigned to be 50 percent, one must still choose the virtuous lifeHis rationale rested on the difference in the severity of the outcomes: He reasoned that an eternity of heavenly bliss was infinitely preferable to one of never-ending damnation. That, in a nutshell, is Pascal’s Wager.[1]

Continue reading “Blaise Pascal and the Great Asymmetry” →

Economics is a discipline for quiet times. The profession, it turns out, … has no grip on understanding how the abnormal grows out of the normal and what happens next, its practitioners like weather forecasters who don’t understand storms.

–Will Hutton, journalist The Observer, London

Continue reading “The Equilibrium Delusion” →

Toward the end of our July 16 post, “The Future of America’s Economy…,” we suggested readers “watch for the June shipment numbers to be released by the RVIA (Recreational Vehicle Industry Association). If a disturbing trend should develop…” Continue reading “Reversing Trends at the RVIA?” →

… Looks A Lot like Elkhart, Indiana, proclaimed the Wall Street Journal on April 13, 2018 in a feature story about the RV manufacturing hub. It is with some authority that I commend Bob Davis’ reporting as anything but fake news. Thorough and perceptive, Davis captured well not only a defining swath of life in Elkhart, my home town, but perhaps a message to a much broader audience.

Continue reading “The Future of America’s Economy…” →

Rudi Dornbusch, the late MIT economist, coined what is today known as “Dornbusch’s Law:” Crises take longer to arrive than you can possibly imagine, but when they do come, they happen faster than you can possibly imagine.” It may well apply to what could happen to portfolios today. Recent headlines evoke the specter of the 1930s: an incipient trade war between the US, Europe and China, the scapegoating of minorities, families separated and interned, shifting alliances and uncertainty about the role of the United States in the world. To be sure, there are also major differences. The global superpowers are not currently looking to upset the prevailing world order through war, for instance. Continue reading “Moving the Needle on a Portfolio” →

The Black-Scholes option pricing model is one of the most famous equations in finance. With it mathematics replaced intuition as the means of pricing options. The knowable inputs in the equation are the stock or index price, the exercise price, the time to expiration and the risk-free rate (which is currently so low that its omission from the formula will not materially alter the results except for very long dated options). Continue reading “Black-Scholes, Volatility, & Risky Tales” →

Occasionally you will see a long-term chart of the S&P with vertical lines indicating expansion peaks and recession troughs. The blue-shaded rectangles in the graph below indicate the official dating of the beginnings and ends of recessions since 2000. Such dates are determined retroactively by the National Bureau of Economic Research’s Business Cycle Dating Committee. Continue reading “The Data of Dating & Staying Ahead of the Curve” →

This is the first of two back-to-back posts on US business cycle expansions and contractions. That the current expansion, which began in June 2009, is now, at 108 months—one year shy of besting the record from March 1991 to March 2001—makes good copy, if nothing else. For those who are statistically inclined, the National Bureau of Economic Research is overflowing with data. The NBER is still somewhat subjective, though, in the parameters it uses in defining the business cycle. For example, rather than stipulating dogmatically that a recession requires two consecutive quarters of decline in real GDP, it specifies that a recession is a “significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.” This subjectivity rises to the fore in the next post.

For the moment, we will attempt to sketch thumbnail comparisons among the five longest expansions since the beginning of the 20^th century with the one the matters most to us, the current expansion. Continue reading “This Isn’t Your Grandfather’s Expansion” →