Advice to leaders of all sorts is abundant, from coaching programs to graduate courses in organizational management. Some of it is good, much of it is repetitive. Truly effective leadership is found in the doing more than the knowing. Character, long a leadership trait valued by those under the authority of others, is earned through practice far more than study. This is not to dismiss the value of leadership training, but to highlight the startling tack taken by the particularly boorish admonition to leaders below:
Continue reading “How a Public Narrative Can Move Markets”Blog
Only the Shadow Knows
Andy Kessler recently wrote an opinion piece for the Wall Street Journal on the “shadow banking system” based on research by Jeff Snider of Alhambra investments. Snider’s work is complex and impressive. He has astutely tracked this hidden side of finance for years and routinely warns about the threats it poses to financial markets.
Snider’s insight is nothing new. Its appearance in the pages of the Wall Street Journal is.
Continue reading “Only the Shadow Knows”Flying Blind
The expression “flying blind” dates back to World War II when pilots who couldn’t see the horizon because of darkness or clouds were forced to rely on their rudimentary navigational instruments. Many became spatially disoriented (SD), experienced vertigo, and often crashed. Even today IFR pilots (instrument flight rules) are not immune from SD. The U.S. Air Force investigated 633 crashes between 1980 and 1989 and SD was identified in 13% of cases as a contributing cause. Non-instrument-rated pilots (VFR or visual flight rules) have a life expectancy of less than three minutes when encountering weather conditions that require navigation instrumentation.
Continue reading “Flying Blind”Pushing on a String
“The Vicious Cycle” was the heading for the final paragraphs of our post on August 1. It was written on the eve of the double whammy the market took from dual announcements by Fed Chairman Powell and President Trump. The former surprised observers by describing the Fed’s 25-basis-point cut to the discount rate as a technical “mid-cycle adjustment.” The latter dramatically escalated the trade war with China by tweeting out a planned 10% tariff on consumer goods by September 1. Based on the knee-jerk reaction of the equity markets, it would appear they wanted less from Trump and more from Powell.
Fast-forward to today, August 16. The intraday volatility of the S&P over the last two weeks has been tellingly extreme.
Continue reading “Pushing on a String”The Tides Trump the Waves
Based on the dearth of criticism from Democrats, they must believe that the domestic economic performance since the passage of the Tax Cuts and Jobs Act of December 2017 has been robust. Such an opinion is well-nigh ubiquitous. Beneath such waves of enthusiasm, though, more powerful tides may well tell a different story.
Continue reading “The Tides Trump the Waves”Why 1925?
Just shy of five years ago, the following essay posed the question that seems even more relevant today: Why did the “Dean of Wall Street,”[1] Benjamin Graham, single out 1925 (not the more fortuitous years of 1926–29) in the following quotation from the first edition of The Intelligent Investor published in 1949?
Continue reading “Why 1925?”It is worth pointing out that assuredly no more than one out of 100 who stayed in the market after 1925 emerged from it with a net profit and that the speculative losses taken were appalling.[2]
Head Fake
In the financial markets, head fakes happen when the market appears to be moving in one direction, but ends up going in the opposite. In January 2018, after an exponential rise on low intraday volatility from August 2017, it unexpectedly reversed course through April. From there, through late September it ascended to an incremental new high, with spectators making note of each new record along the way. Lulled into the invasive complacency that attends such market moves, apathy morphed into shock when the S&P subsequently dropped like a rock, giving up 20% by Christmas Eve. In an abrupt reversal of policy, the equally blindsided Fed went from hawk to dove overnight. In the first six months of 2019, all the ground lost, and a little more, has been recovered.
Continue reading “Head Fake”A Blindside in 2020?
Voters and political opponents have fleeting memories for some pronouncements, but as George H. W. Bush was so inconveniently reminded, painfully long recollections for others. Take his 1988 Republican Convention campaign promise. “Read my lips: No more taxes.” He broke that pledge, but he had no choice. The problem was that he made it in the first place.
Continue reading “A Blindside in 2020?”Between Dreams and Reality: Taxi Drivers, Student Borrowers, and the Retirement Gamble
Sound investment requires rigorous attention to fundamentals, primarily the cost and value of any given economic endeavor. While not every consumer is practiced in the requirements of accurate valuation—economic application aside, U.S. students as a whole are distinctly average in mathematics—the mechanics of valuation are routinely complexified, if not obscured, by the psychological haze through which the analyst, professional or otherwise, must pass. The task is not merely to adjudicate between numeric values. It is to navigate the gray terrain between dreams and reality.
The reality is one defined by return on investment and the sundry considerations such a calculation might include. The dream is the reason we do the calculus in the first place.
Continue reading “Between Dreams and Reality: Taxi Drivers, Student Borrowers, and the Retirement Gamble”