Washington’s sometimes economic irrelevance

David MoonBlog

It’s difficult to imagine a more apparently dysfunctional White House than the current one. Maybe Richard Nixon’s Saturday Night Massacre or Andrew Jackson’s defiance of the Supreme Court were close. Even rank-and-file Trump supporters joke about the odds of them eventually becoming White House spokesman or Chief of Staff. The most reassuring economic observation, however, is that it hasn’t mattered. Other than half the country experiencing a massive increase in anxiety and a longing for the fantastic things that would have otherwise occurred during the first 200 days of a Clinton presidency, relatively few people can point to tangible ways … Read More

Information overload creates opportunities

David MoonBlog

Although a commonly held belief is that Wall Street is rigged against the small, individual investor, in terms long-term investment performance, the opposite is true. Individual investors can take advantage of a cultural bias toward short-term thinking to improve their investment results, quite possibly outperforming the typical institutional investor. The key is knowing what to ignore and when to do nothing. Thirty years ago, institutional investors had an advantage over individuals because they had greater access to information. By the late 1990s, the Internet had leveled the information playing field, eliminating the institutional benefit of access to information. The ability … Read More

A look at 9 years of recovery; our July 2017 letter

David MoonBlog

The U.S. equity market continued its 2017 rally in Q2, as the S&P 500’s 2.4% return was easily the best performance among broad-based indices of the world’s developed economies. Based on our estimate of the value of the S&P 500, the index is overpriced somewhere between 25 and 30 percent.  Relative value – buying an overpriced stock because it is less overpriced than some other stock – seems a little like a convict celebrating his prison sentence being reduced from 300 years to 200 years. Read more: MCM July 2017 letter

Managing cash at a stock market peak

David MoonBlog

If you own stocks, you were almost certainly pleased when the Dow Jones Industrial Average reached another all-time high this past week, but what if, for some reason, you have money sitting in cash that has missed the recent market rally? Should you capitulate and chase the market? Or should you hold onto your liquidity until the Dow retreats? If you’re able to sense when markets reach or approach short-term tops and bottoms, just wait for the inevitable next correction and put your cash to work at the market trough. The preceding sentence was fully satire. Warren Buffett can’t predict … Read More

Free money fuels colleges’ expenditures

David MoonBlog

From 2000 to 2015, total expenditures by public U.S. colleges and universities increased 5.83 percent annually, more than twice the 2.15 percent increase in consumer prices. Don’t blame decreased public funding; federal funding of post-secondary education rose 3.84 percent annual in those years. Easy access to grants and student loans has disconnected the decision to pursue a college degree from the act of paying for it. Sellers can raise prices faster than consumers in an open market would allow, because a third party is paying part of the purchase price or the payment terms obfuscate the buyer’s ultimate responsibility. And … Read More

Recovery results mixed

David MoonBlog

An anniversary passed very quietly earlier this month, as the U.S. entered its ninth year since the end of the Great Recession in June 2009. This recovery is as unique as it is lengthy. The expansion, now 97 months long, is the third longest in U.S. history. Only a 10-year recovery that ended with the 2001 bursting of the internet bubble and a 106-month expansion in the 1960s were longer. As measured by growth in the Gross Domestic Product, however, this has been the weakest recovery in U.S. history. During the past eight years, the economy has averaged real annual … Read More

Knoxcare for uninsured locals?

David MoonBlog

As the stewards of our republic debate the next form of federal medical insurance, proponents of a government-sponsored, public option need not wait on Washington. They can put their positions into action immediately, with publicly-funded healthcare at the local, not national level. The city of Knoxville self-insures medical coverage for its employees, with premium split between employees (generally 75 percent) and taxpayers (25 percent.) Why not allow any city resident to pay the full premium and participate in the plan he already subsidizes? Most group plans don’t accept non-employees as participants, but the City self-insures, only hiring Blue Cross to … Read More

Millennials financially strapped

David MoonBlog

I recently met Landon, an intern in the New York office one of the country’s most successful investment firms. Landon is 21 years old, grew up in a middle class southern family and thinks his future is on Wall Street. Despite his lofty career ambition, he also thinks that his foreseeable future is one of poverty. He currently lives in the equivalent of a closet with four other would-be masters of the universe, consuming a small fortune of his parents’ money for the privilege of spending the summer working 18-hour days for minimum wage. Landon is pretty good with numbers. … Read More

IS YOUR ADVISER LOOKING OUT FOR YOU?

David MoonBlog

by David Moon There are more conflicts of interest in the investment industry than most investors know, but a Department of Labor (DOL) “fiduciary requirement” regulation that went in effect on June 9 may provide some insight into whether your advisor has been recommending investments that benefit him rather than you. The new rule requires that recommendations made for IRAs or other retirement accounts be solely in the best interests of the client. It is embarrassing for the investment industry that such a rule is needed, but it is. Ameriprise Financial recently provided its brokers a list of 1,500 mutual … Read More

MISLEADING CEO PERFORMANCE

David MoonBlog

by David Moon When General Electric CEO Jeffrey Immelt announced on June 12 he was stepping down as the company’s CEO, he did so under fire from a number of shareholders for poor company performance during his tenure. However, Immelt’s time at GE juxtaposed against the performance of another high-profile CEO, Yahoo’s Marissa Mayer, highlights the often misleading nature of executive performance. Immelt is considered a failure by many observers. Since taking over the reins from Jack Welch almost 17 years ago, the stock price has fallen from $48 per share to $29. If the job of management is to … Read More