“Best Interest” regulation creates more investor confusion

David MoonBlog

The key to understanding almost any human interaction is to understand the incentives at play. Whether it involves a disagreement between spouses, buying a car, trying to increase church attendance, treating drug addiction or preparing a football team to play, if you can identify the reward structure and preferences for each person or group, you can avoid mistakes and reach better outcomes. Financial news programs, for example, don’t sell investment advice; they give that away for free. They are in the business of selling viewers – that is, you – to advertisers. They only need to keep viewers engaged with … Read More

Some interest rates declined as Fed raised rates

David MoonBlog

The closer we get to the next Federal Open Market Committee meeting on July 30 and 31, the more fixated investors becomes on what the Federal Reserve will do with interest rates. A month ago, traders debated whether the Fed would cut rates a quarter or a half a point. A reduction in rates was considered inevitable – the only question was how much. That was until July 5 when the Labor Department announced strong June employment figures. (Actually, the figures showed a smaller-than-expected slowing in the rate of positive employment growth. Read that sentence a couple of times and … Read More

Reparations aplenty

Harold Black, PhDBlog

Every year that John Conyers (D-MI) was in Congress, he introduced a bill calling for reparations for black Americans as a compensation for their ancestors being enslaved. The argument being that enslaved blacks contributed to the wealth of the nation without being adequately compensated for their labor. Now that Conyers is no longer in Congress, the mantle has been taken up by Sheila Jackson Lee (D-TX). This is the same Jackson Lee who wondered in a congressional hearing if the Mars lander could go over and take a picture of the flag planted by Neil Armstrong. Nevertheless, the bill which … Read More

Experts lacking expertise

David MoonBlog

It seems like so long ago, but the end of 2018 was miserable for the stock market. The S&P 500 dropped almost 20 percent. Misery dominated the financial press, as public prognosticators turned markedly bearish. The January 4th Wall Street Journal headline screamed that the first two trading days of 2019 were the worst since 2000 – the beginning of a bear market that saw the S&P 500 collapse 49 percent.  Many investors – even people who get paid to know better – simply assume that the near future will look a lot like the recent past. It’s a great … Read More

The national debt doesn’t matter – until it does

Harold Black, PhDBlog

Who would have thought that the announced candidates for president could make Donald Trump seem normal? Consider the following positions that these candidates have endorsed:     Free college Forgive $1.6 trillion in college debt Green new deal Decriminalize illegal border crossing Reparations Medicare for all regardless of citizenship status (elimination of private insurance) Abolish the electoral college Increase the size of the supreme court Bash the rich (increase marginal tax to 70%, add wealth tax, financial transactions tax on Wall Street) National legalization of marijuana for both medicinal and recreational purposes Universal childcare Guaranteed jobs Breakup big tech companies … Read More

In defense of socialism

David MoonBlog

It pains me to admit it, but I am a socialist. For the past nineteen years my family has operated as a pure socialist, centrally planned monarchy: from each according to his ability; to each according to his needs. All assets have been controlled by the central government (that is, my wife), for the benefit of the collective group. (That is, my wife, kids and me.) For the most part, I made all the money and my wife spent most of it on our children. This has not been democratic socialism. We didn’t vote on how many pairs of shoes … Read More

Might Trump’s actions depress stock prices?

David MoonBlog

A number of my football teammates in college regularly prayed for victory. I always assumed that God didn’t care if we beat Auburn, but in hindsight, I realize that Reggie White was simply connecting two topics about which he was both knowledgeable and passionate – then ascribing some causality between the two. Investors do it every day, connecting their beliefs (about politics, not prayer) to their expectations (about investments, not football.) In the eight years following Barack Obama’s election, the S&P 500 increased an average of 12 percent annually. Since Donald Trump’s election, the S&P 500 has increased 12 percent … Read More

TV appearance exposes inability to predict the stock market

David MoonBlog

One of the unexpected difficulties of being in the investment business is answering the most common question from clients, friends and family: “What is the market going to do this year?” The answer to the question is an easy one – because I have no idea what the market is going to do this year – but that answer leaves the questioner unfulfilled and sometimes unintentionally misled. There is a seductive temptation to pretend to have some special discernment about short-term stock market moves. But if anyone pretends to know the answer they are lying – either to you, themselves … Read More

Tighter tech regulation of little benefit

David MoonBlog

In 1974, the Department of Justice filed suit against AT&T, alleging that the company enjoyed an anti-competitive monopoly by controlling long distance, equipment and local phone service. It took eight years, but AT&T was finally broken up in 1982, although local phone service remained regulated another 14 years, until 1996. The breakup of AT&T was a success for regulators, but an abject failure for consumers. Because of the antiquated dysfunction legislated into the quickly changing industry, telecom service in Europe and Japan quickly outpaced that in the U.S. With bipartisan political support from Congress, U.S. regulators seem poised to repeat … Read More

Congress unwisely encourages annuity sales

David MoonBlog

On May 23, the House of Representatives passed a bill purporting to expand and preserve retirement savings. Buried in the bill’s language is the bill’s true purpose: to expand and preserve annuity sales. The Setting Every Community Up for Retirement Enhancement Act (SECURE) would change a number of laws related to retirement plans, many of which are, on whole, positive or reasonably unobjectionable. Among other things, it would eliminate the age restriction on contributing to a retirement plan and would defer required minimum IRA distributions until age 72, rather than the current 70½. There are some weird provisions designed to … Read More