States monopolize “sin businesses”

David MoonBlog

As a teenager in Alabama in the 1970’s, my father would occasionally sit in his truck and send his overgrown 15-year-old son inside the “state store” to buy Jack Daniels or, as he called it, “George Wallace cough syrup.” So much of that scene is disturbing, although I didn’t realize it at the time. Even as a teenager, however, I found it strange that you could only buy liquor in stores owned by the state. Liquor sales are still prohibited in 40% of Alabama’s counties. An unlikely alliance between churches and the Alabama Alcohol Beverage Control Board still argue that … Read More

Extrapolation is poor investment strategy

David MoonBlog

When the U.S. stock market dropped a record 9.18% in December, out came the bears. Both individual and professional investors feared the beginning of a long and painful market decline. Money flows into stock mutual funds declined and forecasts of future continued price drops increased. Forecasts of doom and gloom were just weeks old when the market increased 7.87% in January. Sentiment had already reversed course again, with an increasing number of investors bullish on stocks for 2019. I have found that there are two very common methods that people use to predict future stock returns. Some people base their … Read More

Shutdown exposes financial threat

David MoonBlog

Of the takeaways exposed during the recent partial government shutdown, the most alarming is the precarious financial condition of a huge segment of our professional population. When Elaine Streno, Executive Director of Second Harvest of East Tennessee, told me about calls her organization received from federal employees who had missed their first paycheck, I was initially dismissive. Someone misses one paycheck and the first thing he does is call a food bank? I can think of a number of phone calls to make after missing the first of an unknown number of paychecks, but the food bank would not have … Read More

Random thoughts on government shutdown

David MoonBlog

The term “government shutdown” is a terrible misnomer. The government isn’t shut down. Government shutdown is what happens on a Monday when Christmas falls on Tuesday. And when you force people to come to work without paying them it isn’t even a partial government shutdown. It’s 21st century, first world slavery. Unless you’re unsure about the next deposit onto your EBT card or are travelling through airports experiencing unusually high rates of TSA employee illness, a partial government shutdown likely means little-to-nothing to you. These shutdowns are possible is because of the budgeting process Congress adopted in 1976. In the … Read More

Knoxvillian double dips in the Ponzi pond

David MoonBlog

A recent News Sentinel article describes Securities and Exchange (SEC) accusations against Knoxville’s Richard Fritts, owner of Farragut-based Fritts Financial, for selling unregistered securities, the proceeds of which were used to fund a $1.2 billion Ponzi scheme operated by an unrelated third party, the Woodbridge Group of Companies. The Fritts Financial website touts Mr. Fritts’ 30 years of building “lifelong relationships rooted in performance and trust.”  What the website doesn’t tell you is that 14 years ago Mr. Fritts was accused of doing practically the same thing: selling, to unsuspecting victims, unregistered third-party securities later found to be worthless. Instead of fancy … Read More

Research would-be investment helpers

David MoonBlog

Competent judgment in areas outside of one’s typical environment can be difficult to achieve, which is why the role is often outsourced. In general, giving superior weight to the advice of authority figures has obvious advantages. Because of their field-specific backgrounds, we assume they probably have access to superior information, making it a practical shortcut to follow their advice. Just as patients in a doctor’s office rely on the physician’s word, non-professional investors also often defer to self-described financial “experts.” Behavioral economics even has a name for the tendency to more highly value the judgement of experts—authority bias. Too often, however, the purported … Read More

Stock volatility: the numbers

David MoonBlog

On October 19, 1987, the DJIA dropped 22.8%, still the index’s largest single-day percentage drop. From its peak in August 1987 to its lowest level 2 months later, the stock market dropped 34%, the second worst intra-year market decline since 1980. Unless you lived it – with money in stocks – it is impossible to understand the panic that existed at the time. And even if you did live it, you likely forgot that, even with that massive decline, the U.S. stock market finished 1987 with a two-percent gain. Even though the stock market has increased in most years (in … Read More

When Wall Street meets college football

David MoonBlog

Forget the 25 million people who will watch Clemson and Alabama play for the football national championship, and the $5.6 billion ESPN paid to broadcast the college football playoffs. Ignore the $19.5 million Dabo Swinney and Nick Saban are paid annually, and the thousands of media representatives who make a living reporting on the activities of athletes too young to legally drink beer. If there was ever a question that the NCAA’s self-proclaimed commitment to amateur athletics is a joke, recently revealed internal documents from the Pac-12 conference fully and finally expose the farce. Big-time football is a business, run … Read More

Reacting to Stock Market Declines

David MoonBlog

After increasing in the first three quarters of the year, the Dow Jones Industrial Average (DJIA) fell into negative territory this month. The stock market has declined more than 8% from its October peaks. After peaking in August, the tech-heavy NASDAQ Composite has declined more than 13 percent. Given these price drops, what should you do right now? Surprise: it depends on your specific situation and the eventual purpose of the money you have invested in stocks. Your action should not depend on a forecast of where the DJIA might be a month or even a year from now. If … Read More

Knoxvillians’ Memories of Christmas Past

David MoonBlog

The only Christmas present I recall getting as a kid was a Mossberg model 500 12-gauge pump shotgun – memorable for its kick and because it was the only gift my father ever selected for me. Knox County Mayor Glenn Jacobs looks back with fondness on the Midnight Mass his family attended each year – possibly for the spiritual experience, but definitely because he got to stay up late on Christmas Eve. Retiring Knoxville Chamber CEO Mike Edwards understands the financial sacrifice his middle class parents made to buy the most coveted item among Mike and his friends: a Schwinn … Read More