Corporate pension bailouts coming?

David MoonBlog

An old saying suggests that as General Motors goes, so goes the nation. If true, and I fear it is, retirement planning is being driven into an actuarial ditch. Pension accounting is complex, but hang in with me with for 2 paragraphs. General Motors’ U.S. pension has $62.4 billion in assets, with an estimated $68.5 billion in obligations, resulting in a $6.1 billion funding shortfall. This estimated shortfall would be even greater, except GM increased its estimates of future investment returns and reduced its assumptions for the general level of interest rates. This, when logic suggests doing the exact opposite. … Read More

Dow drops another 4.60 percent today

David MoonBlog

The Dow Jones Industrial Average (DJIA) fell 1,175 points today, bringing the one-week decline to 7.2%. A 7% decline will get your attention, regardless of the macro environment in which it occurs.  To put it in some perspective, however, at 24696, the DJIA has retreated to its level of only 6 weeks ago. The misery of dropping from 26600 to 24700 likely more than offsets any pleasure investors enjoyed as it increased from 24700 to 26600. That makes little logical sense, but following a year in which volatility was at historic lows, we aren’t recently accustom to large market moves, … Read More

What rhymes with 1987?

David MoonBlog

In 1986, Congress passed the Tax Reform Act of 1986, the last major overhaul of the U.S. tax code. In the name of simplicity, a convoluted combination of rate reductions, increased exemptions, eliminated deductions and other items reduced the tax bill of most individuals. A number of corporate tax loopholes were eliminated, including changes to the taxation of the foreign earnings of U.S. companies.  Banks and financial services took special charges recognize the diminished value of certain tax assets. A euphoria ensued. In the 12 months following the implementation of most of the Act’s provisions, the Dow Jones Industrial Average … Read More

Super Bowl advertising slow to change

David MoonBlog

The first Super Bowl commercial I remember was a 1973 Noxzema ad featuring Farrah Fawcett rubbing shaving cream all over Joe Namath’s face.  I couldn’t wait to start shaving. The only other Super Bowl commercial I specifically recall was the Mean Joe Green Coke commercial.  I’m guessing that ad wouldn’t work with Johnny Manziel or Colin Kaepernick. Super Bowl ads have changed, but slowly. Anheuser-Bush isn’t featuring its iconic Clydesdales this year, instead choosing to run a self-congratulatory ad for its philanthropic donations. Food and beverage are still big spenders, but there are more ads for technology products (Amazon and … Read More

Investment sharks: don’t wait on Feds to protect investors

David MoonBlog

Implementation of a law requiring investment advisers to act as fiduciaries for certain clients was set to take effect this month, but has been postponed until July 1, 2019. I have zero confidence it will ever happen. The Department of Labor wants to require investment advisers who work for IRAs and 401(k)s to place clients’ interests before their own. If you want details, search “financial adviser fiduciary responsibility.” Add my name to the search term to read some things I’ve written about the subject over the years. The issue should be akin to passing legislation preventing the beating of puppies, … Read More

Will U.S. Need a Universal Basic Income?

David MoonBlog

General Motors describes its plan to begin operating a ride-sharing service using fully autonomous vehicles next year as “one of the biggest business opportunities of all time.” If the automobile industry succeeds in this technological employment disruption, it will not only replace up to 15 million motor vehicle operator jobs (Department of Commerce estimate), but will also threaten jobs in automobile manufacturing, insurance, road construction and hospital emergency rooms. It would also put a lot of those parking ticket people out of business, something over which I am likely to lose little sleep. The threat of these and scores of … Read More

Even crypto-moguls know it’s a joke

David MoonBlog

It’s hard not to laugh at a market in which a guy creates his own cryptocurrency (Dogecoin) as a joke, but because there is so much dumb money sloshing around in the crypto-sphere it gets bid up to $1 billion simply because of its low price per “coin.” Read more: Dogecoin creator admits it was a joke…    

Lack of volatility not a lack of risk

David MoonBlog

After surging almost 20% in 2017, the S&P 500 has now increased 26% since November 2016 – something almost no one expected. Not only were the stock price increases of the past year or so unexpected, they occurred during a period of remarkably little volatility. For the first time in history, the S&P 500 increased every month during a calendar year. Over the course of 2017 the index never closed below its 2016 year-end mark. The Dow Jones Industrial Average also set 70 new highs, a record in the 121-year history of the index. The largest peak-to-trough decline during the … Read More

BUFFETT MAKES SUCCESSION PLANS CLEARER

Garrett ArmsBlog

This week, Warren Buffett provided a clearer look at Berkshire Hathaway’s management structure in the event he and vice-chair Charlie Munger ever depart their roles at the company.  The two oft-mentioned successors to the Berkshire throne, Ajit Jain and Greg Abel were appointed to the company’s Board of Directors.  In connection with the appointment, Abel was promoted to the role of Vice Chairman of Non-Insurance Business Operations and Jain to the role of Vice Chairman of Insurance Operations.  The announcement is viewed as another piece of Buffett’s move toward succession over time.  Both individuals serve essential roles at Berkshire and … Read More

WARNINGS OF A CHINESE MIRAGE

David MoonBlog

For much of the past 15 years, China was one of the most popular investment themes in the world. From 2005 to 2007, the Chinese Shanghai Composite Index increased 500 percent. Economic statistics told of a construction and real estate boom that appeared to be the most intense in the history of the world. Both individual and professional investors clamored to invest in the land of the Red Dragon. For decades, investors speculated about what would happen when the strength of power of more than a billion Chinese consumers finally spilled onto the world stage. Maybe it was finally happening. … Read More