December 7, 2014

David MoonBlog

December 7, 2014 The drop in gasoline prices since June is currently saving US consumers approximately $400 million a day. Other than those lower pump prices, what are the ramifications of lower oil prices? To some extent, the implications of lower oil prices are a function of their cause. Oil is currently experiencing a perfect storm of increased supply and, thanks to weakening economies, softening worldwide demand. Consumption of oil in North America has been in structural decline for 15 years. Economic growth in China is muting, as is its oil consumption. Most of Europe remains weak. And after earlier … Read More

Many US families have debt problem.

David MoonBlog

Of the 250 million Americans over the age of 15, the National Retail Federation projects that 140.1 million of us will go shopping this weekend, spending more than $50 billion over the four days, or $357 per person. Adding the rest of holiday shopping, Americans are expected to spend a total of $804 on gifts this year. Newspapers and magazines this time of year run their obligatory annual “tips to avoid getting into credit card problems” articles. Carry cash. Make a budget. Tie a string on your finger. Boil an eye of a newt and frog toe. No number of … Read More

Gains not enjoyed by everyone

David MoonBlog

The G650 Gulfstream is the latest in luxury for the ultra-rich.  Even at $65 million a plane there is a three-year wait to purchase the 14-passenger aircraft. Apparently there are a lot of people who need to get places at Mach 0.95. The economy has officially recovered. Sort of. The distribution of recovery is one of today’s most controversial and widely discussed topics.  Unless you own a G650 or collect food stamps, most people consider themselves to be some degree of middle class. It is easy to define “rich” as anyone who has more money than I do. There is … Read More

Digging into the data on US jobs

David MoonBlog

Recent headlines report that US unemployment has dropped to 5.8 percent, the same as it was in 2008. On the surface that makes sense; there were 8.92 million people unemployed in 2008, compared to 8.99 million last month. Same number of unemployed people; same unemployment rate. The data are much more complex and interesting. In these six years, the economy has added 1.9 million new jobs. There were 15 million people who aged into the workforce and 6.5 million who aged out. On a net basis, there were 8.5 million new employable people, but only 1.9 million new jobs. But … Read More

If an investment adviser’s Facebook page says …

David MoonBlog

Several years ago I wrote “if an investment adviser’s Facebook page says, as one did, that he triples his clients’ money every year with no tax consequences, find another adviser.” This was a real person – an actual attorney in Knoxville. At least he claimed to be a licensed attorney. His law license had been suspended several times for misdeeds including among other things, a federal drug conviction and misuse of client funds. In deference to being fairly busy and also preferring to keep my lawsuit-free record intact, I declined to name the guy. A News Sentinel article a little … Read More

Regal script is hard to predict

David MoonBlog

This past week Regal Entertainment Group hired Morgan Stanley to explore strategic alternatives for the company. This is not-so-secret code language for “shop it around and try to sell it.” What might this mean for Knoxville? “Selling the company” is a fairly broad term that can capture a lot of issues, not just a shift in ownership. Regal’s own history is a perfect case study. In 1998, nine years after launching Regal Cinemas, founder Mike Campbell sold the company for $1.5 billion to a couple of private equity firms. Few people even realized it. The company remained in Knoxville. The … Read More

Think greed’s bad? Take a look at envy?

David MoonBlog

In the 1987 film, Wall Street, Michael Douglas’ character gives a speech at a shareholder’s meeting in which he proclaims that greed is good. The scene, based on an actual 1986 University of California at Berkley commencement address by Wall Street thug Ivan Boesky, quickly became a symbol of anything wrong within American capitalism. While both Boesky and Douglas’ Gordon Gekko deservedly ended up in prison, greed generally gets a bad rap. Greed, however, is entirely different from its destructive cousin, envy. Greed is repugnantly destructive when it is unprincipled; envy is always destructive. Always. Even the origin of the … Read More

‘80s market lessons are still in style

David MoonBlog

In 1987 I had been in the investment business less than two years. My wife and I, fresh out of college, purchased our first home. Her job paid more than mine, even with my fancy UT MBA. Three degrees, two jobs, one little dog and one little mortgage. Life was easy. Then on October 19 of that idyllic year, the Dow Jones Industrial Average dropped 508 points, which is the percentage equivalent of a 3,100 point drop today. But in 1987, that 500 point drop was only half of the story. In the two months prior to that record decline, … Read More

Government, economy don’t mix

David MoonBlog

Upon his election in 2008, President Obama was roundly expected to be the financial saviour of the common man. He railed against “fat cat Wall Street bankers,” criticizing both their behavior and the compensation. He promised to help middle class families by reducing their taxes, increasing the minimum wage and reducing income inequality. By these measures, he has been an abject failure. Median family income has continued to decline. Adjusted for inflation, median family income is the lowest it’s been since 1989. By contrast, the top five and one percent of income earners have enjoyed increases in both wealth and … Read More

Interest rates aren’t so bad given history

David MoonBlog

In 1987 my wife and I bought our first house, a vinyl-sided starter home off Cedar Bluff Road. We felt almost like mortgage thieves, borrowing 30-year money for a mere 10.15 percent. Clearly, the credit gods had favored us. In 1987, I was focused on the previous few years, especially when mortgage rates had reached 16.3 percent in 1982. But the world didn’t begin in 1982, nor was it about to end in 1987. Or even in 2014. High quality US mortgage rates averaged 5.1 percent in 1900, or only slightly more than today’s average 30-year rate of 4.30 percent … Read More