Fortunes and Friends

David MoonBlog

In 1987, a few months after I finished graduate school, my wife and I bought our first house. Although the small, vinyl-sided starter-home was the nicest place either my wife or I had ever lived, she wanted a swimming pool. I wanted to pay off the mortgage. After reading a Dear Abby letter from a widow whose newly-retired, workaholic husband died just before they took their long-awaited, trip-of-a-lifetime to Italy, I agreed to the pool. So we built a $20,000 pool in the backyard of our $76,915 house. In percentage terms, it was the worst financial investment of my life. … Read More


David MoonBlog

In 2008, new Duke head football coach David Cutcliffe was watching his squad workout for the first time. After 30 minutes, he abruptly cut the session short, gleefully announcing to the team and staff that he was watching the fattest football players he’d ever seen. “This is fantastic. We can add four wins just by getting you in shape.” Over the next three months, the Blue Devils lost a cumulative 500 pounds. That quarter-ton wasn’t spread equally across 90 players. Far from it. The vast majority of that weight was lost by only a handful of players: the fat ones. … Read More

Thieves in sheep’s clothing

David MoonBlog

When the Republic of China lost the civil war with the upstart Communist Party in 1949, the newly installed communist Chairman, Mao Zedong, enacted a law refusing to honor all pre-1949 Chinese obligations, including both currency and bonds. The bondholders were completely wiped out, including the U.S. Treasury, which had purchased bonds to help finance the war. The bonds have zero investment value. Buying the bonds hoping to collect 70 years’ worth of accrued interest is as silly as doing the same with bonds issued by the Confederate States of America or Saddam Hussein. Yet that is exactly what the … Read More

Flying cars and unemployment

David MoonBlog

In 1834, Scotland’s John Scott Russell built a steam-powered carriage that would travel at breakneck speeds up to 20 mph, providing formidable competition for the traditional horse drawn carriage industry.  Four months after Russell began ferrying passengers for profit, someone piled scrap metal in the middle of the company’s daily route, causing the carriage to topple and explode, killing four passengers.  Although history doesn’t record their names, they were likely the world’s first automobile accident victims. The Steam Carriage Company of Scotland didn’t survive the accident, but the automobile did.  It is impossible to uninvent a technology for which there … Read More

Optimists are richer, not just happier

David MoonBlog

In his most recent letter to Berkshire Hathaway shareholders, Warren Buffett very clearly staked his claim as a long-term bull on the U.S. economy, writing, “since 1776, whatever its problems of the minute, the American economy moves forward.” His public position has been consistent for at least 25 years, and perhaps longer. Of course it’s easy for Buffett to be an optimist. He’s 87-years-old and has $89 billion. He will never personally suffer an economic hardship, and if the U.S. economy ever becomes Venezuela, Buffett will be dead by then, anyway. There is not a lot of personal risk in … Read More

Bear hibernation, not extinction

David MoonBlog

Bull markets for stocks don’t just die of old age, but, historically, neither have they lasted forever. This month marks nine years since the most recent bear market bottom in 2009. It may seem that the current bull market will last forever, but it won’t. Never forget economist Herb Stein’s wise and obvious adage: if something cannot go on forever, it will stop. Markets vacillate between peaks and troughs, even if it takes a while to change course.  In 1966, the Dow Jones Industrial Average peaked at 1,000. In 1982, after 16 years of wild price swings, the DJIA was … Read More

Rick Barnes and value investing

David MoonBlog

When Tennessee and Auburn men’s basketball teams tied for the regular season Southeastern Conference Championship, my first thought was “I would much rather win a championship with our coach than Auburn’s.” My second thought was “this is the perfect example of the difference between investing and speculating.” Confusing investing with speculating is common, and not just with 401(k) s, stock portfolios or safe deposit boxes full of Pet Rocks and records of your Bitcoin purchases. Speculating is about chasing the latest fad, and it happens in big business – like college athletics – as well. After taking his University of … Read More

Stock price volatility, by Harold Black, PhD

Harold Black, PhDBlog

I am no expert on the stock market. For that you need to read my colleague David Moon. However, I do have an opinion as to why the stock market has increased in volatility. Last month saw dramatic swings in the market. In one week, the markets swung over 1,000 points daily and changed directions over 50 times. By the end of that week the markets ended up. The experts said that during the week, the market entered “correction territory” intimating that stocks were over-valued which past Fed chairman Allen Greenspan referred to as “irrational exuberance”. No better cases for … Read More

What Buffett didn’t say

David MoonBlog

The release of Berkshire Hathaway’s annual report, especially Warren Buffett’s Chairman’s Letter to the shareholders, is a highly anticipated literary event for serious investors. This year’s letter addressed tax reform (Berkshire recognized a $29 billion tax-related gain), the pitfalls of hedge fund fees, the importance of reputation, the characteristics of an attractive business, the general stock buying frenzy of 2017, the lack of equity investments available at sensible purchase prices, the risk of high-leveraged acquisitions and the over-optimistic projections used to rationalize most mergers and acquisitions. Buffett also wrote of the importance of prudence, especially when others appear to be neglecting it. … Read More

Implications of a new superpower

David MoonBlog

For much of the 20th century, there were two world superpowers. Every developed country aligned with one of these two governments, creating a creating dualistic, “us versus them” economic and military mindset that shaped politics across the globe. Those two countries were Russia and Saudi Arabia, and the core of their influence wasn’t military strength; it was their position in the world oil market. The U.S. has now joined Russia and Saudi Arabia in the 10 million barrel a day oil production club, and is poised to become the world’s leading producer sometime this year. The potential ramifications cannot be … Read More