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

Trade with China both simple and complex

David MoonBlog

It is almost unanimous conventional wisdom that the U.S. has the economic upper hand in a tariff or trade war with China; that is, China needs the U.S. much more than we need China. From a conventional economic and political sense, that’s very true. But China is not conventional. Its leaders are motivated differently than ours, meaning that we are using two different sets of rules, to fight two different kinds of wars – that just happen to be occurring on the same economic field of battle. It is without question that China cheats. It steals from American companies, which … Read More

Stories from Berkshire Hathaway shareholders’ meeting

David MoonBlog

Somewhere among the 42,000 people at the recent Berkshire Hathaway shareholders’ meeting were members of the Grant Group, a Knoxville investment club. Club members Diana Condon, Jeannie Dulaney, Kathy Hamilton and Karen Pershing were each making their first pilgrimage to the Woodstock for Capitalists, and they were kind enough to share their experiences with me. Each year, much is written about the Q&A with Berkshire’s Chairman Warren Buffett and Vice Chairman Charlie Munger. I was more interested in hearing about their overall adventure. On Friday before the meeting, the ladies joined thousands of others in Shareholders Shopping Day, where shareholders … Read More

Partisanship clouds economic assessments

David MoonBlog

Americans are so illogically politically partisan that they will distort the descriptions of their own economic well-being based simply on the outcome of an election, without any corresponding change in any underlying economics. A February 2019 Gallup poll found that 50% of Americans reported being better off financially than a year ago – the largest percentage since 2007. Since Gallup began conducting this poll in 1977, only once have Americans been more optimistic about their personal finances. But the averages hide an illogical and emotional partisan difference. Twenty-six percent of people describe their financial condition as worse than a year … Read More

How not to fix student loans

David MoonBlog

Last spring, 69% of college graduates left school with an average student loan balance of $29,800. In total, there are 44 million Americans who owe $1.5 trillion for student loans, preventing many young people from starting families, buying homes and enjoying even a modest economic standard of living. Yet the average car loan for Millennials is $22,600 and the average cost of a wedding is $25,000. Why is no one lamenting the social burdens of growing matrimony or transportation crises? Millennials are hamstrung by a $393 student loan payment, but not their $426 average car payment? (In a perverse irony, … Read More

Tips on choosing an adviser

David MoonBlog

I have lost count of the number of Knoxville-area self-described “financial advisers” who, in the past year or so, have been arrested, gone to prison, been sued, practiced without proper licensing or been implicated for their role in Ponzi schemes. Many of their victims could have avoided injury by reversing the order of the steps they took to select an adviser. The AARP has a very simple, short questionnaire to use when interviewing a potential financial adviser. It’s a good starting point to evaluate an adviser’s conflicts and background, assuming his answers are truthful. There is more to successfully selecting … Read More

Tax that fellow behind the tree

David MoonBlog

If you sell an asset for a gain, the IRS taxes you on your profit, but only after you sell the asset. Oregon Senator Ron Wyden has proposed perhaps the goofiest and most impractical tax idea of all time: taxing individuals based on unrealized capital gains, that is, gains they may or may not eventually have. Ignore the motivation for such a proposal; how would it even be implemented? If unrealized capital gains are taxable, would unrealized losses be deductible? If a taxpayer’s unrealized losses exceed his taxable income, would he get a check from the IRS? In 2018, would … Read More

Advice for young job-seekers

David MoonBlog

As the end of the year approaches for colleges and high schools, new graduates and would-be interns scurry to find jobs that will propel them to their fortune. Consider passing these tips along to those young people in your life. Have an English teacher proofread your resume and any cover letter you plan to re-use. Employers look for reasons to discard resumes. Inconsistent verb tense is an easy “no.” Assume the reader is going to read one line of your resume; put the most important thing there. If you want a computer programming job and you won something called the … Read More