Volatility is not risk

David MoonBlog

by David Moon Assessing risk is a useful life skill that people develop and hone over their lives. We eventually learn not to approach crazed dogs, or spray an entire bottle of cologne on our four-year-old brother. Yet when it comes to using those same risk assessment tools to choose a 401(k) investment, people will lose their sensibilities and make decisions they never make when buying a lawnmower. Part of the problem is that people generally get emotional when significant money is involved. Folks get emotional about their 401(k) in a way they seldom do with their garden tools. The … Read More

A real look at US debt

David MoonBlog

by David Moon The US Treasury reports the US federal government debt at $19.2 trillion, a figure that both overstates and understates its true obligations by trillions of dollars. In absolute, an entity’s debt level is irrelevant. A money manager could reasonably carry more debt than someone making sandwiches at Jersey Mikes. Likewise, the debt capacity of the US must be considered in context of our current and expected national income, or Gross Domestic Product (GDP.) In 2015, US GDP, totaled $18.2 trillion. Of our $19.2 trillion in stated federal debt, however, $5.3 trillion is intragovernmental debt that, if the … Read More

Brexit fears overblown

David MoonBlog

by David Moon On Thursday, voters in the United Kingdom decided to leave the European Union (EU), passing the so-called Brexit (Britain exit) referendum. It was a major defeat for Britain’s political and business elite, providing a massive victory for the anti-establishment, populist Brexit supporters. British Prime Minister David Cameron will resign and the UK will begin a several year process of extricating itself from the EU, a 28-member, quasi-sovereign, hybrid continental government, complete with its own army and central bank. The EU provides for free movement of capital, consumer goods and people among most of the member states, alleviating … Read More

“Socially responsible investing” is mostly a feel good exercise

David MoonBlog

by David Moon In the past three years, assets of “socially responsible” mutual funds have jumped 76% and now total more than $5 trillion. Buying such funds may make an investor feel good, but it is unlikely to have any meaningful societal impact. The first challenge of introducing an ethical component into your 401(k) is to define what constitutes socially responsible. One mutual fund may avoid buying beer stocks, while another fund eschews companies that treat their employees poorly. Other funds may simply describe themselves as “socially responsible,” allowing an investor to pretend his definition is consistent with whatever stocks … Read More

Biased reporting is old news

David MoonBlog

by David Moon After being accused of political bias in selecting news stories to feature on Facebook, Mark Zuckerberg vehemently denied the accusations, then hosted a group of conservative pundits and promised not to do it any longer. The traditional media wailed in indignation at the prospect that the social media giant might intentionally and surreptitiously be trying to sway public opinion. Newspapers have been in the business of intentionally and surreptitiously swaying public opinion since Og chiseled out the local cave happenings on stone. In 1828 practically every newspaper in the U.S was either an unabashed supporter or critic … Read More

“Equal/stagnant vs growing/unequal”

David MoonBlog

by David Moon In the 2,100 years from 400 BC to 1700 AD, worker day wages around the world consistently ranged from 15 to 25 times the price of a pound of wheat. Today, the average U.S. worker earns enough each day to buy 1,500 pounds of wheat. (Daily wages in sub-Saharan Africa are still 21 times the price of a pound of wheat—the same as in 3rd century Egypt.) What happened in the past 210 years that didn’t happen in the previous 2,100? The Industrial Revolution and the advent of wealth creation, rather than simple geographic wealth distribution. Prior … Read More

Government stock buys pose risk

David MoonBlog

by David Moon In an attempt to boost investor confidence and economic activity, the Bank of Japan (BOJ) has been purchasing between 3 and 7 trillion yen worth of Japanese stocks during each of the past several years. These purchases, funded with newly-created money, make the BOJ one of the 10 largest shareholders in 200 of the 225 stocks in the Nikkei Stock Average. The Japanese central bank now owns more Japanese blue-chip stocks than Blackrock, the largest money management firm in the world. Why would the BOJ do this? Because it has run out of other stimulus tools. Driving … Read More

“TOO BIG TO FAIL” FAILS

David MoonBlog

by David Moon Beginning in the early 1970’s, brothers Nelson and Herbert Hunt set out to corner the world’s silver market, eventually owning or controlling 200 million ounces of silver, or more than half of the world supply at the time. Silver prices rose from $1.95 an ounce in 1973 to a peak of $54 in 1980, creating billions in paper profit for the brothers—until the U.S. government set out to dismantle the brothers’ market manipulation. The silver market collapsed, exposing the brothers, lenders and other creditors to billions in potential losses. As the massive scale of the Hunt acquisitions … Read More

Economic growth rate declining

David MoonBlog

by David Moon During Barack Obama’s first seven years as president, annual GDP growth has averaged 1.7 percent, peaking at 2.5 percent in 2010, his second year in office. Since the U.S. has recorded such data, President Obama is the first president during whose term of office the economy never grew more than three percent in a year. It would be easy to blame Barack Obama; he has been the most philosophically anti-business president since Woodrow Wilson. Yet the Federal Reserve, under both Ben Bernanke and, to a lesser extent, Janet Yellen, has been the most accommodative and business-friendly central … Read More

Frauds, lotteries and human nature

David MoonBlog

by David Moon   When Judge Leon Jordan sentenced Knoxville financial thug and thief Jacqueline Stanfill to nine years in prison it marked the latest chapter of a long book of Knoxville financial fraud. The collapse of the Butcher banking empire in 1983 wasn’t the first East Tennessee Ponzi scheme, but it certainly launched more than three decades of repeated and costly swindles.  The suckers of these scams have mostly included intelligent, accomplished individuals—not exactly a stereotypical vision of vulnerable victims. While the demographics of professional investment fraud victims differ significantly from that of the low-income, repeated lottery loser, the … Read More