Ignorance may be bliss, but it is ignorant

David MoonBlog

We’ve all heard that if a frog is dropped into a pot of boiling water, it will immediately jump out, but if the water temperature is slowly increased, a frog will sit in the pot until it is eventually boiled to death. The “boil a frog” metaphor is a fantastic lesson about the risk of slow, unnoticed change. It is also a myth. If dropped into boiling water, a frog would likely lose consciousness from the shock or suffer instant severe burns that would render it unable to leap. But if placed in a pot of comfortable, but slowly heating … Read More

Thanksgiving week irritants

David MoonBlog

Rather than offer another boring, self-serving Thanksgiving week recitation of things for which I am grateful, in the interest of balance, here is my very abbreviated annual list of irritants. Restaurants that serve tiny entrees on huge plates. Restaurant menus more than four pages long. People who undertip at Waffle House. People who undertip anywhere. Brown bananas, candy corn and congealed cranberry sauce. People who use “barbeque” as a verb. Potato chip bags: why don’t they have Ziplocs on them? All-beef bologna. People who eat bologna don’t care what’s in it. The new college football overtime rules, placekickers and stadium … Read More

Drastic, lasting change is rare

David MoonBlog

The surprise election of a political novice to the governorship of Virginia provides a useful investment lesson, although probably not one you would guess. It does not, in my opinion, signal a quasi-lasting shift in voter sentiment. Instead, it is a reminder how quickly stable people can change their opinions about very important matters – and not just those involving politics. But politics is a great example, because it is something about which everyone has opinions – and most people are very certain of their opinions. I don’t believe the claims that the recently concluded elections signal some massive change … Read More

Dow 36,000, two decades late for some

David MoonBlog

When the Dow Jones Industrial Average closed above 36,000 on November 2, it satisfied a forecast made by authors James Glassman and Kevin Hassett in their best seller book, “Dow 36,000.” Well, it sort of satisfied their forecast. Their book, published in 1999, predicted that the Dow would reach 36,000 by as early as 2002. They only missed their guess by almost two decades. An economics mentor of mine once told me that the secret to making forecasts is that if you give a date, don’t give a number. And if you give a number, don’t give a date. Glassman … Read More

Inflation misconceptions are common

David MoonBlog

For it to be such a popular topic of discussion, it is surprising how little people understand about inflation. Some of the misconceptions are trivial, but others threaten to lead investors and policymakers into poor decisions. Inflation is not caused by higher prices, no more so than obesity is caused by being fat. Inflation IS an increase in prices. The difference is much more than semantics. If we assume, as many in Washington have proclaimed, that “higher prices are leading to inflation,” it becomes tempting to ignore the factors that really are leading to inflation. Inflation develops when non-substitutable products … Read More

Annuity sales reveal regulatory weakness

David MoonBlog

An investment broker in Connecticut recently settled with regulators over charges that he inappropriately sold certain annuity products over a period of years, lied on disclosure documents and used his wife as a front for hiding his activities. For these transgressions, the guy received a slap on the wrist – and he wasn’t even punished for his most egregious action – because it was completely legal and permissible. And sadly, it is much too common. Although the Connecticut broker had no east Tennessee customers, the case is important because this single situation reveals some of the worst aspects of the … Read More

Country’s best years are ahead

David MoonBlog

Assuming they successfully navigate another semester-and-a-half of college, my two kids will graduate in May. Despite the hardships and challenges they will face; I am convinced this is the best time to be young and starting one’s life as an independent adult. When might have been a better time? What if they had been born in 1900 instead of 2000? The life expectancy of a child born in 1900 was 47 years; their lives would be almost half over by the time they graduated from college. Except that less than three percent of Americans had a bachelor’s degree in 1922. … Read More

Debt ceiling is cruel political theater

David MoonBlog

When the Senate authorized the Treasury to borrow another 60 days’ worth of operating cash, it was not some heroic bipartisan move saving the country from economic catastrophe. It merely postponed the debate until right before Christmas, when the threat of furloughing thousands of government workers will offer legislators maximum political leverage. Threatening to default on our nation’s contractual obligations is a sick and cruel political game, where the outcome is already known. The debt ceiling will be raised. And shutting down the government doesn’t really shut down the government – it merely uses federal employees as pawns in an … Read More

Social program size is less important than its details

David MoonBlog

Those concerned about the potential inflationary effects of President Biden’s proposed social spending package are focusing on the wrong thing. If $3.5 trillion in additional deficit spending would place a higher inflationary burden on (mostly middle class) voters, how can a $1.5 trillion package be palatable? Or why is $6 trillion better than $3.5 trillion? Either these politicians don’t understand very basic economics, or they don’t believe we do. The most important issue isn’t the size of the package, but rather on how the money is spent or invested. And it is important to realize there is a difference between … Read More

An alternate school mask idea

David MoonBlog

I have a recommendation about masks in Knox County schools. Unsolicited advice is usually worth at most what your pay for it, so I’m sure there are plenty of holes in my plan. But maybe it will inspire an actual creative person to solve the problem. The school system should provide N95 respirators for any student or teacher who wants to wear them. Anyone who declines the free N95s can wear their homemade masks or go maskless. Unlike cloth and convenience store masks, medical-grade, NIOSH-certified N95 masks are designed to protect the wearer. As of this week, the CDC website … Read More