Charter Trust - Global Market Update

What are you doing to stay healthy? Photo: Seeman. Source: Morguefile This may seem like a strange question from a financial professional, but our bodies and our finances are connected. Health is an integral part of our lives, just as money is. And finance is a lot like medicine: there are lots of technical issues that require specialized training, but applying them is often pretty basic. Health-wise, we should stay active, eat well, and get enough rest. […]

Could negative interest rates be bad for the global economy? Global publically traded sovereign debt. Source: Humble Student of the Markets Around the world, the use of negative interest rates is growing. Starting with Denmark in 2014, central banks have started to charge banks for keeping reserves. Now the central banks of Switzerland, Sweden, the Eurozone, and Japan have joined the negative interest rate club. Of the $40 trillion in sovereign debt outstanding, about $13 trillion now […]

The case for pessimism seems strong, doesn’t it? Global Real GDP, 2010 dollars (Log scale). Source: Bloomberg, World Bank Secular stagnation in the economy, nationalistic anti-trade political parties growing, and jihadist terrorism rising: it’s easy to have a grim view of the future. But when you look at long-term economic growth, these concerns—although legitimate—seem short-sighted. The large-scale trends that have fueled global growth since World War II haven’t stopped. More people are gaining access to new, productive […]

Do small stocks outperform? Comparison of S&P Small Cap and Large Cap indices. Source: Bloomberg On its face, this seems like a silly question. Everyone “knows” that small cap stocks outperform. Since 2000, small caps have grown over 4 times, while large cap shares have only doubled. There’s a 5% annuallized difference between the S&P 500 and the S&P 600 small cap index. Over longer time frames this relationship seems to hold up as well. From 1926 […]

It’s easy to underestimate big things. Can you guess who’s the biggest? Source: IMF We hear a list of 4 or 5 items, and we tend to average them, treating them alike. But things aren’t all alike. In the global economy, the United States and China dominate every other nation. Together, our two countries total 40%. The next largest country is about 5%. Clearly, if we want to understand what’s going on the economy, we need to […]

Is the market on the edge of a cliff? Photo: Mercy from Wikimedia Commons: Source: Wikipedia That’s what a lot of smart people are saying. They cite our political mess, our slow-growth economy, negative interest rates in Europe and Japan, rising corporate leverage, and accounting tricks and they figure a crash must be coming. So, with the stock market flirting with record highs and bond yields near record lows, is it time to sell everything? The short […]

There’s a mystery lurking in Silicon Valley. Source: Open Clipart Over the past decade and a half the tech industry has quietly added over $60 billion onto its collective balance sheet. Where did that money come from? And where did it all go? The money is hiding in plain sight, on a balance sheet line called “goodwill.” Goodwill is created when a company pays a premium for another company. It’s a way to lump all the “good” […]

Where does money come from? Source: Morguefile Money is a funny thing. Most people around the world look at yen and euros and dollars and say that that’s money. But banknotes are only a small fraction of the money in the world. Most money exists in the form of bank deposits. When we buy a house or a car or pay our credit card bill, we just instruct our banks to make ledger entries transferring some of […]

What makes a work of literature a classic? Photo: SV Klimkin. Source: Morguefile Mark Twain called a classic a book everyone wants to have read, and no one wants to read. We remember them from high-school: big, scary tomes with strange titles our teachers all said were full of wisdom. We really, really tried to get through them. Some of us actually did. But whether it was the 25thcharacter named Ivan in a Tolstoy story, or a […]

Growth and Investments Where do investment returns come from? Photo: Thomas Bresson. Source: Wikipedia For as long as I’ve been investing, people have said to put money into the stock market for growth and to own bonds for stability. That advice has gotten a little jumbled lately, but it still seems to hold true. The US stock market has returned 7.5% per year for the past 10 years, while the bond market has earned 5.25%. The same […]

When do tips work? Photo: S Klimkin. Source: Morguefile Investment advice works best when people treat their investments like a business. If you are investing, you’re really acquiring future sources of cash. Some investments—like bonds—come with contractual payments and a final date. Others—like new companies—come with a vague promise to begin returning cash to shareholders when the business matures. All of them depend on how the economy does. If you were running a restaurant, you wouldn’t tune […]

What’s wrong with investment tips? A “Rubbish Tip” in the UK. Photo: Bob Embleton. Source: Wikipedia   Investment recommendations rarely work out. Part of the reason is because they need to fit into an overall plan. But people who give advice rarely give the nuance and conditions that might make the advice less applicable. Think of all the times you’ve seen the headline: “5 Stocks that could Double in the Next Year!” But what are the risk […]

Everyone wants a tip. What’s the best way to make money? Photo: Nick Stanley. Source: Life of Pix Profitable investing starts with a plan. It starts with investors reviewing their goals, their fears, how much time they have, how much access to their money they need, and other circumstances. No one plans to fail, but many people fail to plan. And if you don’t know where you’re going, any road will do. But once you have a […]

Psst: want a quick stock tip? Photo: Stuart J. Whitmore. Source: Morguefile Lots of folks ask me for a quick tip. It’s natural when they hear that I help people manage their money. After all, if you can find the next 10-bagger before it goes parabolic, you could spin the straw of your savings account into retirement gold. Or we think. But investing isn’t like that. It’s not about getting lucky. When we invest, we put our […]

Who is Mr. Market? Drama masks. Source: Musei Capitolini Investing is a partnership between the investor and Mr. Market. Mr. Market is a moody fellow. Some days he’s gloomy and unhappy. He wants you to buy something—anything—from him at the cheapest prices. The world looks uncertain, the economy looks lousy, profits are miserable, and nothing seems to be getting better. So the prices he asks for his goods are cheap. Other days he’s happier than a lamb […]