Charter Trust - Global Market Update

Why didn’t Europe fall apart? Horace Vernet, “The Battle of the Barricades.” Public Domain. Source: Wikipedia In 1848, revolution swept across Europe. Governments fell in Italy, France, Germany, Denmark, Hungary, Poland, and elsewhere. In all, over 50 countries were affected. The uprisings were led by shaky ad hoc coalitions of reformers, intellectuals, and workers, which didn’t hold together for very long. They were often violently put down, but resulted in lasting social changes, even if the political […]

Are open exchanges over? Public Domain. Source: Wikipedia In Japan, around 1700, producers and consumers of rice decided they needed a place where they could exchange promises to buy or sell that year’s harvest. At the time, samurai were paid in rice, and they needed to know how much they were really being paid. This became the world’s first futures exchange, and it helped Japan’s economy grow, as their currency shifted from rice to coins to paper […]

What good is Facebook? Photo: Anthony7051. Source: Wikipedia Facebook is over 10 years old and claims more than 2 billion active users, posting pictures and updates about their activities and interests. It was originally based on a student directory, known as a facebook, because it combined personal photos with basic information for new students at college. Now people use it to connect with friends and family over time and distance. We love sharing our Facebook updates! But […]

No Shirt, No Shoes, No SSN? Why do we have Social Security Numbers? Source: Social Security Administration Back in the 1930s, the government began a massive undertaking: issuing over 30 million Social Security numbers to American workers. Under the Social Security Act, the Social Security Administration had to track earnings accurately to administer benefits, and they couldn’t just use name and address. The Fred Smiths of New York City had so many identification problems that they formed […]

Which bus would you take? Photo: Adam E. Moreira. Source: Wikipedia Imagine that you want to take the bus from Boston to Atlantic City – down I-95, right through New York City. You have three different busses to choose from: Bus A is driven by someone who has been down this route before. She knows all the twist and turns on the interstate, and could tell you that the merge with traffic from the Whitestone Bridge off […]

Where have all the students gone? Photo: BHVP. Source: Wikipedia College enrollment increased by 50% from 1990 to 2010. This is a big part of the reason that college tuition has gotten so high. While the general population in the US generally increases only 1% per year, college enrollment had been growing by about 2% per year. If demand increases without an increase in supply, prices rise. And colleges aren’t admitting a lot more kids. There are […]

Do investors have rights? 90 percent of an iceberg is under water. Photo: Ansgar Walk. Source: Wikipeida We ought to. After all, it’s our money. But the financial industry is filled with fast-talking rogues who take advantage of people’s trust. Ponzi schemes and outright fraud are just the tip of the iceberg. There are all sorts of ways for advisors to abuse their position that aren’t illegal. First, investors have a right to honest, objective, competent advice. […]

What is an asset class? Photo: Alvimann. Source: Morguefile We all know that it pays to be diversified – to spread your investments around. But you need to spread them among different types of investments. Someone who owns 50 tech stocks can hardly claim to have a diversified portfolio. The most basic investment unit is the asset class. But what is this? An asset class should be a stable group of economic investments that looks similar to […]

What good is the Fed? Federal Open Market Committee. Public Domain. Source: Federal Reserve The conventional wisdom is that the Fed controls the economy in the short run by controlling short-term interest rates. But folks didn’t always think this way. In the ‘60s and ‘70s Keynesian economists thought that interest rates only had a tiny effect on spending, and therefore a minimal impact on the economy. Then came Paul Volker. He made ending inflation the goal of […]

Is there an ETF for everything? Photo: Jack Moreh Source: Free Range Stock Photo It sure seems like it. ETFs used to be primarily an efficient way to invest in a broad market index, like the S&P 500 or an aggregate bond index. Then they branched off into market sectors: small cap stocks, tech companies, country funds like the UK or China. All this seemed like a reasonable way to diversify a portfolio. And it’s so convenient: […]

Cash is king. Image: Glitch. Source: Open clip art Cashflow determines what a business is worth. When investors put money into a company – whether it’s private, public, high tech, or old school, they want a return on their capital. That returns comes from cash the business can sustainably generate from their ongoing operations. When I was first learning how to “read” financial statements, there was no clearly defined way to identify cashflow. Some folks included net […]

Collateral dominates structure. Silk purse. Photo: Sideshowmom. Source: Morguefile That’s a phrase I coined twenty-five years ago when I was an institutional bond investor. At that time, Mortgage Backed Securities were still pretty new. Brokers would take MBS “pools” and put a bunch of them into a single trust. Then the trust would issue its own bonds, with different bonds getting paid first, some bonds taking more prepayment risk, other bonds protected, and so on. They called […]

Are we facing a retail apocalypse? Photo: Cbikle. Source: Morguefile That’s the story that’s being told. Payless, Radio Shack, Rue21, and The Limited have all filed for bankruptcy this year, as have five other retailers. Over 4,000 physical stores have been impacted. There are fewer than 750 Kmart stores open now, down from over 2000 at their peak, and their owners plan to close more stores. Since late last year, general merchandise retailing has shed over 80 […]

Are there any safe places? Photo: Ben Tubby. Source: Wikipedia During the Cold War the superpowers relied on a doctrine called “Mutually Assured Destruction,” or MAD. The idea was that neither party would initiate a nuclear first strike, because enough of the other side’s nuclear arsenal would survive to retaliate. The global devastation would be so complete that both sides would lose. To average folks, the doctrine seemed “mad,” indeed. There was a low-grade fear surrounding everyday […]

What do you do when your boss announced plans for a layoff? Emmanuel Macron. Source: Wikipedia That’s what Emmanuel Macron did a couple days ago, in a powerful speech to both houses of the French Parliament. The assembly has 925 seats, and Macron announced plans to cut its number by a third. If the houses don’t agree, he said, he will bring his initiative to the voters directly. He also told the lawmakers that they need to […]