Charter Trust - Global Market Update

Are stocks expensive now? Photo: Victor Hancek. Source: Picjumbo That depends on what you mean by expensive. Unlike rare art, fine wine, and gold, stocks have an intrinsic value. They represent ownership in an enterprise that can potentially generate earnings and dividends for investors. This leads us to the fundamental paradox of investing: 100% of what we know about a company is based on the past, but 100% of a company’s value is based on a forecast […]

Are companies selling, or preaching? Source: Coca-Cola Company In 1971 Coke produced their “Hilltop” ad, where 500 young people sing about furnishing a home with love, and buying the world a Coke. The ad cost over $250 thousand to produce, a staggering amount at the time. The multi-racial chorus hold bottles of Coke labeled in English, Arabic, Hindi, and Afrikaans. The message is clear: if we can just have a Coke together, the world could be a […]

What are activist shareholders? Photo: Taryn. Source: Wikipedia An activist is someone who buys a stake in a company to make a change. Their goals can be financial, social, or governance-driven. They might want to increase dividends, reduce managements’ salaries, or divest from particular countries or activities. 30 years ago these folks were often called corporate raiders, forcing management to take action or buy them out, often at a fat premium to the current stock price. This […]

How do you spend your leisure time? Source: Photoeverywhere.co.uk Leisure time is increasingly important. The time we spend working has declined over the past decade, and the time spent in leisure activities has increased. But what do we do? Increasingly, we watch TV. Millennials don’t watch as much as older folks – and they may watch TV on their phones – but watching TV constitutes the lion’s share of our down-time. Every year, the Census Bureau surveys […]

How much is a stock worth? Chicago Board of Trade. Source: Wikipedia The short answer is, whatever someone else will pay for it. But what if there isn’t much of a market? What if the shares trade “by appointment,” only changing hands when there are motivated buyers and sellers? If you don’t have access to a private valuation consultant, what do you do? Other markets deal with infrequent trading and illiquidity all the time. Bonds and real […]

What are the most dangerous jobs? Photo Luc Viatour. Source: Wikipedia Several professions come to mind: stunt performers, combat troops, firefighters. But have you ever thought that being a central banker could merit hazard pay? That’s certainly the case in Russia. Ten years ago, their chief bank examiner, Andrey Kozlov, was shot and killed by two gunmen. He had been investigating money laundering and other financial crimes. In Russia at that time, many of the banks were […]

Has the Fed become irrelevant? FOMC Meeting. Public Domain. Source: Philadelphia Fed In case you hadn’t noticed, the Fed is raising rates today. We’ve come a long way from the rock-star Greenspan era – where observers tried to guess which way Fed policy was headed by the girth of The Great One’s briefcase, and markets hung on his every word. Now, with quarterly dot-plots and press conferences, we’re awash in information. By trotting out Fed Governors and […]

Are we in a critical state? Photo: Priscilla Westra. Source: Fancycrave A critical state is a concept from physical chemistry where something is ready for a phase change. Think of water turning to ice. When you look at a body of water that is just about to freeze, it looks the same as normal cold water. But microscopically, they’re quite different. When water is close to freezing, it’s filled with innumerable tiny ice crystals – crystals so […]

Is a price war coming to our mobile phone networks? Photo: Linzy. Source: Morguefile Verizon recently followed its rivals in offering an unlimited data plan. They’ve long had the broadest network, but they’ve been losing revenues by 1% per year for the past several years. By rolling out unlimited data priced right around what AT&T and T-Mobil offer, Verizon hopes to recapture some of the market share that they recently lost. I remember gas price wars in […]

How much regulation do we need?   Photo: Arnaud Clerget. Source: Wikipedia After the financial crisis, Congress enacted new regulations on the financial system. The concern was that big banks had gotten us into an awful mess through their reckless lending, so we needed to put new rules in place to make sure they never did that again. Dodd-Frank has been in effect for over six years now, and it’s reasonable to ask if anything has changed. […]

Why is investing so rewarding? Photo: Victor Hanacek. Source: Picjumbo Investing is fascinating. It’s not just the financial returns, significant as those may be. But investing is valuable in its own right. The profession is intellectually demanding, the competition is consistently stimulating, and the relationships with clients and colleagues are priceless. Here are some timeless truths about investing that have impressed me over the three decades I’ve been investing and the ten years I’ve been writing about […]

Is Apple the greatest cash machine in history? Photo: Leeroy Source: Life of Pix Apple recently reported its 2016 financial performance. Last year the company sold $215 billion worth of products and earned – after expenses, amortization, and taxes – over $45 billion. By contrast, conglomerate GE sold $120 billion and earned $10 billion. Smaller companies may have larger margins, but nothing has ever come close to Apple’s scale. The company has amassed a cash reserve of […]

Who’s in charge? Wilson Bently, “Studies Among Snow Crystals.” Source: NOAA That’s what we often ask about all kinds of complex systems: traffic, language, markets. It often turns out that no one is in charge, that order emerges from the various parts of the system. If you look at any particular automobile, you can’t predict that Route 128 outside of Boston will be bumper-to-bumper at 8:00 am on a snowy Tuesday morning. But if you get a […]

How do storms impact the markets? Source: NOAA We seem to be in a storm cycle. We just had a couple nor’easters, and it looks like more snow is on the way. At times like these, people wonder just how much weather can affect the economy. Last year was a great case-study. For the previous several years we’d had heavy weather disrupt the first quarter’s economic growth. Last year we had a mild winter, along with low […]

Is the market expensive now? Superyacht “Eclipse.” Photo: Moshi Anahory. Source: Wikipedia The stock market has been on a run. Since October of this year the stock market has hit a succession of new highs. A lot of folks look at this market and say that that the market is pricey. When you divide the market’s valuation by the last 12 months’ worth of earnings, the aggregate price-earnings ratio – currently 23 times earnings – is higher […]