Charter Trust - Global Market Update

Do business ethics matter? Photo: Kristopher Psarakis. Source: Morguefile People say they care about whether a business is ethical. But do they mean it? 2016 was seemingly a bad year for business ethics. Wells Fargo systematically signed customers up for accounts they didn’t know about, and then fired employees who complained about the practice. VW admitted that they criminally deceived emissions tests in their diesel vehicles – and may have been copied in this by Chrysler. Drug-maker […]

What’s happening in the global economy? JP Morgan Global Manufacturing PMI. Source: Bloomberg It’s no secret that the US stock market is approaching record levels. Business news reports seem to be obsessed with the Dow’s flirtation with the 20,000 mark – which first neared about a month ago. But far more important than Disney or IBM’s price – stock prices, after all, determine the level of the Dow Jones Industrial Average – is the status of the […]

What is a market failure? Photo: NASA A market failure in economics happens when goods and services aren’t allocated appropriately—when people don’t get what they pay for, or when someone gets a free-ride. It’s like slip-streaming on the highway: if I follow a truck closely, I can benefit from the turbulence behind the trailer. But I can only do that if I follow so close that I can’t see hazards in the road ahead. There’s no free […]

Does cold weather hurt the economy? Icicles on a tree. Source: Wikipedia On the face of it, it sure seems that way. Frigid temperatures keep people home and depress retail sales. They hurt agricultural output and can lead to injuries or even death from accidents and physical stress. There’s even some thought that the 16th century’s “little ice age” may have led to crop failures and witch trials. Certainly extreme weather interrupts us. It’s hard to go […]

Can modern investors learn something from an ancient love story? Orpheus among the animals. Source: Wikipedia I’m a sucker for a good story, especially an ancient one. Many of our oldest tales tell us something about ourselves – about our hopes and dreams and fears and tendencies. The very fact that these stories have been preserved from antiquity tells us that they have a special relevance: they speak to us on many levels. Such is the case […]

How big is the market? S&P 500 Market Cap. Source: Bloomberg That depends on what you mean by the market. The US stock market is worth about $20 trillion. That’s the value if you add up all the shares traded times their market price – the market cap of the S&P 500. When you divide the market’s total value by the total earnings (and losses) produced by those companies, you get the market’s PE ratio—a basic measure […]

What does our low inflation environment mean for investors? Core Personal Consumption Expenditure Deflator. Source: Department of Commerce Inflation is an average. Prices in some areas are growing quickly, while others fall. That’s the way it has to be in a broadly diversified economy. The broadest measure of inflation—the personal consumption deflator—measures everything that consumers buy, and weights it by how much then spend on those items. It measures substitution effects. So if the cost of cotton […]

Why is saving for retirement so hard? Photo: Ahborson. Source: Morguefile We often hear that there is a saving crisis. People don’t save enough today to fund their retirement tomorrow. And with the national savings rate somewhere around 5%, that seems pretty accurate. After all, if you save 5% of your salary for 40 years—and just put it in the bank—by the time you retire you’ll have only two times your salary socked away. If you spend […]

Is inflation finally headed higher? Core Personal Consumption Inflation. Source: Bureau of Economic Analysis It sure doesn’t look that way. The broadest measure of consumer prices, the deflator for personal consumption expenditures, was flat November. That’s because incomes were flat, and consumption was flat. Most economists believe that a reacceleration in consumption will be the overarching economic theme for 2017. But this isn’t set in stone. If employment growth slows and wages stall, then we’ll still be […]

Well that was fast. Performance of Low Vol / High Dividend Strategy vs. S&P 500. Source: Bloomberg For the past year the investment world has been buzzing about the success of “low volatility” strategies. The idea is that less-volatile stocks can give you just as much performance as highly-volatile stocks, without all the heartache. In other words, in the great risk-return tradeoff, there may be a something like a free lunch—more return with less risk. Like the […]

What is the economic impact of Christmas? Photo: Andree Autza. Source: Morguefile There are lots of ways that people celebrate Christmas. There’s the religious holiday, which is outside the scope of this blog. There is the secular holiday, where people take time off to be with family and friends. It’s been noted that a lot of homeless shelters are pretty empty at Christmas—it’s the one time of the year many of those folks have someone to take […]

What’s the forecast? Source: NOAA The short answer is, no one really knows. There were very few prognosticators that predicted a Trump victory, and even fewer who thought a sweep by the Republicans would lead to a major stock market rally and bond market selloff. But that’s where we find ourselves. Stocks are up in the US in the low teens—almost 10% more than most folks expected a year ago. Interest rates are up modestly. A year […]

Do we need more science majors? Photo: Analytical Mechanics Association. Source: NASA That’s what a lot of people think. And as a science major myself, the husband of a science major, and the father of four science majors, I certainly believe in the utility and importance of studying science in college. It helps young minds develop rigorous, analytical thinking, along with quantitative skills. But some proposals to provide special encouragement for kids to study science seem misguided, […]

Why is passion so powerful? German Wright Flyer stamp. Source: Wikipedia We all know that 113 years ago the Wright Brothers were first to fly an airplane. But did you know that they had a well-financed, expert administrator as a rival? Samuel Pierpont Langley wanted to build the first airplane. He was Secretary of the Smithsonian and taught at Annapolis. He obtained a grant from the War Department and hired engineers, inventors, and a test pilot. What […]

How do we raise the bar for ourselves? Photo: Douglas Tengdin People face ethical issues every day. How meticulous do I need to be with my records? Could accepting a gift affect my objectivity? How responsible are supervisors for the actions of their subordinates? Most people can agree on a basic moral framework —universal rules like don’t lie, don’t steal, respect everyone, be kind, generous, and fair. But how do we work that out in practice? How […]