My first Summer job was scooping ice cream at Oxford Creamery in Mattapoisett, MA, where after every shift I'd mop the floors. I like this story from Tyler Bonin at The Wall Street Journal. Bonin's advice for new grads is to "mop your way to success." It’s never too early to learn how to make yourself useful. He writes: Every commencement season, thousands of graduates are treated to something I call “standard keynote language.” Everyone can recognize these tiny, easily digestible nuggets of wisdom: “Don’t be afraid to take risks,” or “Be courageous.” And the classic: “Follow your passion.” … [Read more...]
A Risky Addition to an Otherwise Decent Dodd-Frank Reform: Part II
Yesterday I wrote to you about a risky change classifying municipal bonds as "high quality liquid assets." That change, though simple, could lead to increased spending by states and cities. This is obviously a danger given many states' indebted status, take for example the state of Illinois. A spiral of debt and taxes is driving residents out of the state, which in turn is worsening the state's revenue problem. Ben Bradley reports for WGN9 news from Chicago: 33,703. That’s how many residents left Illinois last year. People leave the state for a variety of reasons from weather to career … [Read more...]
A Risky Addition to an Otherwise Decent Dodd-Frank Reform
Despite passing a major reform to the Obama-era Dodd-Frank financial regulation, Congress has unfortunately added a few unnecessary, and even risky, clauses to the bill. The one that worries me most classifies investment-grade muni bonds as "high quality liquid assets." Some, repeat some, muni bonds are high quality assets. Many are not, even some of those that hold investment-grade ratings. What's worse is that few muni bonds are very liquid. They typically aren't large enough to create the kind of investor pool necessary for high levels of liquidity. The editorial board at The Wall … [Read more...]
A Warning for the Global Economy
The WSJ Logistics Report raises the red flag on a major warning sign for the global economy. Copper, known as Dr. Copper for having a Ph.D. in economics, has begun falling in price, even while other commodities are rising. Another early indicator of the direction of the world economy, the Baltic Dry Index, has plummeted as well. See my charts below on both. The WSJ reports: Warning signs for the global economy are being drawn in copper. After hitting a high of nearly four years in 2017, copper prices have slumped this year even as prices for other commodities have been rising. That’s a … [Read more...]
Wealth Shock! “All of a Sudden Their Wealth is Gone”
You simply cannot afford to take heavy losses in or near retirement. From a financial standpoint the arithmetic of losses is devastating—lose half your portfolio and you need a 100% gain (not likely) to get back to even. Now, a study has been done to show the impact of losing money on one’s health. And it’s not good. “Published last month in the Journal of the American Medical Association, [Lindsay Pool of Northwestern University] investigated how losing one’s life savings in the short term might curtail one’s lifespan in the long term,” writes the WSJ’s Susan Pinker. Every two … [Read more...]
Is Your State’s Pension System about to Collapse?
Katherine Loughead discusses state pension data from The Pew Charitable Trusts at The Tax Foundation. I've warned many times that states are under-funding their pensions and using unrealistic expected rates of return to hide their malfeasance (read here, here, here, and here). The low funding ratios are starting to bite. She writes: As of fiscal year 2016 (the most recent data available), states reported a combined $1.4 trillion in state pension plan funding deficits. Over the last two years, below-expected returns on investment and insufficient state allocations contributed to widening … [Read more...]
The Big Implications of Blockchain
“We’re quite confident that (blockchain) has big, big implications in supply chain, transportation and logistics. In the area where FedEx makes its living, this could be a big deal.” That's what FedEx CEO Fred Smith told the Consensus 2018 conference in early May. The blockchain technology Smith is excited about was touted by many at the Consensus conference, and could be applied in a range of industries. Steven Norton reports for The Wall Street Journal: Speaking at the Consensus 2018 conference, panelists described how distributed ledger technology could create an immutable data source … [Read more...]
RAGE Gauge: Sell in May?
Sell in May? Not if you have a plan you don’t. Successful investing requires that you have a plan and the patience to stick to it. Being paid to be in the market through dividends from stocks, and interest from bonds, makes the waiting all the more palatable. Risk continues to be high. Stocks continue to feel like a popularity contest, especially the FAANGs. We know how that story ends. … [Read more...]
Happy Mother’s Day
One of the more important gifts a mother can give to her children is educating them about money. Growing up, my mother was always talking to my sister and me about money. Just the other day she asked: “E.J. what’s going on with GNMA?” As a sixth-grade teacher my mom made investing fun for her students. Every year she would hold an investing contest. The students would pick their stocks and then, through the course of the school year, excitedly comb through The Wall Street Journal for quotes, pumping their fists and letting out a “YES!” for the winners or pressing their ink-stained finger … [Read more...]
How Many Times Can SpaceX Reuse a Rocket?
A new very of SpaceX's Falcon rocket, the 9 Block 5 is "designed to be capable of 10 or more flights with very limited refurbishment." The company is striving for "rapid reusability and extremely high reliability." Improvements in efficiency for rockets are paramount to making any commercial rocket program a success. In the past rockets were taxpayer funded, and therefore little attention was paid to the profitability of their operation. But with SpaceX and Blue Origin vying with traditional rocket builders like Boeing to become American alternatives to Russian launch operations, every … [Read more...]
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