In a much anticipated statement, the Federal Reserve on December 18 announced a change in monetary policy—that it will begin to taper its large scale asset purchase program. The statement was coupled with additional guidance that interest rates will stay low for a considerable period. The statement’s impact is more a tweak than a decisive
The last few days have brought some good news for both Main Street and Wall Street. The House passed a budget deal, so we can avoid the uncertainty of a government shutdown for at least two more years. Regulators finally agreed on rules that reduce the potential of banks making risky trading bets that spill
Why diversify—especially in years like this when the S&P 500 is doing so well? The essence of diversification is captured by the proverb: “Do not put all your eggs in one basket.” Insights into diversification were given a theoretical basis by Harry Markowitz (1952), who won the Nobel Prize for his work in 1990. Click
Are we in a bubble? A few clients have asked this recently—a natural one with the major indexes reaching new highs. The short answer: we’re probably not in a bubble, but cautious investors should consider reducing their equity bets. The stock market is high because corporate profits are high, and stock prices ultimately are driven
November 22, 1963—a profoundly sad day in American history—is a memory that seems like yesterday. I was in a first grade classroom in Crossville, Tennessee when Mrs. Gaston told us the news: “The President has been shot.” It seemed like the world stood still for the next four days. I am reminded of the line
Investors can profit from the insights of this year’s Nobel prizewinners in economics. Though each award winner’s viewpoint seemingly contradicts the other’s viewpoint, together they provide insight into how securities markets are valued. Eugene Fama of the University of Chicago is father of the Efficient Markets Hypothesis (EMH); Robert Shiller of Yale University shot down
The Federal Reserve met last week and it made no changes to its large scale asset purchase program. The late spring/early summer experience, where its communications about tapering the program were bungled, drove up interest rates, in expectation that stimulus would be withdrawn in the near future. As markets reacted, the Fed backtracked, and since
Inflation rates—a general increase in prices--are very low. With Fed officials talking openly about low inflation and the risk of deflation, it is appropriate to examine inflation risk and how to address it. High levels of inflation erode purchasing power and the value of stocks and bonds. This week we review aspects of inflation. The
I sure am glad that’s over—that is—the debt ceiling standoff, even though Congress simply “kicked the can down the road.” Maybe next time cooler heads will prevail. Maybe some lessons have been learned, such as The debt limit is out of bounds. The debate next time should be on legitimate budgetary issues, not on the
I fondly remember “the good old days,” when government actually worked much of the time, when a conciliatory spirit was a badge of honor, and tough issues were resolved thoughtfully and with civility. Howard Baker, Tennessee Senator from 1967 until 1985, exemplifies a leader who set the tone for those times. In his day he