The Good Professor’s Measure

A reader and good friend recently sent me an article by Robert Shiller, Nobel Laureate and Sterling Professor of Economics at Yale University.  In it, Prof. Shiller uses his own tool for evaluating markets, the so-called C.A.P.E. price-earnings ratio, to make the case that markets are overpriced and that the current market rally is running …

Why We Should Be Careful With Statistics

After I voiced skepticism in my recent post about the Business Roundtable’s newfound interest in stakeholders (in addition to shareholders), readers have asked how we could judge –– with hard, meaning statistical evidence –– whether the decision-makers in these firms really do consider all stakeholders.  The short answer is that it would be all but …

Bill Gates Embarrasses Himself, But Offers an Investment Lesson Nonetheless

Bill Gates of Microsoft fame and fortune gave an interview recently, and though he embarrassed himself, the exchange offers investors an important lesson: No one has secret knowledge. Someone may perhaps have special knowledge, but nothing that amounts to magic. The Gates interview teaches this important point in two different ways: He spoke on the …

The Stock Market and Trading with China

Financial pages note diligently, seemingly daily, how stock prices rise and fall with the prospects of a U.S.-China trade deal.  When hopes dim, prices fall, and when they improve, prices surge.  Partly this reflects investors’ constant desire for peace and business-as-usual. They want the uncertainty to lift and to be able to plan around doing business …

When to Get Out – Or Not

No doubt because markets rose and fell so violently in August, many are asking whether now is the time to get out of stocks.  My answer has two parts: If you are within five years of needing any or all of the money you presently have in stocks, now would be a good time to …

The Meaning of Negative Interest Rates

So called “negative interest rates” have appeared with greater frequency in Europe and Japan.  It is not that individuals in these countries can borrow from a bank and get paid to borrow.  The negative rates concern governments and large, financially sound corporations.  Here is how they work:  A government issues a bond at a very …

CDs

  Of late my inbox has filled with suggestions from my bank that I transfer some of my savings account into certificates of deposit (CDs).  The e-mails from my bank correctly point out that, because the rates on conventional savings accounts are lower than the rate of inflation, I am actually losing purchasing power on …

A Sane Response to Market Panics

Stocks have panicked twice during the last few weeks. The first downdraft came on Monday, August 12 on the news that China had allowed its currency, the Yuan, to fall sharply against the dollar.  The Dow Jones Industrial average fell some 400 points that day.  All day, people asked each other, “Is this the big turn?” In …

Brexit and You

The story of Great Britain’s exit from the European Union (EU) periodically dominates headlines and rocks financial markets.  For the individual investor, even those in Britain and Europe, the major problem is uncertainty.  No one knows how this will turn out, and what arrangements Britain will have with Europe and the rest of the world …

What Does the Market Listen to?

I was perplexed when I got this question not too long ago.  My first impulse was to respond with a single word: “Everything.” Market participants are always gathering all the information and insight they can about investments in which they have a position or an interest. At any moment, some investors have an interest in just …