Economics & History
Want to know more about the macro picture or if we’re doomed to repeat history?
How The Risk of a Double Dip Recession is Being Overblown
7/29/2010 | Cale Smith | 3 Comments
Like many value investors, my skepticism of economic predictions and forecasts runs fairly high. There was a time when I rarely devoted any serious time to thinking about GDP growth, unemployment levels, or our government’s fiscal policies. Not because such things aren’t important, but because they are so difficult to accurately predict. Successful investing is much more about solid bottoms‐up analysis than accurate top‐down forecasting.
In recent months, however, my skepticism about the usefulness of macroeconomics has been dulled by my contrarian streak. When every headline seems to be cause for a sell‐off on Wall Street, I find myself reflexively searching for silver linings. And I’m pleased to say that despite recent headlines, there are more reasons for optimism out there than you might think.
When Economies Collapse
6/16/2010 | Joe Ponzio | 10 Comments
How will the historians call this one? The European Crisis? Euro-doom? If you’ve been under a rock for the past few months, you may not have noticed the recent downturn in the markets. The headlines are all about the potential default of Greece on its debt, possibly followed in short order by a slew of other EU counties — Spain, Portugal, Ireland and Italy top the list.
Naturally, I have received a few e-mails and phone calls on this one; so, let’s talk about what happens if/when one or some of these countries go down for the count.
Why This Won’t Be Like 1929
3/8/2009 | Joe Ponzio | 12 Comments
Let me continue this economic discussion, though I also have to get back to a few other topics as well. There is a lot of chatter as to whether we are in a recession or depression. Since November of 2007, Wall Street has been calling bottoms to this market, first setting their sights on Dow 13,000, and then incrementally lowering their targets by 1,000 points as time marched on.
Optimism and pessimism have no place in investing. Let’s look at the economy from a realistic perspective to see why this recession will be nothing like the Great Depression.
Is Peter Full of Schiff on the Economy?
3/3/2009 | Joe Ponzio | 23 Comments
In December of 2007, as Apple was approaching $200 a share, you couldn’t say a word about it for fear of backlash from the Apple investment community that insisted it was going to $600 a share. Today, Nouriel Roubini and Peter Schiff are considered gods for predicting the economic turmoil, and anyone discrediting their teachings should be burned at the stake. Well, get the gas and matches, because I have to say that Peter is full of Schiff in his latest article.
A broken clock is still right twice a day. The problem is this: If you look at that clock at that exact “right” moment in time, you should not automatically assume that the clock is always right. Warren Buffett came out recently and said how “dumb” he was in 2008. Should we then assume that Buffett is doomed to be eternally wrong in the future?
2008. Crazy…But Predictable.
12/23/2008 | Joe Ponzio | 21 Comments | about: GM
I have a personal goal – something I’ve been doing for years. Every day, I try to learn something new. I don’t always focus on business or investing (though those are two of my greatest passions). From time to time, I’ll try my hand at something new, and I am all over the board with my learning. Sometimes I’ll read a biography or history book; sometimes I’ll learn about spot welding or video game design. I’ll take mixed martial arts classes. I’ve built remote control cars.
(Inadvertently, some of these little diversions of mine creep into my investing by helping to increase my sphere of competence and confidence in various businesses and industries.)
The other night, while searching for capoeira studios in Chicago (it’s pretty cool, but I doubt it will help with investing), the television caught my attention. CNBC was airing A Year of Fear and Hope, and I started to marvel at how ridiculous 2008 has been.
Will The Markets Be Higher Ten Years From Now?
10/20/2008 | Joe Ponzio | 15 Comments
There have been some very good comments on What Drives The Stock Market. Today, we posted Will The Markets Be Higher Ten Years From Now? with our thoughts on what drives the stock markets and why investors – in the aggregate – should lower their expectations going forward.
Much of it was stolen from Warren Buffett; so, send him your hate mail. (This report will also provide insight into why Buffett held mostly US Treasuries the past few years (until now) in his personal portfolio.)
What Drives The Stock Market?
10/19/2008 | Joe Ponzio | 22 Comments
On Thursday, I referenced a second letter that we’ll be sending to clients, intending to send it out on Friday. Rather than rush it out, and because it scratches the surface of economics and business valuation, I decided to put it in front of some friends and family to see if it really made sense. Obviously, a deep discussion about economics would bore most people to sleep.
So, with the letter written and ready to go out in the next day or two, I’ll ask you the same question I asked my friends and family before I gave them the letter:
Why do you think the stock market will be higher ten years from now?
(Most common answer: That’s what it does – it goes up over time.)
As you consider this question, don’t look at Friday’s close or speculate about where the Dow will close in 2018. Instead, look at averages. The Dow averaged about 10,500 or 11,000 this year. Why should it be much higher than that ten years from now?
Obviously, I don’t have all the answers and I don’t know where the markets will close tomorrow or in 2018. All I can do is shamelessly steal from Warren Buffett’s past discussions on the subject. (And if you’ve read those, don’t spoil the answer for everyone else!)
Feel free to spark a discussion in the comments, or just give the question and your answer some serious thought. I won’t jump in to the discussion until after the letter goes out.
EDIT: Rene brought up some great points; but, I should have clarified this question. I’m assuming that it’s business as usual in the United States. I’m not talking about making fundamental shifts, though one could argue the necessity of those shifts. I’m asking: If it’s business as usual in the United States, why should the stock market be higher ten years from now?
Back Online; The FWS Portfolio; Outlooks
10/16/2008 | Joe Ponzio | 13 Comments
In business, timing is everything; so, I can only imagine what people thought when I sent out that letter last weekend, the markets ran up 10%, and F Wall Street went offline. The truth is: The company hosting this site cancelled their hosting service without forewarning. I didn’t know for two or three days. Now, we’re back online with a new host, and ready to go.
(It’s somewhat funny because the people that thought they might have heard a big Ooops had clearly missed the long-term outlook of that letter.)
Continue reading »
What Should You Be Doing Now?
10/10/2008 | Joe Ponzio | 17 Comments
Folks – it’s ugly out there right now. Not just from a market standpoint, but from a global economic standpoint. We put together a nine-page report for investors that are scared, confused, or not sure how to understand or navigate this mess.
It is being sent to our clients today via e-mail (about half have received it), and is now available for download as well. You can download it for free here (no registration required).
Feel free to pass the report or link on.
Here’s what I had said in the e-mail as I sent out the report:
To my friends, family, clients, and others:
Attached is a 9-page report about understanding, saving in, and investing for the global economic crisis. It’s really bad out there right now; and, it’s likely to get much worse before it gets better. If you are having a hard time figuring out what to do right now, this report should help. Excuse the typos, if any. I felt the timeliness and depth of the content was the critical part. As I write this e-mail, the Dow Jones Industrial Average hit a daily low of 7,882.51 – a level first achieved by the Dow on July 21, 1997. In addition to losing nearly 50% over the past year, many people have lost 11 years of saving and investing.
This isn’t your standard “stay the course” strategy that many investment advisors and talking heads are promoting. Instead, this report should help you understand the problems and its implications going forward. Feel free to pass it on to others, or let them know they can download it for free from http://www.meridgroup.com/blog/7.htm.
Now is the time to look for permanent holdings; but, keep a watchful eye on the situation as it unravels.
Let me pull one line out of the report that is of critical importance as you consider your strategy going forward:
[P]ortfolios must be managed in a dynamic way so that they are not reactive to the markets, but carefully planned for the future.
On a broad market and economic scale, the future looks bleak for the next few years; so, forget reacting to what has happened and carefully plan your portfolio for the future, even if that means taking losses now.
Now What? The Great Market Meltdown.
10/7/2008 | Joe Ponzio | 14 Comments | about: JNJ
The US Government passes a $700 billion bailout (or rescue) package, and the markets continue their spiral down. Financial advisors across the country are shouting, “Stay the course!” (Usually from under their desks.)
This crisis is unlike anything we’ve seen in recent history (and perhaps not-so-recent history); so, what should we do now?
