Archive | May 2015




Let me stipulate up-front: I love Greece. Everything about it: the food, the weather, the history, the music, the people. Everything. But I wouldn’t lend them my money. Greece has a long (very long) history of borrowing money with little regard for paying it back. I’m not casting aspersions, or taking a moral stance, just saying the facts. As the calendar flips from May to June, we are about to come to (another) moment of truth about Greek debts. Or rather, their lenders are about to come to this moment of truth. And what is that truth? Greece cannot pay. Read More


Long Term


In much of life, certainty dissipates with time. Weather forecasts are pretty accurate over the next 24 hours, a little better than a coin flip over the next week, and worthless a month from now. The same holds for our daily, mundane events: the people we will see today, the food we will eat tonight, we know what to expect. But beyond a week, a month, we just don’t know exactly what the day will bring. For investors, the opposite is true. The day-to-day fluctuations of the markets are coin flips, impossible to predict. But over the course of years, Read More


Don’t Blame Nature


Commodity prices rise and fall; no great insight there. Which is why most of us, mostly, take the fluctuations in stride. We (I) may get a little annoyed when the price of gasoline is a few cents higher than last week, and get a little boost of endorphins when it falls a few cents (maybe it’s just me). Of course, some commodities are more important than others. For me, it’s not oil or gold, wheat or pork bellies. It’s cocoa, whose price has jumped 10% in the past few weeks. The problem is Ghana, which produces 20% of the world’s Read More


Distortion or Reflation?


A month ago, Germany could borrow for 10 years at a rate of 0.06%. Lenders were also happy that day to earn 0.47% for the next 30 years. That’s $4,700 of annual interest for every $1 million. Investors were happy with this yield because the ECB was buying up all the newly issued bunds, deflation was omnipresent, and, well, Germany is a good credit. Their happiness didn’t last long, as rates jumped 70 basis points over the subsequent two weeks, wiping 0ut about 30 years of income. It’s logical to blame central bank meddling in the bond markets for these Read More




The trade deficit ballooned in March to over $51 billion, $8.6 billion more than a year ago. Exports were up a little, but imports surged, up more than $17 billion from February, the biggest monthly rise in imports since 1992. Over the past year, imports are up 1% while exports are down more than 3%. Some of the surge in imports can be attributed to the end of West Coast port strikes, which released a flood of imports (mostly cars and cell phones) into the US. While it makes sense that we should see a spike in imports, we should Read More


Feliz Cinco de Mayo!


There will always be a debate about the relevance of history to current conditions. I am firmly in the pro-history camp, but am quick to acknowledge that historical analogies are always imperfect. They are a guide, not a blueprint, for how present events will unfold. A related debate is how much behavior really changes over time. At the personal level, most of us would like to think that we can progress toward being “better” people: kinder, more sensitive, more empathetic, etc. The reality that is that most of us probably don’t change our behavior very much, despite good intentions. It Read More




In 2009, there were 19 buildings in the world with heights above 1,000 feet (305 meters for the non-American readers). Today there are 79 such buildings, a four-fold increase in just 5 years! And if you have never been to China or the Emirates, you have missed most of them. 40% of these tallest buildings are in China, another 28% are in the U.A.E. The graphic below (from Knight Frank) highlights the average annual rent (per square foot) in the top cities of the world. Despite my grumbling, LA is still pretty cheap. Although our next office may be more Read More




They’re going up. Total salaries and benefits moved up 4.4% in 2014, rising to 53.6% of GDP, still below historic averages, but a decided bounce off the lows recently seen (Chart 1). One reason wage growth has held pretty steady over the past few years is that lower-wage jobs have been added at a faster pace than higher-wage jobs. But it looks like wages for these lower paying jobs are moving up more quickly than for higher paying jobs. Two different measures of wage growth show an accelerating trend (Chart 2). Not coincidentally, we’re also seeing corporate profit margins flatten Read More