The end of the neo-liberal global order will entail changes in the current alignment of Capital and Labor. I use those terms in capitalized form to evoke an earlier time and place where political economy was all about the relationship between the two. That is no longer even remotely the case. Three full decades of globalization and deregulation have meant that any presumed approximate balance between the two in the US has been long discarded in favor of a largely unfettered Wall Street. The upcoming refresh between businesses and their workforces will be the topic of many other books, but …
Political Economy and the US Stock Market
Investors massively underestimate the importance of political economy. Our financial institutions rely on our political structures, and our political framework only really works because of certain underlying economic relationships. Separating the two realms is impossible. Think about how critical the rule of law, the inviolability of contracts, individual liberty, and an independent judiciary are for the functioning of capital markets. And in the other direction, private property, commerce, and entrepreneurship create the foundations for the liberal political order, meaning the representative democracies of the past two centuries. Adam Smith might be considered the first modern “political economist.” Karl Marx wrote …
Russia’s borders after Ukraine
State boundaries move all the time. Even nation-state boundaries, those that are supposed to be ethnically contiguous and therefore more stable, move frequently. It is simply a presentist illusion to assume that today’s borders are going to be permanent. Even for observers based in the US, where the northern and southern borders have been fixed for some time, it is inaccurate. During our expansion in the 19th century (beyond the breakaway from England in the 18th century and the expansion through native American lands), we took by force, negotiation, or payment territory from Spain (Florida), France (Louisiana Purchase), Mexico (Texas), …
Interview on RIA Channel
Low Room Rater score, but more reasonable commentary about being a dividend investor in a stock market. RIA Channel interview
Biology might or might not be destiny, but demography is.
Russia is a multi-ethnic empire. The “traditional” Western empires such as Britain have well-known histories involving their often-distant possessions (though their home territories also featured a variety of ethnic groups such as the Scots, Welsh, Irish, etc.) In contrast, Russia is a solely contiguous, but very large amalgamation of numerous ethnicities. In some cases, the ethnicities have distinct geographies, but often the populations are just jumbled amidst the overall polity. Some of those ethnicities within Russia have been distinct for centuries, some were a product of 19th century nationalism, and some (ironically) were created nearly from scratch in the early …
Your 2023 Market Outlook
Looking for a good guide to the markets in 2023? May I suggest Isaiah Berlin’s The Hedgehog & the Fox. Written in 1953 as a meditation on Lev Tolstoy’s approach to history, especially in War & Peace (1869), it’s as good a guide to investing as you’ll find anywhere. That’s because its about you; it is about self-knowledge. Interest rates, currencies, P/E multiples, etc will always come second to awareness of who you are, what you want, what really matters to you as an investor. Berlin draws on a fragment from an ancient Greek poet Archilochus that “the fox knows many …
Decision making under conditions of uncertainty….
Decision-making under conditions of uncertainty is hard, even when you have “good” information. And we necessarily assume that high-level policy-makers have at least a marketplace-range of information as an input into the process. But what if we’re wrong? What if the information available to, for instance, the leader of a country, is so poor, that the decision-making necessarily following from it is exceptionally bad? Garbage in; garbage out. That scenario would explain (but not excuse) what heretofore seems inexplicable: R’s invasion of Ukr and its subsequent decisions to double-down, triple-down, etc. In the most recent issue of Foreign Affairs Magazine, Boris …
Book review: Paul Werth’s 1837.
Just finished Paul Werth’s 1837 (https://lnkd.in/eU6gD-gj?) He is to be congratulated. It is a gem of a work. Rather than A-then-B-then-C history, Paul provides a snapshot in time, a few-year period in the late 1830s when a lot was going on in Russia. Paul’s “horizontal” approach is something only a well-tenured professor or a non-academic historian could get away with. That is, it’s readable, enjoyable, jargon-free and not trying to score points in some obscure debate among academics. Non-specialist readers will come away with a sense of time and place that narrower works of history struggle to deliver. My favorite …
On crypto….
As the frisson of fury over SBF/FTX subsides, a few comments from a traditional dividend investor, cash-on-the-barrel, bricks & mortar business owner: 1. Distributed ledgers are not new. 2. A World Wide Web of servers is well-suited to implement distributed ledger technology that is faster and more expansive than could ever have been imagined prior to the internet. 3. Encryption of transactions in a distributed ledger system makes sense. 4. The full flourishing of this system will likely require an internal system of measurement, store of value, & medium of exchange. 5. Existing ones such as blocks of salt, strings …
A nice write up….
A nice write up from James Faris of Business Insider. Behind a paywall, but makes the point that being a dividend investor/business owner in a stock market has its benefits. https://www.businessinsider.com/how-to-invest-2023-dividend-stocks-strategy-top-fund-manager-2022-12
McKinsey and the gutting of the American economy…
Aiding and abetting…. the gutting of the American middle class & the off-shoring of US industry and manufacturing. walt bogdanich and Mike Forsythe join me on the New Books Network to discuss their new account of the role played by the much-vaunted McKinsey. https://newbooksnetwork.com/when-mckinsey-comes-to-town
Another boring year as a dividend investor in a stock market…..
Putting to bed another boring year of dividend investing in a stock market. FX a headwind, but otherwise a typical div yld + div growth = IRR/long-term TR context. Less common but encouraging to see it add up in any 12-month period. Reasonably expecting to be dull again in 2023.
Social media craziness….
Now on, to some degree, Mastadon (@HistoryInvestor@alphaville.club), Post.News (@HistoryInvestor), Facebook (@HistoryInvestor), and LinkedIn (under my name). Crazy…
US corporate margin reset
I’ve been highlighting the need for US corps to “reset” margins to make up for the excessively asset-light business models that have come to the fore the past three decades. Has the Great Reset begun? Perhaps. Empirical Research Partners, LLC has a report out today highlighting that Capital Expenditures are up 20% ytd for the S&P 500 vs. earnings that will barely be positive. Is this the beginning of that new spending? We shall see. If so, companies that can afford to invest during the downturn should do so. Those that can’t will continue cost-cutting/hewing to the prior model. On the capital …
Decision making in Russia.
Decision-making under conditions of uncertainty is hard, even when you have “good” information. And we necessarily assume that high-level policy-makers have at least a marketplace-range of information as an input into the process. But what if we’re wrong? What if the information available to, for instance, the leader of a country, is so poor, that the decision-making necessarily following from it is exceptionally bad? Garbage in; garbage out. That scenario would explain (but not excuse) what heretofore seems inexplicable: R’s invasion of Ukr and its subsequent decisions to double-down, triple-down, etc. In the most recent issue of Foreign Affairs Magazine, Boris …
The US midterm elections.
This is my statement on the midterms. It will not sway anyone, but given the high stakes, I wish to be on the record. Across the nation, the ballot offers voters two very poor options. The first is the radicalized party in power offering a dizzying array of bad policies, in energy, in social matters, in economics, in education. The challenger radical party would toss out the nearly unique, pathbreaking system built up over the past 250 years. They would do so in the service of an organized crime family led by a grifter-in-chief who finds sedition and supporting hostile …
On being “fuddy-duddy” in a gunslinger market.
A partial write-up on the Wall Street Journal here.
“Company loyalty will make you poor.” Really?
This recent job advice on social media caught my eye, as it was posted almost to the day of my 20th work anniversary at my current employer. That coincidence set me thinking about the nature of employment in the modern age. And from that perspective, hitting two decades stands out. I’m posting this on LinkedIn, which is a website designed mostly around getting a new job, not keeping your old one. And I work in financial services, where the poster’s advice of jumping from lilly-pad to lilly-pad is assumed by many to be the way to fame and fortune. And …
Down markets and higher returns.
The market has declined by 25% in nine months. No one is particularly happy about that, but the rapid reset of prices does provide an opportunity to remind investors about basic investing math. In this case, the issue is expected future returns after a sharp move in the market, either up or down. And that math is somewhat paradoxical. Consider, for instance, investment in the income stream—the dividends—of a diversified portfolio of stable publicly traded companies. The cash yield at time of purchase in 2021 is 4%. Fast forward to September 30, 2022, and the price of the portfolio has …
For want of a nail, a shoe was lost…
The United States has now had more than three decades of neo-liberal globalism which has favored outsourcing, off-shoring, margin improvement and earnings growth above all else. Encouraged by the capital markets, corporate America has privileged short-term efficiency over long-term efficacy. Capital spending on hard assets is down as a percentage of sales; intangibles are up. A benign post-Cold War geopolitics and an addressable labor cost differential allowed us to import deflation. We’re not quite at the “virtual” enterprise level, but we’ve moved beyond the polite and acceptable “service” economy that replaced our prior “manufacturing” engine. At the same time, declining …
An early look into The Ownership Dividend.
American Affairs has published an excerpt of the first three chapters of The Ownership Dividend, due out next year from Routledge. The Retreat of Dividends and the Changing Nature of the Stock Market
“Once more unto the breach, dear friends, once more.”
The universally respected and admired Michael Mauboussin has chimed in on the now political issue of share repurchase programs. His opinion piece in the FT this week in defense of them tries to clear up what he considers “confusion and sloppy thinking” critical of buybacks. Cliff Asness, his equally formidable ally in support of buybacks, has made similar points in print recently. Wrestling with either of these finance heavyweights is done at one’s peril. But I can’t help but add some additional color around their assertions from the perspective of a dividend investor. I’ve spent the past two decades competing …
More media coverage for dividend investing…
Even more coverage of dividend investing, this time an article in Business Insider.
Dividend investing is! sustainable investing
Dividend investing was “sustainable” decades ahead of the current frisson of ESG-based sustainability. Think about it. The attraction of an income stream—whether of a publicly traded or closely held asset—is its value over time. Whereas a “price only” asset can be bought or sold tomorrow with the intention of profiting from a change in price a week or month from now, an income stream-based asset delivers its worth over many years. Investors might agree or disagree as to the current value of that income stream—and put a changing, daily price on it—but the NPV of the income stream is measured …
Suddenly lots of media attention for dividend investing…
Is that a sign of a top in investor sentiment? Very near-term, perhaps. Longer-term, not at all. Dividend investing has been falling out of favor for the past three decades. The mean reversion back to “normal” business ownership practices and cash return metrics will play out over a decade, if not more. For now, however, a WSJ article about being at the top.
The NBN interview of Vitaliy Katsenelson
A well-lived life closely examined. Listen in to my New Books Network interview of Vitaliy Katsenelson — a rare US public intellectual–about his “Soul in the Game: the Art of a Meaningful Life”, just out from Harriman House. https://newbooksnetwork.com/soul-in-the-game
Talking rates, dividend investing & the future of the stock market w/Demetri Kofinas.
Great fun catching up with Demetri Kofinas on his Hidden Forces podcast. We discussed interest rates vs risk rates, cashflow real economy companies vs. rainbow stocks, and the role of agency in history…. Please listen in. The Revenge of Risk Rates & the Return of Dividend Investing | Daniel Peris
Stock market drawdowns during retirement…..
A follower wrote in to suggest a stronger assertion of the value of dividend-focused investing for retirees concerned about drawing down their portfolio. He argues that for those investors, the sequence of their returns matters hugely, especially in a market not moving up steadily. (He was responding to my post about the difference between a harvested capital gain vs. a dividend payment.) He writes: “The argument goes that there’s no difference between an income stream derived from selling stocks or one derived from amassing dividends. But that isn’t true. Selling stocks in a bad year means selling more stocks. Dividends …
A dollar may be fungible; how it is generated is not.
The recent market sell off has provided investors an opportunity to reconsider a fundamental belief in modern finance and investment. And that is that investors are indifferent between the two forms of return, a harvested capital gain or a cash dividend payment. That notion underpins pretty much all of modern stock market investing, from the calculation of return, to the capital allocation of corporations, to the behavior of investors. In short, it’s a biggie. And in a rising market, it looks like a pretty good assumption, since most of the time the market is up, open and liquid. The belief …
The Language of Career Transition 2/x
A continuation of a LinkedIn post on career transition: 2/x In retrospect, I liken my career transition mostly to learning a new language. By language, I mean not high-school French, but language in the broader sense of a means of communication, an agreed-upon set of references, of metaphors and understandings. Music and mathematics are languages in that sense, and recognized as such. Computer coding languages are narrower but the same. Trained in history and having learned Russian, I was completely mute in regard to the language of business, finance, and investing. I don’t want to downplay the technical skills involved …