Modern finance isn’t really all that modern. Three centuries ago, Great Britain’s need for money to fight its wars, the appearance of joint stock companies, and the emerging quantification of all aspects of life converged to create new notions and forms of money and investments. And then there was a spectacular bubble in 1720. The South Sea stock rose and fell quickly, but the financing structures remained and last to this day in evolved form. In his new book Money for Nothing: The Scientists, Fraudsters, and Corrupt Politicians Who Reinvented Money, Panicked a Nation, and Made the World Rich (Random House, …
NBN Interview with Gene Ludwig: The Vanishing American Dream
Gene Ludwig cares. The former banker, government regulator, and serial entrepreneur cares deeply about the hollowing out of the American middle class over the past several decades, not least of all in his hometown of York, PA. So he gathered the country’s best and brightest in 2019 for a conference at Yale Law School to come up with specific policy proposals that can reverse that process. The details of what has happened make for difficult but necessary reading. In The Vanishing American Dream: A Frank Look at the Economic Realities Facing Middle- and Lower-Income Americans, (Disruption Books) the policy proposals to rebuild …
The 2020 election in historical context.
Heading into our presidential election, it is worth reminding the electorate how unusual our circumstances are. I am not referring to the country’s extreme political division and dysfunction, but instead to our framework of classical liberalism where individuals matter so much in a system of governance that they are actually asked to vote on the leadership of the country. From a historical perspective, that is an extremely rare approach to the management of complex societies. But to many of us, it does not seem abnormal at all. In fact, our system of representative democracy within a legal and financial system …
Episode #4: A conversation with David Solomon on dividend investing in a stock market.
David Solomon (along with his co-author Samuel Hartzmark) write on the challenges of dividend investing from an academic perspective. While we may have to agree to disagree on certain points, all dividend-oriented investors, advisors, and consultants should be aware of the issues that arise from being a dividend investor in very stock-price oriented market. David Solomon is Associate Professor at the Carroll School of Management at Boston College. You can find his work here. Samuel Hartzmark is Associate Professor at the University of Chicago School of Business. His site.
Same problem–global warming–but very different answers.
Is there a consensus on the best response to global warming? Not even close. Left and right both bring their own tools, math, and, most notably, agendas–climate related and non-climate related–to their policy prescriptions. From the economic right, Bjorn Lomborg offers economic growth to increase adaptation to a warming planet, as well as market-based innovation to mitigate carbon generation. From the left, Robert Pollin (and his co-author Noam Chomsky) put forth an Eco-Socialist New Green Deal. Listen to the NBN interview with the former here, and with the latter here.
NBN Interview with Robert Pollin: Climate Crisis and the Global Green New Deal
Economist Robert Pollin has teamed up with Noam Chomsky to produce a manifesto for the New Green Deal in Climate Crisis and the Global Green New Deal: The Political Economy of Saving the Planet (Verso). Their plan attempts to keep the planet from heating up too much while simultaneously redressing the economic wrongs that they blame substantially on unfettered capitalism. Not everyone will agree that eco-socialism is the answer to global warming, but all participants in the debate will want to understand the wide range of policy proposals that are being brought to the table. Listen to the NBN interview here.
The FT on the current challenges of investing for dividends.
Quoted in the FT’s Big Read today, on the current challenges of being a dividend investor/manager. Lots of individuals/retirees directly affected when dividends under pressure due to business interruption or shifting market preferences. https://www.ft.com/content/2719966c-b228-4300-bdc0-dcbe2f7050fd
NBN Interview with Joshua Greenberg: Bank Notes and Shinplasters
What is money? Really, what is money? It turns out that the answer is not so simple. During the course of the 20th century, most of us have gotten used to the notion of a single medium of exchange based on Federal Reserve notes which we call dollars. They look the same, feel the same, and have the same use everywhere in the country. We are so comfortable with that medium of exchange that we are now increasingly doing away with the paper and accepting a digital version of said money. The convenience of having a single and stable currency …
NBN Interview with James Pearce: The weaponization of history in Russia.
History matters in Russia. It really matters, so much so that the state has a “historical policy” to help legitimize itself and support its policy agenda. In The Use of History in Putin’s Russia (Vernon Press, 2020), James C. Pearce examines how the past is perceived in contemporary Russia and analyses the ways in which the Russian state uses history to create a broad social consensus and forge a national identity. Listen to the NBN interview here.
NBN Interview with Bjorn Lomborg: The economics of climate policy.
Should climate change policy be subject to a cost-benefit analysis leading to a variety of policy choices? Or is it so critical that the only “proper” path is immediate and extreme carbon reduction, regardless of the costs and the impact of those measures on the welfare of the population? Bjorn Lomborg’s new and controversial work, False Alarm: How Climate Change Panic Costs Us Trillions, Hurts the Poor, and Fails to Fix the Planet (Basic Books, 2020) leans strongly in the direction of the former. Conducting that analysis, he comes to some shocking conclusions, notably that the “optimal” mix of global warming and …
May you live in interesting times….
The stock of an upstart but very successful EV company is currently trading at 144 times the average of 2020, 2021, and 2022 forecast consensus earnings. That’s an earnings yield of 0.7%. In contrast, an older telecommunications company that has focused in recent years on its “network” is trading at 12 times the average of forward earnings. Its earnings yield on forward consensus earnings is 8.3%. Few if any investors are doing the math of cashflows and discount rates when considering the former company, but it is still permissible and interesting to think about such things. Maybe theories of value …
Episode #2: A conversation with Jeff Kosnett
Nearly 40 years with Kiplinger’s has given Jeff Kosnett unique insights into the market and investor behavior. Hear his thoughts on investing for income when rates are in the teens (the early 1980s) and when they are close to zero (now.)
Episode #1: A conversation with James Garland
Jim Garland is the retired, long-time president of the Jeffrey Company, a family office. He is also one of the industry’s “wise men.” You’ll understand why as we discuss his approach to portfolio management as reflected in a “Brief” that he wrote for the CFA Institute in 2019. That article can be found here. His other publications can be found here.
Random Book Project #4: Men’s clothier staging
Saw these three books as staging in the window of a men’s clothing store that declared bankruptcy this week. Store founded in 1818; think sheep. These books had been de-accessioned once, which is how they got into the window. Because this store is in the downtown business district and therefore likely to close permanently, these books will probably be tossed. Gamle Pybus appears to be a Danish translation of the 1928 novel Old Pybus by English writer G. Warwick Deeping (1877-1950). Pictures from the Life: Paul Gerhardt, an 1881 English-language translation of the 1845 biography of the 17th century German …
NBN Interview with Tim Koller: What’s a company worth?
What’s a company worth? To judge by the stock market, you might think that there is little rhyme or reason to the exercise. Yet, since the beginning of commerce thousands of years ago, people have been asserting the value of enterprises. Despite that long history, the math and specific logic of enterprise valuation is only about a century old. For thirty of those years, Tim Koller and his colleagues at McKinsey have been in the forefront of thinking about value and how to measure it. The first edition of Valuation: Measuring and Managing the Value of Companies came out in …
NBN Interview with David Shimer: Russia and the West…..
“The guard is tired.” With that simple phrase, the newly installed Bolshevik regime in Russia dismissed the duly elected Constituent Assembly in January 1918. And, one might say, so started Russia’s century-long interference in elections and electoral outcomes. In his new book Rigged: America, Russia, and One Hundred Years of Covert Electoral Interference (Knopf, 2020), David Shimer narrates in meticulous but page-turning detail a century of covert electoral interference, by both the United States and the Soviet Union during the Cold War, and continuing to this day with a focus on post-Soviet Russia’s efforts to affect US politics. His account of the …
Heretical views!
Managing a portfolio based on cashflows? Heresy! Well, maybe not. Others are also making arguments similar to mine in Getting Back to Business. See Jim Garland’s 2019 CFA Institute Research Foundation Brief, introduced by Laurence Siegel. Thanks to Will Goetzmann for the link here .
Random Book Project #3: The Sinews of American Commerce (1941)
#3: Roy A. Foulke, The Sinews of American Commerce (New York: Dun & Bradstreet, Inc., 1941). No price. How did I get it: The book was recently given to me as a housegift by someone who knows that my proclivities run in this direction. Why: The book is classic deaccessioning material. It is a commissioned history to celebrate the 100th anniversary of Dun & Bradstreet, a business information and credit research founded in 1841. Published in August 1941, just before the outbreak of direct US involvement in World War II, the book is a testament to a muscular, unapologetic capitalism …
NBN Interview with Catherine Belton: The Russian state is back….
The Russian state is back. That may not be a big surprise to Russia watchers. The degree to which it is a KGB state, however, is documented in great detail in Catherine Belton‘s new book Putin’s People: How the KGB Took Back Russia and Then Took on the West (Farrar, Straus and Giroux 2020). Certain elements of the KGB were playing a “long game” as early as the 1980s and saw the need for an alternative to the sclerotic late Soviet system. And they were going to be part of that post-Soviet regime. Fast forward 20 years later, these security and intelligence officials …
Barron’s conversation about dividend investing
A conversation with Barron’s Lawrence Strauss and Lauren Rublin on dividend investing in the current economic and financial climate. The replay should be “free” but you may have to register with Barron’s to hear it. https://tinyurl.com/ya5apobb Note: The views expressed here are those of the author alone, and do not necessarily reflect the views of his employer. Nothing written here should be construed as investment advice. Consult your investment advisor for specific recommendations.
Another battle in the neverending war between clarity and confusion….
A recent opinion piece in the Wall Street Journal starts off with a promising title, “Why Many People Misunderstand Dividends, and the Damage This Does.” June 7, 2020 . That is most certainly true. After nearly two decades helping to manage dividend portfolios, I can say that even institutional investors and pension fund consultants still seem to trip over the basic math of dividend investing. Unfortunately the newspaper article only adds to the confusion when the author, an academic, asserts that “Paying dividends doesn’t benefit investors, because a dividend of $1 simply reduces the stock price by $1—just as withdrawing from …
NBN Interview with Tyler Cowen: You mean big business is good?
You mean big business is good, contributes to our general welfare, and is not generally guilty–with notable exceptions–of all of the charges made against it? That’s the argument libertarian economist Tyler Cowen makes in his book Big Business: A Love Letter to an American Anti-Hero (St. Martins, 2019) Most NBN listeners will raise an eyebrow to that claim, but most of those same NBN listeners are up for a good back-and-forth on the virtues and demerits of our market system. And to that end, being familiar with Cowen’s arguments–made in this book and his many other publications and platforms–is very useful. The shift …
Random Book Project #1
I’m launching something I call the Random Book Project. Its purpose is to give additional “life” to some of the books that I have collected over the years and are gathering dust on my shelves. These books are disappearing in the digital age. They are left in a decreasing number of public and university libraries, before they are ultimately “de-accessioned.” Some hardbacks end up as color coordinated staging in steak houses and boutique hotels. The Random Book Project attempts to give these books at least a minimal digital presence for works that Project Gutenberg and Google Books will likely skip. …
Are the Generals fighting the last war?
In Dealing with the Russians (Polity, 2019), Andrew Monaghan argues that Western policy makers are using an outdated Cold War model of ideology, language and institutions, which is wholly unsuited for understanding, engaging, and countering where necessary Russia in the 21st century. One of England’s leading experts on Russia, Monaghan argues Western policy makers need to let go of the past Cold War rhetoric and come up with modern tools to manage the current stage of the three-century long “Russia and the West” policy conundrum. Listen to the New Books Network interview here.
What price life?
A New Books Network interview with Howard Friedman on how human lives are valued, in dollars…. https://newbooksnetwork.com/howard-friedman-ultimate-price-the-value-we-place-on-life-u-california-press-2020/
New York Times column on dividend investing.
A recent column by Jeff Sommer in The New York Times (https://www.nytimes.com/2020/04/24/business/coronavirus-stocks-investing-dividends.html) highlights some of the challenges faced today by investors seeking income from their stock holdings. While the economic shutdown has certainly created an adverse environment for the public-company cashflows that have historically been paid out in dividends, income-seeking investors will want to consider a few additional perspectives beyond what is raised in the Times. First, Sommer implies that because stock ownership has shifted from individuals a century or half century ago, to mutual funds, pension portfolios, and other institutional accounts now, that dividends are somehow less felt on …
Interviewed on HistoricallyThinking podcast
I enjoyed being a guest on Al Zambone’s HistoricallyThinking podcast. Discussed making the transition from Russian history to investment management, dividend investing, and the main arguments in Getting Back to Business. https://historicallythinking.org/episode-146-the-historically-informed-investment-portfolio-or-the-historian-as-financial-analyst/
German money situation then and now…
Germany one hundred years ago: wheelbarrows full of money to buy bread. Germany now: vaults overflowing with cash due to negative interest rates. https://www.bloomberg.com/news/articles/2020-01-31/german-banks-are-hoarding-so-many-euros-they-need-more-vaults As a refresher, the well-told tale by Adam Fergusson, When Money Dies: https://www.amazon.com/gp/product/1586489941
“Go East, Mr. Douglas….”
Bill Douglas needed money. He always needed money. And now, reeling from a very expensive divorce, and with a new wife, he needed even more money. Douglas had come from a modest upbringing, the son of an itinerant preacher who had ended up in the Pacific northwest. He worked his way through a local college—after getting the first year free on a scholarship—and then crossed the country to New York, where he worked his way through law school. Douglas advanced very quickly in the legal profession, but his expenses regularly outstripped his income. He borrowed. He did one-off writing jobs. …
At the intersection of History and Finance…..
Think that Wall Street has nothing to do with the real economy? You are probably not alone in that regard. But it turns out, you are wrong. As William N. Goetzmann demonstrates in his Money Changes Everything: How Finance Made Civilization Possible (Princeton University Press, 2016), the tools of finance were as important for the rise of civilization as were the soldiers, castles and battles. Were it not for property contracts, agreements over imports and exports of grain, how to manage risk in increasingly complex economic ventures, etc we are still living in small agricultural communities eaking out an existence, …