Executives at Amazon have come under scrutiny for search results that appear to favor Amazon's own products and more profitable products over those the customer is actually looking for. Dana Mattioli reports in The Wall Street Journal that retail managers fought for years with the company's algorithm team to give Amazon's favored products special treatment. She writes: Customers often believe that search algorithms are neutral and objective, and that results from their queries are the most relevant listings. Executives from Amazon’s retail divisions have frequently pressured the engineers … [Read more...]
Archives for September 2019
The Two Reasons Muni Bonds Don’t Belong in Your Portfolio
Two reasons municipal bonds don’t belong in your portfolio are underfunded pensions and Wall Street. In the case of underfunded pensions look at what happened to GM. It was the bondholders who got skewered. When push comes to shove who do you think will get paid first, you or the government employees (pensions)? And then there’s Wall Street. Tom McGinty and Heather Gillers explain in The Wall Street Journal, writing: When the West Contra Costa Unified School District in California needed money to repair and upgrade deteriorating classrooms, it hired Piper Jaffray Cos. to sell $191 … [Read more...]
Attacks on Saudi Oil More Likely to Hurt China than the U.S.
The U.S. economy may be better prepared than China's to handle any disruptions in energy supplies caused by the recent attacks on Saudi oil facilities, according to David Harrison at The Wall Street Journal. He writes: Where surging oil prices would do the most damage is in countries that rely on energy imports, such as China and Japan, the world’s second- and third-largest economies after the U.S. China produces roughly 4.8 million barrels of oil a day but consumes about 12.8 million, according to the EIA, which makes it heavily dependent on oil imports. China’s economy has already … [Read more...]
Chinese Millennials Spend Big on Luxury, but Americans Are too Poor to Keep Up
Luxury goods companies have found steady demand from young Chinese consumers, flush with cash and ready to spend. Meanwhile, American Millennials can't keep up with their Chinese counterparts for a variety of reasons. Carol Ryan explains at The Wall Street Journal: Luxury brands have done a great job of attracting young Chinese shoppers. Cash-strapped U.S. millennials will be a tougher sell. Chinese spending on Gucci handbags, Burberry trench coats and the like has been surprisingly resilient despite the country’s weakening economy. That has buoyed the stock-market valuations of listed … [Read more...]
Witness the Raw Power of Diversification
Diversification isn’t only a tool to minimize losses when assets fall in value, it has the power to actually increase your return while lowering risk. Here’s how I explained it in December of 2015 (with the chart and associated text updated to 2017): Calculating the Efficient Frontier You need to look at your asset deployment from the top down, focusing on diversification between stocks and bonds. My Efficient Frontier display shows you the power of diversification. Note the left-to-right uphill slanting curve that initiates with a position of 100% bonds and terminates with a position of … [Read more...]
Dividends Win Today, They Won Yesterday, and They’ll Probably Win Tomorrow
Imagine for a moment you have a pile of cash. Where are you going to put it? Into the S&P 500? A passive index fund? Not me. Legendary investor Jack Bogle, and now Michael Burry, whose story was immortalized in The Big Short as one of the first investors to call the subprime mortgage crisis, have expressed their concerns. “There no longer can be any doubt that the creation of the first index mutual fund was the most successful innovation—especially for investors—in modern financial history,” wrote Bogle here, “The question we need to ask ourselves now is: What happens if it … [Read more...]
Is Sheltering in Munis a Safe Bet for Investors Bitten by SALT Caps?
Many investors seeking to avoid the pain caused by caps on deductions for state and local taxes are putting money in muni funds. But is that the best decision? Reporting by Heather Gillers and Richard Rubin at The Wall Street Journal suggests that it may not be. They write: To get higher yields that are tax-free in California, some investors are pushing deeper into riskier municipal debt such as bonds issued for charter schools, nursing homes and real-estate development projects. Governments confer their tax-exempt borrowing power on those entities because they are seen to spur economic … [Read more...]
Trump’s Plan to Finally Privatize the Mortgage Industry
Since the financial crisis, mortgage companies Fannie Mae and Freddie Mac have been languishing on the federal government's balance sheet. The two federally backed mortgage securitization companies were taken into government conservatorship in 2008. Now, Federal Housing Finance Agency director Mark Calabria has been tasked with the almost impossible task of reprivatizing them. I know Mark from his time at the Cato Institute, and I can tell you that he is passionate about this fight. If anyone can do it, it's Mark, but it won't be easy. Congress has been less than helpful to the Trump … [Read more...]
Is an Interim China Deal in Play?
Bloomberg's Jenny Leonard and Shawn Donnan report that officials from the Trump administration have discussed a limited trade agreement with China. The agreement could delay or roll back some tariffs in exchange for Chinese concessions on intellectual property and agricultural purchases. They write: Some of President Donald Trump’s top trade advisers in recent days have discussed the plan in preparation for two rounds of face-to-face negotiations with Chinese officials in Washington, due to take place in coming weeks, the people said. The discussions are preliminary and Trump has yet to … [Read more...]
You Can Kiss Your Savings Goodbye if this Happens
Your key to investment success is to align yourself with companies that are aligned with you. What do I mean? When it comes to investment counsel and account management, you want a fiduciary at the helm. By law, a fiduciary must act in your best interests. When it comes to investing your hard-earned money you want to own companies that put you the shareholder or owner at the head of the table. If Elizabeth Warren is elected those two investor rules to live by are thrown out the window as explained below by Phil Gramm and Mike Solon at The Wall Street Journal. Do yourself and your money a … [Read more...]