Paying the Piper

Adam M. Grossman  |  Jul 7, 2024

FROM THE COLOSSEUM in Rome to the palace at Versailles, look around Europe and you’ll find artifacts of once-great empires. What happened to them?
Each faced its own challenges, but there was also a common theme: They had poor financial management and became overburdened by debt. That’s why a recent analysis in The Wall Street Journal—titled “Will Debt Sink the American Empire?”—is worth our attention.
In 2024, the federal government’s budget deficit will come in at $1.9 trillion.

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Non-Leading Indicators

Marjorie Kondrack  |  May 13, 2024

IN TRYING TO FORETELL the economy’s direction, former Federal Reserve Chair Alan Greenspan has shown “a keen interest in men’s underwear,” according to CNN Business. “He sees underwear sales as a key economic predictor.”
This isn’t because Greenspan is preoccupied with nether garments. Rather, says an NPR reporter, he believes that “the garment that is most private is male underpants because nobody sees it except people like in the locker room.”
Yes, the men’s underwear index exists.

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Not Scared of Bears

Jonathan Clements  |  Apr 27, 2024

I HAVE NO IDEA HOW stocks will perform this year or next. But I have full confidence that a globally diversified stock portfolio will fare just fine over the decades ahead.
My optimism, it seems, isn’t shared by many HumbleDollar readers, who fear we’re facing some rough years for the economy and the stock market. How do I justify my optimism about the long term? Here are five reasons.
1. Heads I win,

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All About the Quest

Richard Quinn  |  Apr 21, 2024

OUR ANNUAL INTEREST and dividend income in 2024 will exceed my inflation-adjusted pay as a mailroom boy in 1961. Of course, back then, I earned a bit over minimum wage. It’s been a long journey.

Below are the daily net portfolio gains and losses for the third and fourth weeks of last month. These figures reflect our cash account, index and actively managed stock funds, corporate and municipal bond funds, two utility stocks and two variable annuities.

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The Money Tournament

Tom Welsh  |  Mar 19, 2024

MARCH MADNESS IS upon us, with millions of sports fans rooting for their favorite college or university basketball team. For your team to win, all other teams in the tournament must lose—a zero-sum game. We accept this as part of the sport.
What’s that got to do with finance? Household economics can be a similar win-lose tournament. But it’s a zero-sum game that’s rarely acknowledged.
Relative purchasing power. In the U.S., we have some 130 million households that collectively possess roughly $150 trillion in wealth.

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Longtime Worry

Ken Cutler  |  Dec 26, 2023

IS A STORM COMING? Long before I discovered HumbleDollar, I regularly read articles by Scott Burns. Now in his 80s, Burns was a popular financial columnist who wrote for the Boston Herald and later The Dallas Morning News. He’s a graduate of Massachusetts Institute of Technology, so he’s comfortable presenting quantitative arguments. Burns is an advocate of low-cost index funds, and he helped popularize couch potato investing,

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Lean Against the Wind

Jonathan Clements  |  Dec 23, 2023

AT THE RISK OF CAUSING readers to think too much on a Saturday morning, let me start by offering a pair of seemingly contradictory statements:

The financial markets are efficient, but occasionally go stark, raving mad.
Nobody knows what stocks are worth, but they have fundamental value.

My contention: There’s a payoff to be had from grappling with these two apparent contradictions—a payoff that takes the form of greater calm in the face of market turmoil and improved long-run portfolio performance.

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Riding the Cycle

Adam M. Grossman  |  Oct 22, 2023

DO YOU EXPECT IT TO be warmer this winter in Minneapolis or in Miami? This isn’t meant to be a trick question. We’d probably all agree that it’ll be warmer in Miami. But what if I asked you to predict the precise temperature in either city on Jan. 1. This is a much more difficult question.
In his book Mastering the Market Cycle, investor Howard Marks uses illustrations like this to make an important point.

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Losing Value

Adam M. Grossman  |  May 28, 2023

PERHAPS YOU’VE SEEN charts like the one below, which comes from Dimensional Fund Advisors. The message: Investors who try to time the market in search of better returns often end up damaging their results. To many investors, this seems intuitive, because trading isn’t easy.
But to others, market timing appears to make a lot of sense. For instance, for years, Yale University professor Robert Shiller has been maintaining a measure of market valuation known as the cyclically adjusted price-earnings (CAPE) ratio.

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Long Time Coming

Adam M. Grossman  |  May 21, 2023

IN THE NETHERLANDS in 1602, the Dutch East India Company conducted the world’s first initial public offering. Then, in 1610, the Netherlands saw the issuance of the first ever stock dividend. And in 1611, when the Amsterdam Exchange opened, the Netherlands became home to the world’s first stock market. Throughout the 1600s, the Netherlands continued to see further financial growth and innovation.
During that period, the Dutch economy was among the world’s largest. But its dominance faded over time,

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Not Crazy

Adam M. Grossman  |  May 7, 2023

SUPPOSE YOU WERE presented with two prospective investments. On the surface, they look similar, except one has outperformed the other in 12 of the past 15 years. Which one would you choose?
This example isn’t hypothetical. The two investments in question are the S&P 500 and the EAFE Index. The S&P 500 is broadly representative of the U.S. stock market, while EAFE stands for Europe, Australasia and Far East. It’s the most commonly referenced index for developed international stock markets.

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Beyond Valuations

Adam M. Grossman  |  Apr 30, 2023

WHERE DOES THE STOCK market stand? After 2022’s decline, is it now fairly valued—or still overvalued?
When I think about questions like this, I’m reminded of an opinion piece written by Robert Shiller a few years back. By way of background, Shiller is a professor at Yale University and a Nobel Prize recipient. Along with a colleague, he created one of the more well-known and well-regarded measures of market valuation: the cyclically adjusted price-earnings ratio (CAPE).

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March of History

James McGlynn  |  Mar 26, 2023

MANY COMMENTATORS worry about the stock market in October, a month associated with the crashes of 1929 and 1987. But I now pay more attention to March—especially March 10.
As an observer of the stock market since 1980, I stumbled upon an odd coincidence. Major financial events this century, like stock market peaks and troughs, have centered on the month of March. Here are four examples:
March 10, 2000: The Nasdaq peaked at 5048.

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Learning from Failure

Adam M. Grossman  |  Mar 19, 2023

IN THE WEEK SINCE Silicon Valley Bank (SVB) failed, a debate has raged: Did the government do the right thing when it decided to guarantee all of SVB’s depositors, including those that exceeded FDIC limits?
On one side of this debate are those who view the government’s action as an inappropriate and undeserved bailout. In an article titled “You Should Be Outraged About Silicon Valley Bank,” The Atlantic argued that the bank’s failure was the predictable result of incompetent risk management.

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Defying Logic

Adam M. Grossman  |  Mar 12, 2023

THERE’S SOMETHING ODD going on in the housing market. Mortgage rates are appreciably higher than they were a year ago, but home prices—on average—have yet to fall. As of the most recent reading, prices continue to rise on a year-over-year basis. It reminds me of the cartoon character Wile E. Coyote, who experiences a delayed reaction every time he runs off the edge of a cliff. It’s only after he looks down that he realizes he has a problem.

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