Since the start of the great recession in 2009, two things have happened in the stock market:
- In the short term, events have occurred that correlate with declines in the stock market
- In the long term, the stock market has steadily improved significantly
This leads me to two conclusions
- Always take a longer term view of the stock market
- The things that drive the stock market in the long term are very different than the short term drivers
The second conclusion is something that this piece tries to tackle: Gradual Improvements Go Unnoticed. It is easy to see what drives the stock market down in the short term: it is difficult to ascertain what drives the stock market up in the long term. Gradual improvements could be a contributor. Other things, like the activity of the central bank, affects this. Even how other markets in the world in the world can affect the stock market.
Then you want to read these two really good pieces on why it is brutally tough to get tickets to an event without paying a fortune:
What it comes down to is a very limited supply and a very high demand. But that’s obvious. Read the pieces to see just how it really plays out.
I was impressed by this study of economic mobility over many generations in Florence: What’s your (sur)name? Intergenerational mobility over six centuries | VOX, CEPR’s Policy Portal. They make a good case that the richer families stay richer and the poorer families stay poorer regardless of the many other changes that occur in an area.To add to this, VOX reviews it and also references a study done in Sweden that finds something similar (Today’s rich families in Florence, Italy, were rich 700 years ago – Vox).
It’s depressing, but not surprising to me. I suspect that while individuals may rise and fall in terms of economic mobility, specific families work to insure that the wealth acquired is maintained through marriage and inheritance. Worse, conditions for poorer families are such that they can never acquire enough wealth to move them from the lower percentile to a higher one.
When you hear of companies like Apple having their money offshore, you might imagine piles of gold bullion or paper bills sitting in a physical bank somewhere in Switzerland or Ireland. More likely that money is residing in one of the big banks head-quartered somewhere in the United States. (For that matter, it is likely residing as so many numbers in a computer run by one of these banks and not piles of paper or gold.)
The Times and Slate explain it here: For U.S. Companies, Money ‘Offshore’ Means Manhattan – The New York Times and Offshore accounts not actually offshore.
It looks like the Fed in the US is going to raise rates. It is highly arguable whether it is a good idea. For a long time, it was a bad idea. Despite that, commercial banks recently have been arguing for the Fed to raise rates. Now whatever reasons they have been given, the true and underlying reason is mentioned here: Why Bankers Want Rate Hikes – The New York Times.
It is more difficult for banks to make money with lower rates. Higher rates make it easier for them to make money. Hence the push by some of them to raise the rates.
Banks aren’t stupid: they don’t want the economy to tank: they don’t make money that way either. But the sooner rates rise, the easier it is for them. Here’s hoping the US Fed continues to be smart enough to resist the pressure and do the right thing for the American economy.
Sales people asking you if you want insurance at a counter leans on your anxiety and often leads you to end up buying it. Should you? Well, if it is rental car insurance, Vox says no and does so persuasively, here: Why rental car insurance is usually a rip-off – Vox.
Two other places I see people wasting money on insurance is toys and video games. Toys R Us used to push insurance on me all the time. Before you buy it, consider how your child plays with a toy. Chances are, the insurance doesn’t buy you anything. If it is the only toy you are going to buy your child and the only one they will play with for a long time, then sure. But most children will play intently with a toy for awhile and then the interest drops.
Likewise with video games. Perhaps your child will play with it for a year and it will be their favorite game. Most times, I’ll bet they play intently for awhile, and then the interest drops. During that time, the chance of damage is very slight.
The insurance for toys and video games is low, but it buys you next to nothing. If the store said: do you mind if we charge you an extra 5-10% on this item, you would laugh and say “no!”. Yet that is what they are doing with insurance.
Skip it and use the few bucks to treat your child to a sweet or yourself to a coffee or give it to someone in need.
I didn’t expect a positive review of Janet Yellen in the wsj, but this piece, linked to below, is really positive. Here’s a sample:
Steering central bank policy depends more than anything on assessing where the economy is heading. Yet, central bankers, surprisingly, are seldom picked for their forecasting acumen. More often they are former public servants, bankers or academics.
Then there is Janet Yellen.
Her forecasts as a Fed official have been strikingly accurate, as the release of 2009 transcripts to the Fed’s deliberations make clear. If she worked on Wall Street, she’d be a “hot hand.” This does not mean as chairwoman she is necessarily right; but it does suggest her forecasts deserve the benefit of the doubt.
via Janet Yellen, Forecasting Ace – Real Time Economics – WSJ. A really good piece.
Posted in money
Tagged economics, money, WSJ