Monthly Archives: April 2010

The Rules, Part XII

Growth in total factor outputs must equal the growth in payment to inputs.  The equity market cannot forever outgrow the real economy. This is the “real economy rule,” and was listed first in my document, but i have not gotten to it until now.  It is very important to remember, because men are tempted to […]

The Lack of Cultural Agreement Roars, the Eurozone Mews

Economic systems are the result of cultures.  Where there is little cultural agreement, the economic system will be unstable, as will be governmental action. No, this is not another “Rules” post.  But this is a post about the Eurozone and Japan today.  Japan faces trouble, but there is cultural agreement on what should be done, […]

Industry Update April 2010

=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=- With regard to equity market performance, I am torn.  My head says, “Go with the momentum. Broad rally here.”  My heart says, “Profit margins will be at records with the 2011 earnings estimates; aim for industries that are out of favor.” If I try to unify the two, I remain convinced that high quality […]

In Defense of the Rating Agencies – V (summary, and hopefully final)

I write this because I was invited to be on CNBC on the topic, but I suggested that my opinion would not make for good television.  That said, I have taken my four prior posts on the topic, and assembled them into one comprehensive post.  I do not intend on posting on this again.  With […]

The Whole Earth is Owned; Debts Net Out to Zero

Tonight’s post could be one in the “rules” series, but since I did not get this idea prior to 2003, when I started investment writing at, it does not qualify for me.  But here it is: At the end of the day, the world as a whole is owned 100%.  There are people with […]

The Rules, Part X

The more entities manage for total return, the more unstable the financial system becomes. The shorter the performance horizon, the more volatile the market becomes, and the more index-like managers become.  This is not a contradiction, because volatile markets initially force out those would bring stability, until things are dramatically out of whack. I was […]

Don’t Buy Stocks on Margin, Unless you are an Expert

Most academic economists are irrelevant, so we can ignore them.  The few that are relevant are worth noting.  They can write such that ordinary people can understand — think of Milton Friedman with his “Free to Choose.”  Such economists are viewed skeptically by the “profession” because they interact with the unwashed. So it is with […]

Are Utilities Like Bonds or Like Stocks?

I like CXO Advisory, and always read them as they publish.  That said, I think they sometimes have a weakness in their methods by not using multivariate techniques when it would make sense.  So, when their article, “Interest Rates and Utilities,” I asked myself, “What would this look like if I used multiple regression?” Rather […]