An old French riddle, “The 29th Day,” has become a very popular allegory for the potential perils of excessive population growth. It reads as follows:

Lily pads double once every day. There is a pond that, on the first day, has one lily pad floating in it. Assuming the pond will be completely covered by the 30th day, when is the pond half full with lily pads?

Although the knee-jerk reaction might be to blurt out the 15th day, the answer, as the name of the riddle implies, is the 29th day. The moral of the story is that exponential, or non-linear, growth is sneaky. One minute things appear manageable, even benign, when in fact we may be a mere “day” away from total saturation.

And with the world’s population toping 7 billion this year, it only seems fitting to future-cast a little, with a specific eye towards the effects that this global population explosion will likely have on investors’ portfolios. Read the rest of this entry »

From time to time, industry notables publish pieces on the effect of missing a certain number of the best trading days over a particular time period. Most commonly, the 10 best trading days are subtracted from performance, but over the years there have been many derivations in which the 20, 30, 50, and even 100 best trading days were omitted.

The graph below (courtesy of is no different.  It tracks the since inception performance of the S&P 500-mimicking SPDR ETF (Symbol: SPY) from State Street Global Advisors. Read the rest of this entry »

With several weeks in the rearview mirror since Standard & Poor’s historic downgrade of the United States’ credit rating, it is worth a look back to process everything that has transpired.

Beginning with the obvious, the downgrade caused the global markets to go berserk, producing a multitude of indisputably outsized numbers:

  • The Dow Jones Industrial Average experienced an unprecedented 4 consecutive trading days during which the index moved by 400 points or more, in  either direction.
  • Volatility exploded, with August futures on the VIX (the market’s volatility index) trading at a record 100,000+ contracts/day for 3 days in a row
  • Gold hit a nominal high of greater than $1,800/troy oz., and is only a karat or two away from its inflation-adjusted high of ~$2,250/troy oz., established in 1980

S&P’s US downgrade was an unmistakable watershed event, causing everyone from the President to the proletariat to take a long, hard look at the lackluster numbers that have typified the US economy for months. Perhaps equally noteworthy during the tumult, however, was the sheer quantity of contradictions, ironies, and paradoxes that arose throughout the downgrade process. They sprung from all sides, ranging from the subtle to the downright staggering, and yielded a portrait of a country desperate for direction. What follows is a chronicle of these incongruities. Read the rest of this entry »


Despite the most recent vote by its leaders to rein in spending, Greece really has little choice but to permanently restructure its debt. According to the major credit rating agencies, restructuring (or “reprofiling” as it has been euphemistically branded) will likely constitute a technical default. Compounding matters, the civil unrest resulting from continued spending cuts is gouging deeply into Greece’s number one source of income, tourism.

So how significant is the credit worthiness of one tiny, sun-soaked nation in Southern Europe?  In short… very. Admittedly, Greece is far from an economic Orion. Its 2010 GDP was just 2.9% of the European Union’s (EU) and a mere .44% of the world’s as a whole. However, its debt crisis stands as a monument to our ever-increasing global interconnectedness. Greece’s fate is now the fate of Western Europe and perhaps for many, more distant, economically-developed nations as well. Read the rest of this entry »

As the news of Osama bin Laden’s death enveloped the world’s airwaves this past Sunday evening, many were wondering how the stock market might respond. The Japanese market, represented by the Nikkei 225, immediately popped 145 points (~1.5%) following the news, closing above 10,000 for the first time since the March 11th earthquake. However, after a week to digest the news, the US markets have not followed suit. Read the rest of this entry »

In a world where cash yields are non-existent and those for bonds are not much better, where equity multiples appear to once again be rapidly approaching “white hot” status, and where the scepter of significant inflation looms in the not so distant future, investors are left with few appealing options. Where can a risk-minded, inflation-conscious investor turn in this environment? Dividend-paying stocks. Read the rest of this entry »

The stock market is on a tear right now… no doubt. As of this morning, the S&P 500 Index is up roughly 25% since September of last year, and boasts an astounding 91% rate of return from the market nadir in March of 2009. It has blown through resistance level after resistance level, eschewing headline risk like Egyptian protesters storming through the US Press Corps.

Part of what has fueled this extended recovery is pent up demand. The US has been tightening its proverbial savings belt over the past few years, and we saw evidence this past holiday season that they are ready to exhale a bit. Further, the Fed’s QEII policy, although not achieving the stated purpose of keeping long-term interest rates low, has definitely kept money supply up in the absence of velocity. However, the question still remains:  How can this recovery persist, when unemployment is following suit? Read the rest of this entry »

It’s official. Apple is everywhere… in our homes, our offices, our pockets and purses, and for some diehard supporters, even in their hearts. Over the past decade, the much beloved computer company has single-handedly reshaped the personal device market with an onslaught of everything “i,” from desktops to laptops, tablets to telephones, and the list goes on. In fact, Apple is so ubiquitous, an estimated 1-in-5 US households uses at least one of their game-changing gadgets1. Read the rest of this entry »

This question takes on very different meanings, depending on which group of “investors” you are considering.

Investors in Goldman Sachs, i.e. shareholders, are absolutely smitten. It has been the darling of Wall St. well before its IPO back in 1999. The firm has its hands in virtually every major investment banking deal, consistently reports record earnings, and appears headed right back to its pre-meltdown highs. Even the occasional headline shock or SEC inquiry can’t trump the company’s gargantuan bottom line.

Investors of Goldman Sachs, i.e. clients, may not lean so heavily to the love side of the love-hate continuum, in particular those not governed by a fiduciary standard. For those investors, working with Goldman is a little like juggling torches–you may not get burned, but you’re going to have to pay a lot of attention to avoid it.

Goldman’s recent Facebook dealings are a prime example. Over the past few weeks, the firm has been hocking ~$1.5B of the social-networking stock to its wealthy clientele under a suitability standard, while those clients having their money managed by Goldman under a fiduciary standard are being steered away from the very same deal.

Chris Harper of Bloomberg has the whole story on why one sort of Goldman investor is inherently pitted against the other:

Also, see principal Jonathan Leidy’s recent story on fiduciary duty in the retirement plan market:  Click Here

Up until last Friday, those “fortunate” enough to pass-on in 2010 faced no estate taxation (although capital gains were still a factor), while those passing in 2011 and beyond were confronted with a return to the year 2000, and the associated estate tax exemption of $1MM. However, the Tax Relief, Unemployment Insurance Reauthorization, and Jobs Creation Act of 2010 has changed all that by bringing much needed reform to our seemingly topsy-turvy set of estate tax laws.

Through 2012, the estate tax exemption for individuals has been set at $5MM per person and the top estate tax rate has declined to 35%. This means that a couple, using both of their exemptions, can now shelter up to $10MM of their estate from taxation. Also included in the bill is the concept of “exemption portability.” Portability refers to the idea that, should an individual’s estate be unable to use the entirety of their $5MM exemption, their surviving spouse retains the rights to apply the remainder to his or her own estate.

Previously, exemptions were not portable, which gave rise to the creation of AB trusts as a means of preserving them. With the new portability provision in place, there is a great deal of talk about the potential obsolescence of the AB trust structure. However, as Julie Garber of points out, there are still several reasons why AB trusts will likely persist.