Insights

Fourth Quarter 2006|Jim Williams| I recently came across an interesting article in The New Yorker magazine written by Malcolm Gladwell, the author of “The Tipping Point” and “Blink." A central point of Gladwell’s article is the distinction between puzzles and mysteries. So, what do we care whether Enron was a puzzle or a mystery? It has to do with what lessons might be learned. Mostly what seems to have been learned is based on the model of puzzle, not of a mystery. What else might we learn?

First Quarter 2006|Jim Williams| What causes a trade deficit and why is it so scary? The general perspective is to look at the flow of goods and services, look at the balance/imbalance and then decide whether to start sounding the alarm. But this ignores the other part of the transaction, that is: the money. The money side of the trade deficit is U.S. dollars in the hands of foreigners.

Third Quarter 2005|Jim Williams| Energy prices will never again be what they were a year or so ago, so go ahead and reserve your Prius. While as individuals we feel the pain of high energy prices, we will also see that conservation, alternative energy sources, more production from marginal oil & gas properties, and increased exploration will clearly result.

Second Quarter 2005|Jim Williams| One of the most persistent “sky is falling” stories threatening investor’s confidence in the capital markets is the notion that when baby boomers retire, they will liquidate their investments in the equities markets producing a downward spiral of declining prices and increasing redemptions leaving us boomers in a market meltdown with greatly diminished retirement resources.

First Quarter 2004|Jim Williams| Occasionally when money is available for addition to a portfolio, the question arises as to whether it is a good time to invest. Stocks have been going up for 4 full quarters. Is the run-up over? Are stocks overpriced? Where will the market go next year? Stocks have been going down for the last three years. Isn’t this the end of the world? Shouldn’t we be buying canned goods?

Fourth Quarter 2003|Jim Williams| Two years ago in this newsletter, I addressed the issue of fixed-income asset classes in the investment portfolio. At that time, as now, interest rates were quite low, and the prospects for rising interest rates seemed gathering if not imminent. Rising interest rates mean declining bond prices (the longer the duration of the bond, the greater the decline in price, more about this later). And with yields as low as they are now, it makes fixed income seem like a quite unattractive investment alternative. But let’s remember why we have fixed income in the portfolio.