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If you were in charge… If you oversaw your own country, what trade policy would you pursue? Would you be friendly and cooperative or unfriendly and betraying? Maximizing your country’s payoff may be more difficult than imagined. Game theory can be used to measure success and failure. It can also validate just how hard it can be to strike the right balance and allow both trade partners to win. The prisoner’s dilemma… The current trade and tariff dialogue between the U.S. and China is essentially a repeated prisoner’s dilemma – a workhorse model of game theory that captures the tradeoff between mutually beneficial cooperation and individually beneficial betrayal. If played once, there is only one outcome where neither side can do better with a different strategy: both sides betray one another. While unfriendly, the mutual betrayal results in equilibrium or balance. The shortfall of playing one time as if there is no tomorrow, is that trading partners have an infinite number of days in which to trade goods. If prisoner’s dilemma is played multiple times, even infinitely, game Read on! →
Stay up-to-date with six major changes to Social Security for 2018.
You’ve got to know when to hold’em Know when to fold’em Know when to walk away Know when to run… The Gambler (released 1978), lyrics by Don Schlitz, vocals by Kenny Rogers Growing up in rural western Kentucky, it shouldn’t come as a surprise that country music stations littered the AM/FM radio dials. The Gambler received significant air time not only on country stations but also pop stations as the country sound began a “crossover” from its honky-tonk roots to arguably, the more mainstream pop or Top 40 genre. While our method of following disciplined allocation strategies doesn’t correspond with the chorus, the lyrics do seem to reference the subtleties of reading a situation and taking steps (in a portfolio) that might work to one’s advantage. The Winning Streak To date, 2017 has been a positive year for equity and bond markets alike. It is always gratifying to see client portfolios increase in measured increments without the anxiety that often accompanies a sharp peak or a deep, extended valley. What may be less obvious is the un-harried Read on! →
As I write this commentary at the mid-point of 2017, the markets have made steady progress in the first 6 months despite what has been an unpredictable and often concerning geopolitical environment around the world. I often tell clients and interested parties that unexpected events can have an impact on markets but they are generally short-lived. At the end of the day, the markets go back to being influenced by companies and their profits. That seems to be the case so far in 2017 as we get ready to celebrate with July 4th fireworks, even though every week is filled with news about our partisan politics or the latest terrorist incident. In the U.S., the Federal Reserve (Fed) made good on raising interest rates. Unemployment is low, workers are producing goods and services and financial markets have responded in-kind. While somewhat different economic factors are in play, most overseas’ economies and financial markets are outperforming the U.S. Even bonds, an asset class most felt would lag as the Fed raised rates, have done well on a relative basis. Read on! →
It’s rare to find someone who likes to be early to a party. It’s a unique person indeed who enjoys what most consider at best, an awkward situation with a host who silently wishes they had a few extra minutes to prepare. At the other end of the etiquette spectrum are those who don’t know when to leave. Most make their exit while still having fun, but there are always a few who overstay their welcome, fueled by the adrenaline of rich food and heavy handed cocktails. Sound familiar? Like most celebrations, the “market party” has an awkward beginning with a handful of guests making idle chatter while anxiously waiting for others to arrive. Somewhere along the way, the early arrivers are joined by the validators. The party then takes its legitimate place as a festive, burgeoning event where everyone seems happy and revels in good cheer. Last but not least, the latecomers arrive. Whether due to procrastination, an overbooked dance card or just plain forgetfulness, every party has them. Whichever group the investor may belong to there is Read on! →