We are about three weeks away from the next Republican candidates' debate, but I'm still stuck on one item from the last debate. Toward the end, the moderators cited a Treasury Department proposal to replace the image of Alexander Hamilton on the ten-dollar bill with that of a woman, and asked the candidates which woman they would choose for that honor. When Senator Cruz's turn came, he prefaced his answer by saying he would prefer to keep Hamilton on the ten, and instead replace the portrait of Andrew Jackson on the twenty.
Sen. Cruz's defense of Hamilton seemed bizarre, given his stated positions on a variety of issues. Hamilton, after all, believed in a strong Federal government and a strong central bank (the type of bank that Jackson killed). He was the architect of the Compromise of 1790, under which Congress assumed the Revolutionary War debt of the states, rescheduling them where necessary – a bailout, if you will.
Hamilton also believed in a strong national economic policy. In his 1791 Report on Manufactures, he advocated major public infrastructure investments, along with other measures explicitly intended to promote the development of a manufacturing economy. In arguing both for assuming the states' debts and for setting up a strong central bank, Hamilton urged Congress to make a credible commitment to make timely payment of principal and interest on the public debt. This "funded debt," Hamilton felt, could serve as a monetary base in an economy desperately short on hard currency. The […]
We are pleased to announce another exciting development at Tiemann Investment Advisors. Stan Thomas, Managing Member of Thomas & Atkinson Capital Management LLC (formerly Thomas Capital Management LLC) and Dr. Jonathan Tiemann of Tiemann Investment Advisors, LLC have agreed to a new strategic relationship. Commencing September 2015, Stan Thomas (individually) will join Tiemann Investment Advisors as a Managing Director, move into TIA’s Menlo Park office and continue to provide investment management services for his direct client accounts through Tiemann Investment Advisors, LLC. The partners of Thomas & Atkinson Capital Management, Stan Thomas and Anne Atkinson, have chosen different strategic directions, so Thomas & Atkinson Capital Management and/or its successor entity, are not a party to this agreement. This new strategic relationship will enable Stan Thomas to join forces with Dr. Jonathan Tiemann, an investment management expert, and work together to ensure that the highest level of investment services are available to Thomas' clients both currently and for the foreseeable future. Because of the significance of this event, TIA, a Registered Investment Advisor (RIA), will be updating its Form ADV, Part 2 with the Securities and Exchange Commission, to reflect this news.
By Dr. Jonathan Tiemann
In honor of Labor Day Weekend, here’s a note concerning a matter that could have surprising implications for organized labor:
Fans of the New England Patriots are no doubt celebrating yesterday’s ruling from US District Court in the Southern District of New York, which overturned NFL Commissioner Roger Goodell’s imposition of a four-game suspension on Patriots uber-star quarterback Tom Brady. But there’s another group that potentially gained even more from the ruling than Patriots fans did: Leaders of organized labor should see in the ruling a strengthening of both the role of collective bargaining agreements and protections for workers facing arbitrary and capricious workplace disciplinary action.
Mr. Goodell’s action, you’ll recall, stems from the Patriots’ apparent use of under-inflated footballs (in the NFL each team provides the balls for use when its offensive platoon is on the field) during last year’s AFC Championship Game. After investigating the incident, the League imposed sanctions on the Patriots, including a fine of $1 million and the loss of two future draft picks. At the same time, the League informed Mr. Brady that it would suspend him, without pay, for the first four games of the 2015 season. Mr. Brady asked for, and was granted, an arbitration hearing. Mr. Goodell appointed himself arbitrator at that hearing, and found in his own favor, reaffirming Mr. Brady’s suspension. Yesterday’s opinion resolved a pair of cross-motions: the NFL’s motion to confirm, and Mr. Brady’s (actually, and crucially, the NFL Players Association’s) to vacate, the suspension. […]
Is it time to think about how climate change might impact your portfolio? Apparently, some 120 CEOs and investment managers representing more than $12 trillion in assets think so. They were worried enough to send an open letter on May 25, 2015 to the Group of Seven (G-7) Finance Ministers to urge them to commit to reduce greenhouse gas emissions during the U.N. climate talks in Paris later this year that would limit warming to a 2° Celsius rise. Their reason? Because of the uncertaintly surrounding how bad climate change would be and how it would affect their businesses.
“As institutional investors responsible for managing the retirement savings and investments of millions of people or managing endowments, we believe climate change is one of the biggest systemic risks we face.” Along with more clarity about the future, a strong goal to reduce emission would "serve to reduce policy risk, incentivize , facilitate the deployment of new technologies and ultimately create new jobs."
According to Emily Atkin, writing for Climate Progress, the letter from this group of CEOs was not the first group representing monetary interests to come out and demand action on climate change. Last month, a large group of major insurance companies and consumer organizations asked the United States to strengthen its disaster policies in the face of increasingly extreme weather events resulting from human-caused climate change. Some of these insurance companies have also pledged to drop their coverage of coal assets, claiming that they were […]
By Dr. Jonathan Tiemann
I’ve written on this theme before, but it bears repeating. As often as we hear politicians, venture capitalists, bankers, corporate managers, and even economists extol the virtues of free market competition, business leaders know better: Competition is bad for business. And every once in a while, one of the designated cheerleaders of American capitalism suffers a lapse and admits it.
Wednesday morning on CNBC, Jim Cramer was discussing the poor recent market performance of stocks in the transport sector, and the airlines in particular. Here’s what he had to say :
"Sometimes though, this kind of action is a sign not of weakening trade, but of potentially ruinous, cutthroat competition. And that's what is driving the group down at this very moment," Cramer said. Cramer considers competition to be the absolute worst thing that could linger in the market. On Tuesday, the "Mad Money" host spoke with Doug Parker the CEO of American Airlines. Parker confirmed that his competitors in the industry have decided to take advantage of the strong travel market right now by ramping up capacity.
Mr. Cramer’s remark was an unusually frank admission that in their hearts, many business people view competition as destructive. In the case of airlines, what if an increase in capacity results in lower fares, better service, and perhaps more comfort? That would add up to a transfer of value, whether in dollars or not, from the owners of the airlines to the public at large. That would be terrible, wouldn’t it?
By Dr. Jonathan Tiemann
Pity the poor hedge fund manager. The lead item in one of the many daily “news” emails I received today — this one from Chief Investment Officer magazine — reads, “Don’t Blame the Hedge Fund Managers.”
So why did the hedge funds do so badly? According to the CIO item, an analytics outfit called Novus figures that the reason is that the markets have been going through a period of unusually high correlations among stocks, and unusually low dispersion of returns across stocks. The idea is that in such an environment, the opportunities for managers to add value through stock-picking are unusually sparse. So it must be good news for hedge fund managers that Michael Santoli of Yahoo! Finance has declared the current environment a “stock picker’s market,” which he defines as “a market where a greater number of individual stocks and sectors go their own way, rather than track the broad market.” And really, it isn’t just hedge fund managers that should, it would appear, be happy. Managers of traditional active mutual funds, which try to out-perform the market, should see greater opportunity in such a market too, right?
Let’s set aside the point that fund managers are constantly on business TV, claiming that we’re in a stock picker’s market, and suppose Mr. Santoli is right. That would mean it’s a good time to invest in hedge funds, or at least in actively managed mutual funds, right? Well, not so fast. The problem is that […]
By Dr. Jonathan Tiemann, April 20, 2015
Although we don't hear the word explicitly that often, austerity is very much at the center of economic debate today. In the US, both the Senate and the House of Representatives are working on budget proposals, which would (their sponsors say) balance the Federal budget within a decade. Those proposals would do so largely with budget cuts, including reductions in Medicaid, Obamacare, and food stamps, and (in the case of the House proposal) restructuring how Medicare works. The budget is also a major issue in the run-up to next month's general election in the UK. Both the Tories and Labour have put forth proposals that would eliminate the current budget deficit, although the Conservative (Tory) proposal is more aggressive. And in Europe, policymakers continue to demand steep reductions in Greek public spending as a condition for the next round of fiscal assistance.
The orthodoxy behind an aggressive approach to fiscal (taxation and spending) consolidation (reducing the deficit) generally holds that fiscal consolidation is advantageous because it improves public confidence, moral because it avoids burdening future generations with the cost of our profligacy, and beneficial because it reduces the share of the public sector in the economy. Even if cuts in government spending bring on a recession in the short-term, the orthodoxy goes, the cleansing effect of the recession clears the way for stronger economic growth in the future. This orthodoxy is exactly the Protestant Ethic, as analyzed by Max Weber.
In Weber’s formulation, the Protestant […]
By Dr. Jonathan Tiemann, March 23, 2015
While we're on the subject of fiduciaries (see the post just before this one), there's another important principal (owner) – agent (person acting on owners' behalf) relationship in finance. That's the relationship between shareholders and corporate managers. The extent of managers' fiduciary duty to shareholders isn't really clear under the law, especially since public companies have a mechanism, the Board of Directors, whereby shareholders elect representatives to monitor management. But the subject does come up from time to time. It was a big issue in the 1980s, when financiers trying to take over underperforming companies (we used to call them raiders, but nowadays CNBC calls them activists) accused managers that tried to resist them of breach of fiduciary duty. The basic argument was that managers entrenched themselves so they could continue in their jobs, even though shareholders would be better off replacing them.
We only occasionally hear the fiduciary argument in corporate control contests these days, perhaps because Boards have become a bit more responsive to activists, and more corporate managers have significant shareholdings in their firms. Many may welcome the opportunity to make a profitable exit. But the interests of managers and public shareholders – especially individuals with small holdings – can still be in conflict. One area where the conflict arises in a curious way is in the so-called corporate tax inversions. These are transactions in which a US company merges with a company in a country with a lower corporate […]
By Dr. Jonathan Tiemann
In my childhood, my favorite cartoon was The Adventures of Rocky and Bullwinkle, a Cold War-era sendup of the popular cloak-and-dagger movies of the day. The heroes, Rocky the Flying Squirrel and Bullwinkle T. Moose, always managed, in their bumbling way, to thwart the arch-villains, Boris Badenov and Natasha Fatale. In one memorable adventure, Boris and Natasha plotted to destabilize the American economy by flooding the market with counterfeit cereal boxtops, the kind you used to be able to send in for premiums and prizes. They were successful enough at first that the Chair of the Federal Reserve, a man called Fiduciary Blurt, went on television to appeal to the public for calm.
Fiduciary is one of those words most of us only hear now and again, and we seldom hear it in the news. But we have heard it in the past couple of weeks in connection with a new rule the US Department of Labor is considering that would require all advisors giving investment advice to retirement plan participants to act as fiduciaries. Fiduciary duty is the affirmative obligation on the part of any agent acting on behalf of another (a principal) to place the principal’s interests first. By law and custom Registered Investment Advisers (RIAs) owe a fiduciary duty to our clients, and for most of us, that corresponds with how we view our responsibilities anyway. Brokers, on the other hand, generally have no such duty, although may confuse the issue by referring to […]
By Dr. Jonathan Tiemann
Last month, a general election in Greece brought to power a leftist party called Syriza. Syriza’s leader — Greece’s new Prime Minister — Alexis Tsipras, campaigned on promises to roll back the severe economic austerity the previous government had accepted as a condition for continued financial support from the rest of the Eurozone. But while Mr. Tsipras heads the new government, the new star of the European economic and political scene is Greece’s finance minister, Yanis Varoufakis. Mr. Varoufakis is an academic economist, whose CV includes faculty appointments at the University of Sydney, the University of Athens, and the University of Texas – Austin. The main focus of his academic work is game theory, but he turns out to be a deep thinker and an articulate proponent of left-wing views. He also may be just the man to save the euro.
For much of the ‘00s, Greece’s membership in the Eurozone allowed it to sustain substantial fiscal deficits by borrowing at relatively low rates. By 2010, however, both the country’s public finances and banking system were in trouble, and Greece accepted substantial support (a bailout, if you like) from the European Commission, the European Central Bank, and the International Monetary Fund in exchange for agreeing to adopt a policy of fiscal austerity. This agreement averted an immediate crisis, but at a substantial cost to the Greek economy and people. By the end of 2014 Greek Gross Domestic Product (GDP) had fallen to less than 75% of its […]
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