Understanding the past highlights the importance of trust in the dollar — For decades I’ve been telling thousands of business school students that U.S. Treasury bills and notes are risk-free. Well, that’s arguably not quite true. For example, in 1979, Mrs. Claire Barton, a small investor from Enrico, California tried to signal to the world that the U.S. Treasury had stiffed her…

Basic banking explained: It’s all about trust — In the Christmas classic, It’s a Wonderful Life, George Bailey, played by Jimmy Stewart, is about to embark on his honeymoon when he notices a run on his bank, Bailey Brothers Building and Loan. He rushes to the bank where he is greeted by a mob of customers, frantically looking…

Common Sense Investing Practices Could Have Prevented SVB’s Failure — In Ernest Hemingway’s classic 1926 novel, The Sun Also Rises, Bill Gorton asks Mike Campbell, “How did you go bankrupt?” Campbell replies, “Two ways. Gradually, then suddenly.” That’s what happened recently with Silicon Valley Bank (SVB), and its parent SVB Financial Group. With over $200 billion in assets, it was…

Trumped-Up Charges, Conflict, Deceit, a Plague, and an Angry Mob — Today, we take bonds as an investment vehicle for granted. Bonds — along with stocks — are known as traditional investments because they’ve been around for many centuries. Governments borrow when current spending needs exceed current revenue. Investors tend to get steady returns. So it’s a win-win. Bonds are considered…

Stocks are much cheaper, tend to bounce back after a bad year, and ‘year 3’ of the presidential cycle is overwhelmingly positive — High inflation. Increasing interest rates. Recession fears. These are all good reasons why one should be cautious when investing in stocks during the upcoming year. Last year I predicted why 2022 was probably going to be a bad year for stocks. That turned out to be a good call, with…

It Pays to Be a Healthy Sceptic — He was well-respected in the industry, as head of a major exchange. He was able to attract billions of dollars in investments. He was known for his major philanthropic initiatives. And then his world suddenly collapsed, wiping out billions for his investors. This portrayal aptly describes Sam Bankman-Fried (also known…

Inflation-indexed bonds, including TIPS, reinvented in the 20th century, help protect investor returns — In the late 1770s, the Revolutionary War wasn’t going well for America. The British Army was making gains in America’s south, and the British Navy was blockading the eastern coast. U.S. Army morale was low as the troops were poorly clothed, poorly fed, and often in need of medical attention…

An award-winning study shows the importance of luck versus talent — Every October, prominent academics in their ivory towers silently wonder if this could be their year, to capture the most prestigious accolade of all, a Nobel Prize. The announcements are followed by black-tie events in Stockholm in December. Less well known is a ceremony that has taken place each year…

A feel-good conspiracy theory following October 1987’s Black Monday — This month marks the 35th anniversary of one of the most famous events on Wall Street. I’ve previously written about the worst U.S. stock market crash in history, known as Black Monday, when stocks dropped on average by over 22 percent on Monday, October 19, 1987. The next day, markets…