S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
IT WAS A DIFFICULT WEEK FOR MARKET GENIUSES. Last week, there was extraordinary drama in financial markets. It made the ups and downs of stock and bond markets seem almost mundane. Here’s what happened:
Tales from cryptocurrency. The world’s third largest cryptocurrency exchange declared bankruptcy after suffering the 21st century equivalent of a bank run. It was similar to the townspeople crowding into the Bailey Building and Loan in Frank Capra’s It’s a Wonderful Life. In the film, George Bailey uses his honeymoon money to avoid a collapse. The founder of the cryptocurrency exchange had a shortfall of about $8 billion, reported Philip van Doorn of MarketWatch.
When asked about the bankruptcy, U.S. Treasury secretary Janet Yellen said that cryptocurrencies require careful regulation, reported Christopher Condon of Bloomberg. “In other regulated exchanges, you would have segregation of customer assets,” Yellen said. “The notion you could use the deposits of customers of an exchange and lend them to a separate enterprise that you control to do leveraged, risky investments – that wouldn’t be something that’s allowed.”
It's not easy. A popular social media company was recently privatized, which means that all shares of its stock were purchased by a new owner, and it no longer trades on a stock exchange. In this case, the purchaser was one of the world’s wealthiest individuals, who used his own money along with $13 billion in financing from large investors and private banks, reported Reuters.
The owners of privately held companies are not constrained by regulation or boards of directors, which can be advantageous, although that hasn’t proven out in this case, so far. The company’s new leader implemented a subscription service that produced undesirable results. “Once the option was available, users started creating accounts pretending to be major brands and politicians, fooling users and potentially jeopardizing [the social media company’s] now-shaky reputation with top advertisers,” reported Davey Alba and Kurt Wagner of Bloomberg.
“Companies led by lone geniuses need strong governance first and foremost,” said Yale School of Management’s Jeffrey Sonnenfeld in an interview with CNBC. “Having built-in checks and balances and a board that has field expertise as well as the ability to watch out for mission creep is critical to allowing these businesses to function with less risk of costly blunders.”
Weekly Focus – Think About It
“These are the times in which a genius would wish to live. It is not in the still calm of life, or the repose of a pacific station, that great characters are formed. The habits of a vigorous mind are formed in contending with difficulties. Great necessities call out great virtues. When a mind is raised, and animated by scenes that engage the heart, then those qualities which would otherwise lay dormant, wake into life and form the character of the hero and the statesman.”
—Abigail Adams, Founding Mother
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