Altavista Wealth Management
  • Client Login

866-684-2600

  • Our Approach
  • Our Services
  • Our Team
  • News & Insights
  • Resources
  • Contact Us

Developed in conjunction with Ext-Joom.com

 
Altavista Wealth Management
  • Client Login

866-684-2600

  • Our Approach
  • Our Services
  • Our Team
  • News & Insights
  • Resources
  • Contact Us

Developed in conjunction with Ext-Joom.com

  • Our Approach
    • Managing Your Investments
      • Setting objectives
      • Asset allocation
      • Meaningful Diversification
      • Security Selection
      • Supervising Concentrated Holdings
    • Planning Your Finances
    • Preparing Your Estate Plan
      • Encouraging family stewardship
      • Managing trusts
      • Estate planning
    • Selling Your Business
    • Giving To Charity
      • Investing charitable funds
      • Setting up charitable trusts and foundations
      • Working with community foundations
  • Our Services
    • Portfolio Management
    • Asset Deployment and Allocation
    • Trust Administration and Fiduciary Services
    • Financial Planning
    • Family Office Services
    • Third-party Services for Legal and Accounting Practices
    • Women in Conversation
  • Our Team
    • L. Daniel Akers, Jr.
    • Kyle R. Boyd
    • Karen G. Coble
    • Jacqui S. Friedrich
    • Logan Bolick
    • Mari Panzenhagen
    • Christine B. Nelson
    • W. Edmond Zorigian
    • Sallie Williams
    • Jeff Howden
    • Jonathan E. Shumate
    • Mary Margaret Burdett
  • News & Insights
    • Outlook
    • Newsletters
    • Market & Economic Review
  • Resources
    • Market Data
    • Stock Quotes
    • Calculators
    • Web Resources
    • Financial Briefs
  • Contact Us

News & Insights

  • Quarterly Investment Outlook
  • Newsletters & Articles

Archives

  • 2017
    • Winter 2017
    • Spring 2017
    • Summer 2017
    • Fall 2017
  • 2016
    • Winter 2016
    • Spring 2016
    • Summer 2016
    • Fall 2016
  • 2015
    • Winter 2015
    • Spring 2015
    • Summer 2015
    • Fall 2015
  • 2014
    • Winter 2014
    • Spring 2014
    • Summer 2014
    • Fall 2014
  • 2013
    • Winter 2013
    • Spring 2013
    • Summer 2013
    • Fall 2013
  • 2012
    • Winter 2012
    • Spring 2012
    • Summer 2012
    • Fall 2012
  • 2011
    • Winter 2011
    • Spring 2011
    • Summer 2011
    • Fall 2011
  • 2010
    • Winter 2010
    • Spring 2010
    • Summer 2010
    • Fall 2010
  • 2009
    • Winter 2009
    • Spring 2009
    • Summer 2009
    • Fall 2009
  • 2008
    • Winter 2008
    • Spring 2008
    • Summer 2008
    • Fall 2008
  • 2007
    • Winter 2007
    • Spring 2007
    • Summer 2007
    • Fall 2007
  • 2006
    • Winter 2006
    • Spring 2006
    • Summer 2006
    • Fall 2006
  • 2005
    • Winter 2005
    • Spring 2005
    • Summer 2005
    • Fall 2005
  • 2004
    • Winter 2004
    • Spring 2004
    • Summer 2004
    • Fall 2004
  • 2003
    • Summer 2003
    • Fall 2003

Summer 2014

Thinking of Minsky

 

2014 is shaping up to be a remarkable year. Stocks, bonds and commodities have all advanced together for the first time since 1993. The S&P 500 is up around 7% at the halfway mark building on the extraordinary gains of 2013. The stock market advanced in the face of skeptical investors and increasingly stretched valuations, some 65% to 100% above their historical averages depending on your yardstick. By metrics we trust the market has only been more highly priced in 1929 and 2000. Except for a small swoon in February, the move upward has been steady and remarkably calm.

 

This advance occurred despite Russians on the move in Ukraine and the rise of possible terrorist states in Syria and Iraq.  Margin debt, when investors borrow money to buy stocks, hovers near an all-time high after declining a bit over the past couple of months. The U.S. economy surprisingly shrunk in the first quarter of 2014 and still the market advances. A steady advancing market in the face of poor values and geopolitical risk is certainly not unusual. The market advanced smartly as protestors clogged the streets and the war in Vietnam was escalating in the highly priced market of 1968.

 

Current conditions do not warrant a bunker mentality but the current combination of high prices, near record margin debt, and geopolitical risks are cause for some caution.  Another factor adding to this posture is the extraordinary calm of the stock market in 2014. It seems counter intuitive, but calm and stable markets begat volatile markets. This was the main point of economist Hyman Minsky, who 15 years after his death has a lot to tell us about today’s markets.

 

To paraphrase, Minsky said that stability in markets masks underlying risks, encouraging investors and bankers to take on more risk.  Securities prices are driven higher, encouraging investors to take on increasingly speculative debt eagerly provided by financiers. As the proceeds from debt finds its way into the market, prices increase further. This cycle continues until it is unsustainable and the market falls, correcting these excesses in what is referred to as a “Minsky Moment.”

 

We witnessed such moments in technology stocks in 2000 and in the housing market in 2008. The richer prices we see today in stocks, the willingness to take on margin debt, the Fed’s easy money policy and the lack of real market volatility do not yet add up in severity to the conditions prior to the tech bust or the housing crisis. However, Dr. Minsky’s work reminds us to keep a close eye on the risks accumulating in the buoyant market of 2014.

 

The Altavista Investment Team - Summer 2014

 


 

    

  • Contact Us
  • Site Map
  • Policies & Disclosure
  • Altavista Brochure

4 Vanderbilt Park Drive Suite 310 Asheville, NC 28803
6201 Fairview Road Suite 322 Charlotte, NC 28210

© 2018 Altavista Wealth Management, Inc.

866-684-2600