Our Essays, Articles, Methods & Musings
The following archive is a list of the essays, newsletter articles and booklets written by the portfolio managers and key event speakers over the 30+ year history of the Muhlenkamp Fund as well as our founder’s 40+ year history in the business.
| Nobody Asked Me About Cryptocurrencies, But – October 2021 Jeff Muhlenkamp provides a basic explanation of how cryptocurrencies work, their potential future uses, precautions for blockchain investors, and the secondary effects of a cryptocurrency collapse. |
| Ron’s Reading List – February 2020 Ron’s reading list for life and investment fundamentals includes recommended books on the topics: the way things work; why you’ll never understand the other sex; values; the evolution of moral standards; the difference between modern liberals and conservatives; how the best and the brightest can be totally wrong. Recommended authors include: Macaulay, Wanniski, Tannen, Pirsig, Sowell, and Halberstam. |
| Reflecting Over 40 Years–Lessons Learned and Changes Observed – February 2020 To celebrate the 40th anniversary of Muhlenkamp and Company in 2017, Ron shared his insights on human behavior, instant communications, and the free markets. He then tied his lessons together to give you a useful way of thinking about things. |
| Some Things I Would Have Liked to Have Known Sooner – February 2019 Here is a collection of items published by Ronald H. Muhlenkamp, including: • “Reading List For Life And Investment Fundamentals 101” • “Basic Financial Maxims I Want My Kids to Know” • “Muhlenkamp’s Musings on Economics” • “Employment Costs” • “U.S. Personal Consumption Expenditures” • “Reflecting over 40 Years—Lessons Learned and Changes Observed” |
| Natural Gas: An Energy Game Changer Booklet – Chart Updates – April 2017 Ron published Natural Gas: An Energy Game Changer in November 2013. Here are 2017 updates to some of the charts in the booklet. |
| Natural Gas: An Energy Game Changer – April 2017 In this country, a quarter of our natural gas production is used by industry, a quarter is used to generate electricity, and half is used for home heating. As investors, we learned a long time ago that if a product or service makes sense to the consumer it probably will last a long time. |
| Yield = Income = Caution! – June 2016 This essay gives examples of why you should completely understand what you are buying before you buy it. Be sure to read the fine print—check the numbers and check the underlying assumptions! |
| Learn the Difference Between Price and Value: Take Your Child to an Auction – June 2016 Price vs. Value—there is no better place to learn the difference in these commonly used terms than by participating at an auction! This essay was originally published in Muhlenkamp Memorandum Issue 107, July 2013. |
| Let’s Get Real: Understanding Your Purchasing Power – June 2016 You must understand the difference between a nominal interest rate and a real interest rate to determine your purchasing power. This essay was originally published in Muhlenkamp Memorandum Issue 108, October 2013. |
| Recap: December 3, 2015 Investment Seminar – December 2015 On December 3, 2015, portfolio managers Ron and Jeff Muhlenkamp provided an update on the checklist they use to monitor the investment climate. Over the past several years, the stock market, in general, has been acting as though we’ve had a normal recovery from a normal recession. The items on their checklist indicate otherwise: there is a gap between how the stock market is performing and how the economy is performing. |
| Effects of Currency Manipulation – January 2015 This article explains the ripple effect that could occur when one country devalues its currency. It also examines who “wins” and who “loses” in the game of currency manipulation. |
| The Financial Aspects of Shale Gas for the Landowner – September 2013 This essay was originally published in 2013. Ron addresses how drilling companies secure the right to bring natural gas to market within a land unit. He also discusses bonuses and royalties for the landowners. |
| Natural Gas, Hydraulic Fracturing, and Water – April 2013 This essay was originally published in 2013. Ron examines the amount of water that is produced by burning methane and explains the chemistry behind his calculations. |
| Shale Gas: An Environmental Perspective – August 2012 This essay was originally published in 2012. Ron compares the carbon content of various energy sources and the number of acres of land needed by each one to produce the fuel to generate enough electricity to serve 1,000 households for one year. |
| Shale Gas Versus Ethanol: A Water Perspective – August 2012 This essay was originally published in 2012. Ron examines the amount of water needed to produce the BTU equivalent of ethanol vs. natural gas. |
| How Shale Gas Benefits the Consumer – March 2012 This essay was originally published in 2012. Ron—investment manager, engineer, farmer, and landowner—examines how the consumer of natural gas is benefitting from the lower price of natural gas. |
| U.S. Personal Consumption Expenditures Per Capita: 1950, 1980, and 2010 – January 2012 Pie charts of U.S. Personal Consumption Expenditures Per Capita: 1950, 1980, and 2010. |
| The Frugal Consumer: Will It Last? – November 2009 Any time you talk about recession, be aware there are multiple definitions — and if you are using one definition and listening or talking to someone with a different definition, you are not going to come to a common ground. Regardless of definition, it’s my observation that during a recession people tend to work a little harder, spend a little less, save a little more, and the pattern tends to heal itself. |
| The Signposts of Change: Economics, Rules, Markets – May 2009 We have three topics for today: what’s happening with the economy, the rules (informal and formal) that affect ongoing changes, and how it all gets reflected in the markets. |
| Where to from Here? – November 2006 It’s surprising how many people try to predict the direction of where the economy and the markets without understanding where we are today. If you don’t understand what’s going on today, how can you possibly predict what’s going to happen next? To understand today’s investing markets, you need to understand what’s led up to them. |
| How Much Money Are You Willing to Lose for a Theory? – May 2005 There are a lot of theories that people use when choosing investments for their portfolio. Unfortunately, they are only theories, meaning they are not always accurate or helpful. The challenge is to determine which ones are and which ones are not. The criteria are simple: Does this theory help me make better investment choices (does it make me money?), or does following this theory lead me to poor investment choices (does it cost me money?). There are currently several very popular theories that are costing people an awful lot of money. I’d like to discuss four of them. |
| Social Security Revisited: A Plan to Fix It – January 2005 This essay is a follow-up to Social Security by the Numbers. “How much did I pay into it?” and “What can I expect to get out of it?” In order to address these questions, we need to review Social Security in the aggregate—that is, what does the whole program look like? |
| Consumer Spending – January 2003 Consumer spending and consumer debt are often used as indicators of the health of the economy. If consumer spending is strong, the economy continues to grow. If consumer debt is under control, then the consumer spending is sustainable. In this essay, Ron takes a look at consumer spending over the last 55 years to gain perspective not only on the strength of the economy overall, but to evaluate changes in spending patterns over those 55 years. |
| Foreign Investing – December 2002 Just as many investors fail to take changes in inflation into account when evaluating investment choices, many also fail to take currency exchange rates into account when investing outside the United States. In this essay, adapted from a presentation delivered in December 2002, Ron takes a sharp look at foreign investing by tracking not only foreign stock performance, but tracking currency exchange rates as well. |
| The “Fad,” Recession, and Getting Back to “Normal” – December 2002 In December of 2002, the investing community was still trying to come to grips with the dramatic fluctuations in some stock prices (commonly referred to as the Tech Stock Bubble). Ron presents an argument of why those prices rose and fell, and what to make of it. |
| The Basics of Investing – December 2002 This booklet is a brief overview of the fundamentals of intelligent investment management — an attempt to answer the following questions: What works? What doesn’t? and Why? The Basics of Investing is the survivor’s guide to investing. We find that if you don’t get too far from the basics, you won’t get tagged too far off base. |
| How to Choose a Money Manager – July 2001 One of the most common mistakes that investors make is that they move their money from one manager to another frequently, and often at the wrong times. There is a tendency to choose a money manager based on good performance in the last year or two. But then when the manager has a bad year, the investor takes his or her business elsewhere. The problem with this approach is that, in essence, the investor has bought high and sold low. The solution is to do a better job choosing your money manager in the first place so you are confident staying with him or her in the down years. Ron shows us how. |
| Economics and Why Election 2000 is Important – October 2000 This essay is the capstone of Ron’s writings on economics. It weaves together his theories on inflation and its effects on the bond and stock markets, interest rates and what drives them, taxation and work incentive, and government spending. The common thread is the idea that people drive the economy. |
| Taxes: Choose Your Poison – January 2000 In 2000, Steve Forbes was campaigning to be the Republican candidate for president. One of his campaign promises was to reform the federal income tax, replacing it with a “flat” tax of 17%. We have printed the tax return you would have to file should Steve Forbes be elected president and get his programs enacted. When you have completed your tax return, you might want to fill out the form to determine the difference in dollars, time, and frustration between his proposal and our current system. |
| Prosperity – October 1999 What does “prosperity” mean to you? When I ask this question, people respond in terms of a better lifestyle, home, car, or vacation; a secure retirement; funding college education; and so on. But these responses describe how we consume prosperity. I believe we can’t consume prosperity unless we produce prosperity. |
| Muhlenkamp Musings on Economics – January 1998 Themes include free will and the government, the effects of inflation and recession on spending patterns, the effects of investment on the economy, and the effect of income taxes on work incentive. There is no free lunch. Prices are set by the buyer. We are all volunteers. |
| Competition for the Consumer – October 1997 We often hear the argument that a company or a country must do certain things “to compete” or “to be competitive.” This goal “to be competitive” is stated as the rationale for much of the cost cutting and downsizing in industry, as well as the privatizing of various tasks previously done by government, both in the United States and in other countries. |
| Review of “What Works on Wall Street” – July 1997 A friend asked me to review the book What Works on Wall Street, by James P. O’Shaughnessy. The book was published in 1997 by McGraw-Hill and is subtitled A Guide to the Best-Performing Investment Strategies of All Time. These are my comments: It is a useful book—chock full of data; the book is limited in scope, focusing on the “Wall Street” in the title instead of the “Investment Strategies” in the subtitle; the book is all hindsight. It should be titled, “What Would Have Worked on Wall Street.” |
| Why Did the Fed Raise Short-Term Rates? – April 1997 In April 1997, the Federal Reserve had just raised short-term rates in response to fears of inflation. Some people expected inflation because the GDP was growing, and Keynesian economic theory says that GDP growth causes inflation. The opposing school of thought, Classical economic theory, says that printing money causes inflation. Since in 1997 the GDP was growing but the government wasn’t printing money, it was a good time to take a look at the two theories. |
| Thoughts on the Future – January 1997 The future is good! The future is good because large parts of the world population are adopting freer markets. In Asia, in Eastern Europe, and in much of South America, the move from state-controlled economies to free-market economies is now irreversible. In a free market, the consumer is king. |
| The Trouble with Government Spending – October 1996 In 1996, as in any election year, there was much discussion of taxes and government spending. But the discussion often dissolved into political attacks and sound bites instead of furthering any true understanding of the underlying economic issues. In this essay, Ron offers his own perspective on taxes, federal spending, and their effects on the economy. |
| Problems with Investing for Income – October 1996 In “Estate Planning for Generations,” we began a discussion on the effective integration of good investing and good estate planning. In this essay, Ron shows how investing for “income” is flawed. What investors should do is invest to grow their assets. Though it may seem like semantics to some, it is a fundamentally different approach to investing and will lead to better investments and lower taxes. |
| Why I Like the Flat Tax – April 1996 The first reason I favor a flat tax is because I just did my taxes. Despite my being fairly knowledgeable about taxes and my having a fairly simple tax return, it took me the better part of a day to do it. This day’s work produced nothing of value to me, to the government, or to anyone else. It didn’t affect what I earn or what I pay in taxes. It was simply the time I spent in calculating the tax. And I am not alone. |
| The Fundamentals of Life Insurance – January 1996 As professional investors our perspective and conclusions differ from the conventional wisdom in several areas. One important area of difference is life insurance, which plays an important part in many financial plans. The following is a discussion of life insurance from an investment perspective. |
| Estate Planning for Generations – July 1995 We wrote an essay titled, “Fund Your IRA Every Year, or How to Retire Wealthy by Driving Used Cars.” We could have called it “How to Get Started on the Road to Wealth.” Once started on that road, there is an ongoing need for intelligent investment management, which is a topic we address in most of our essays. But there is also a need for an intelligent finish, and for the management of assets you have accumulated but are not likely to spend during your lifetime. This endeavor is called estate planning… |
| Fund Your IRA or How to Retire Wealthy by Driving Used Cars – April 1995 Recently, I commented to a friend that most investors buy stocks the way teenagers buy clothes. He responded, “How should they buy stocks?” Being a slow thinker, I didn’t have a ready answer then, but I do now. Buy stocks the way you would buy used cars. The truly amazing fact is, if you also buy used cars, you can get rich on these two actions alone. It is not hard to save $2,000 per year by driving a used car. |
| The Game of the Stock Market vs. The Business of Investing – January 1995 I entered this business in 1968. At that time, I had never owned a stock or bond, and I had never taken any courses in Wall Street finance. (I had taken courses in corporate finance.) So I began my studies with a clean slate. I soon learned that there are an unlimited number of people with ideas about how to invest your money, and all the ideas sound good at the time. Some of these people are paid to sell newspapers and magazines; some are paid to entertain on radio or television; some are paid commissions to sell financial products; and some are actually paid to manage other people’s money. Only this last group publishes the results of their advice. |
| Diversification: Too Much of a Good Thing – October 1994 We often hear the phrase “Don’t put all your eggs in one basket.” We think that’s good advice. We always use at least 20 baskets, never putting more than 5% of our assets into any one of them. But it’s still important to check the quality of the baskets. Not all baskets are well constructed. Easter baskets are designed to be pretty. They are okay for carrying a few eggs which are already hard-boiled, but they are not suited to carrying a full load of fresh eggs on a daily basis. Not all baskets are appropriate in all climates or for all purposes. |
| Are Stocks Too High? – January 1994 This essay, written in January 1994, looks at the assumptions behind stock valuation models and why they often mis-price the stock market. Using the same data, but modifying the model, Ron creates a new valuation model that better anticipates stock prices. Same data—different perspective. |
| What is Risk: Part II – October 1993 “What is Risk: Part I“ was written in October 1989 and discuss two categories of risk: the risk of volatility and the risk of losing money. In October 1993, one of Ron’s largest clients (a pension fund) was being told by a stock brokerage firm to increase its investment allocation to bonds, since bonds were “guaranteed” and the returns for the prior 10 years had been nearly as good as the average for stocks. Ron didn’t think the prior 10 years was the appropriate time to consider. In this essay he looks back to 1952 to examine the long-term performance of stocks and bonds. In doing so, he illustrates why the brokerage firm’s advice to invest in more bonds was misguided. |
| Beware of Good Yields – April 1993 This essay, written in April 1993, was published as investors had just come through a period when many of the risks of fixed-income securities had become apparent, but this did not stop them from continuing to look for high yields in fixed-income securities. This essay explains the yields and risks of fixed-income securities so that investors can know what to expect and what to watch out for. Remember, if it seems too good to be true, it probably is. Look for the hidden risks. |
| And the Climate Is – January 1993 This essay reviews the investment climate changes from the 1970s to 1993. Of particular interest is the lag in perception of the changes by the public. In the ’70s, people used strategies appropriate in the climate of the 1960s, and lost money. In the 1980s, people used strategies appropriate in the 1970s, and lost money. You don’t have to predict climate changes, but you must recognize them when they occur. |
| Social Security by the Numbers – October 1992 As with all government programs, the numbers are much more understandable when viewed on a per-person or per-family basis. The numbers in this essay are from 2004. The Social Security Web site states that a single person retiring in 2004 at age 66, who had always paid in the maximum, would receive $21,924 per year. A married couple with a nonworking spouse (“Family”) would receive $32,880. |
| Investing and Farming: Know the Climate – April 1992 The longer I manage money, the more it looks like farming. In mid-February 1992, we had 70º weather in Pittsburgh. While looking at the calendar one day, I started to ponder how a farmer without a calendar would know whether it was February, normally a poor time to plant crops, or April, normally a good time to plant. Of course, this very problem resulted in the invention of the calendar in the first place. It then occurred to me that investing in the stock and bond markets isn’t much different from farming—but without the benefit of a calendar. |
| Mom: The Squeeze on Your Income Will Continue – January 1992 Mom: since November 1990, you’ve seen the interest rate paid on one-year bank CDs fall. Many of your friends are waiting (hoping) for these rates to go back up, but it isn’t going to happen. To understand why, you really need to look no further than the actions of your children. Today your children are paying down their debts and refinancing their mortgages, often for a shorter term. |
| How We Benefit from Free Trade – January 1992 At the time of the writing of this essay, there was much debate whether or not the United States should sign the North American Free Trade Agreement (NAFTA). There was concern that such a large free-trade zone would hurt the U.S. economy. Unions feared jobs going to Mexico and Canada. Companies feared their prices would be undercut and they would lose business. Ron presented the following on the benefits of a large free-trade zone. |
| Personal Finances (Basic Financial Maxims Part II) – January 1992 Here are some additional notes and things I didn’t cover in “Basic Financial Maxims I Want My Kids to Know.” There are books available that go into great detail (maybe too much) on a whole shopping list of items relevant to spending and saving money. Two that I think you will find useful are Making the Most of Your Money by Jane Bryant Quinn and Wealth Without Risk by Charles Givens. |
| Why Interest Rates Won’t Go Back Up Any Time Soon – October 1991 In 1991, whether or not interest rates would “go back up” was a hot topic in economic and investing circles. In June of that year, Ron went to his M.I.T. reunion. He spent half an hour debating interest rates with an old classmate who has a Ph.D. in economics and is the chief economist at a major investment firm. His classmate was certain that interest rates were going to “go back up” because of the federal budget deficit. Ron wrote this essay to explain why the shift in the public from “Trade up on the equity” to “Prepay the mortgage” would drive rates down. |
| The More Things Change, the More They Stay the Same – July 1991 One major function of recession is to dampen consumer enthusiasm, typically after years of growth. Another function is to make the public reevaluate and reappraise those areas where prices have gotten most out of line with economic reality. During the 1970s, for example, farmers who sold land for twice its “economic” price watched their neighbors bid it still higher. In Texas, the assumption that the price of oil could only increase drove other prices up as well, especially real estate. |
| Basic Financial Maxims I Want My Kids to Know – July 1991 “There is No Free Lunch.”—Milton Friedman…There’s no free income either….The essentials of life are cheap. Only the luxuries are expensive….A bad product is always a bad deal. Don’t buy a car or appliance with a poor service record. Don’t buy a house with a cracked foundation….A good product can be a bad deal if the price is wrong. How do you know a good price? Shop around and be willing to walk away from any “deal.” |
| Open Letter to My Congressman – October 1990 I am disturbed by the current state of affairs in Washington, D.C. You and your colleagues in Congress are addressing issues important to the future of our nation and our economy. Here are my thoughts on these issues. |
| Why I Like Long-Term Treasury Rates – October 1990 As we noted in an earlier essay entitled “Defusing the Inflation Time Bomb,” it is unlikely in the future that short-term interest rates will stay significantly above inflation rates. Therefore, to get a real return, investors must opt for long-term debt (bonds) or equity (stocks). Each of these has associated risks, some of which are well known. We want to point out some of the risks in long-term bonds that are not well known or understood. |
| This is 20/20 – January 1990 Written in January 1990, this essay looks back at the international growth of free-market economies since the 1960s and their effect on America’s economic position in 1990. By understanding the past, we can better assess the present and better prepare for the future. |
| What is Risk – October 1989 This essay discusses risk in two categories: the risk of volatility and the risk of losing money. It also discusses long-term investing and diversification as preventive measures to these risks. The 2005 update suggests a third, and often overlooked, risk: paying too much for a stock in the first place. The preventive measure is knowing how to value stocks. |
| Defusing the Inflation Time Bomb – July 1989 The intent of “The Inflation Time Bomb” was to point out that long-term investment planning that focuses only on dollars and income, while ignoring purchasing power and assets, can be a trap. Dollars must be adjusted for inflation to get purchasing power, and incomes must be adjusted for the loss of purchasing power. Without these adjustments, assets will be depleted and so will income. The problems that arise from neglecting to make these adjustments have come to the fore over the last 30 years as inflation created large differences between nominal and real interest rates. |
| The Inflation Time Bomb – June 1989 The very rules that we were taught to conserve principal have become a trap. People are desperately trying to maintain their “incomes” by buying investments with high yields, believing that if they “spend only the income—don’t touch the principal,” the value of their assets and their incomes will remain intact. But it’s a trap! |
| One Family’s Perspective on the US Federal Budget – April 1988 This essay looks at the federal budget and entitlement programs on a per-person basis, which allows people to review them in terms they understand. It points out that government spending is a concern not just because of debt, but because it removes money from the private sector. It also discusses the growth of entitlements in the federal budget. |
| Worker Capitalism Triumphs – October 1987 As reflected in literature and the popular media from Dickens and Marx to Studs Terkel and Jesse Jackson, people have always viewed themselves as workers. As workers, they think of themselves as being in direct competition with owners and managers for a share of the wealth created by business enterprise. People naturally think in terms of net “take-home” pay, money that is then spent on the day-to-day necessities and luxuries of life. Yet take-home pay is only a part of the benefits received for work. |
| Wake Up America — Houses Don’t Make You Money! – July 1987 In the 1970s (when inflation rates were higher than mortgage rates), one of the best investment strategies was to borrow money. The easy way for people to borrow money was on real estate. It worked in housing, in farmland, and in commercial real estate (which was also an effective tax shelter). People continued to believe in the strategy through the 1980s, even though the economic climate had reversed in roughly 1981. Ron wrote “Wake Up, America—Houses Don’t Make You Money!,” in July 1987, to point out that change. |
| Why the Market Went Down – January 1979 This essay was written in 1979 for Ron’s peers in the investment industry. Price-to-earnings (P/E) ratios on stocks had declined from 17 to 7 in just seven years, and no one seemed to understand why. A short glossary has been added at the end of the essay for easy reference. |