Can We Identify Good & Bad Forecasters?

Forecasting is part of life.  And it’s certainly part of economics and finance.  Anyone who puts together a view of the economy or an investment portfolio has to make some forward looking assumptions.  They have to make forecasts about how the future might play out even if they’re just making…

Read More→


No, Higher Velocity Will Not Necessarily Mean Higher Inflation

In my book I go into some detail about the equation of exchange (MV = PQ) and why it can be terribly misleading. In essence, the equation is based on totally unrealistic assumptions such as the idea that “money” is some easily discernible item in an economy where financial assets…

Read More→


The British Origins of the US Endowment Model

Yale University has generated annual returns of 13.9% over the last 20 years on its endowment – well in excess of the 9.2% average return on US university endowments. Keynes’ writings were a considerable influence on the investment philosophy of David Swensen, Yale’s CIO. This column traces how Keynes’ experiences managing his Cambridge college endowment influenced his ideas, and sheds light on how some of the lessons he learnt are still relevant to endowments and foundations today.


The Core of the Modern Bond Strategy: Go Global

“Keep Calm and Carry On” reads a popular World War II–era British motivational poster. We think the first half of the slogan is good advice for bond investors in today’s uncertain markets, but we’d substitute the second with “Go Global.”

thumbs up

Yes, Boosting Gross Exports (and Imports) Would be Wonderful…

In a post today Scott Sumner says that the world would be better off if we could increase gross exports.   He refers to this Tyler Cowen post before going into more detail calling it “wonderful”.  I’ll probably never understand the Market Monetarism way of thought.  It just strikes me…

Read More→

Broken Euro

Will New Greek Drama Threaten European Periphery?

Markets are reacting badly to Greek plans to exit its bailout program early. Uncertainties are being heightened by the prospect of early general elections. The end-result has been a sharp sell-off in Greek sovereign bonds, which has raised fresh concerns about the potential for spillover from Greek risks to other peripheral markets.


“the most crucial factor for investing success is cost” – FALSE

I was intrigued by this Vanguard response to PIMCO’s defense of active bond management in which a Vanguard spokesman said: “We believe the most crucial factor for investing success is cost” This is an empirically incorrect statement.  Yes, costs matter a great deal.  But the way you choose to allocate your…

Read More→


The Unintended Consequences of Fed Policy

For the most part, I think it’s safe to say that Central Banks are designed to help the economy.  As I’ve described before in detail, at their most basic level Central Banks are just big clearinghouses.  For instance, in the case of the Fed it’s really just an entity that…

Read More→


Interest Rates are less Important Than Economists Think

I complain about the state of modern economics a good deal because, as a market practioner and an entrepreneur, I notice that much of the textbook theoretical modeling doesn’t actually reflect anything realistic about the way the world works.  While there are many flawed econ and finance concepts such as…

Read More→


Why I Love the Stock Market

“The thing that most affects the market is everything.” – James Playsted Wood


The Good, the Bad and the Ugly of Falling Energy Prices

The recent correction in the price of crude oil should have an immediate positive impact on the US consumer as well as on a number of business sectors. However there also may be a significant economic downside to this adjustment. Here are some facts to consider.


Sunday Q&A

I wanted to open the comments up here for a Q&A since I haven’t done one in a while.  With the markets so volatile and the global economy looking shaky again I figured people might have some questions.  So fire away if you want.  Anything goes….


Three Bullish Macro Charts

You didn’t think I was going to let you go into the weekend all depressed now did you?  I mentioned last week that the recent downturn in stocks appears to be a purely non-USA event.  That is, the US economic data that’s been coming out in recent weeks really looks no…

Read More→


Implied Vol Dislocation

The recent spike in volatility has created a “dislocation” in US equity options markets.


“Why Did the Stock Market Decline?”

Whenever the market moves violently in one direction or the other we tend to ask questions after the fact.  In recent days the stock market has been falling rather rapidly.  And people want answers.  But I find this questioning misguided.  Who cares why the stock market went down.  Answering that…

Read More→