The Profits-Investment Disconnect? (Pretty Nerdy)

I always talk about how important it is to understand accounting when doing economics.  While most economists want to build rigorous mathematical models of the world I would much prefer rigorous stock-flow consistent models of the world by understanding the relationship between income statements, cash flow statements and balance sheets….

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We The Economy – 20 Short Films You Don’t Need to Watch

Morgan Spurlock has a new set of films out supposedly explaining how the economy works.  They’re 20 short films that explain various elements of the monetary system and economy.  The only problem is that the films are filled with basic errors.  For instance: The film on “What is Money” uses a…

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Don’t Take This Personally

“I wasn’t unlucky, I got outplayed. I got outplayed that time. But I know I’m good enough to sit at that table.” – Mike McD, Rounders


Global Inflation Update – Continued Disinflation

Global disinflation has picked up pace in recent months and several regions of the global economy are now on the verge of a full blown deflation. The latest readings on inflation are just about unanimous – there’s widespread disinflation, or a slowing rate of positive inflation. The latest reading out of…

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Deflation Is Getting Too Popular

I cannot believe the volume of the news stories I am seeing in the financial media, with people worrying about impending deflation. And as any card-carrying contrarian knows, when a topic gets too popular, you are near a turning point.


Rail Traffic Just Keeps on Chugging

The latest trends in rail traffic showed more of the same that we’ve been seeing for the last few months.  Interestingly, despite the Ebola scare and the brief Europe shock, there was no substantive change in rail trends. The latest weekly reading came in at 3% which is just below…

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Equity Shock Absorbers Pass October Test

After nearly nine months of calm, equity market volatility has returned and is threatening investors with the prospect of losing money. We believe the recent episode in US and global stocks reinforces the case for having a strategic allocation to equities that can withstand shocks.


Negative Interest Rates – How’s That Working Out?

Back in June the ECB initiated a small negative interest rate on deposits held at the ECB.  Over the last 5 years we’ve repeatedly heard economists and other pundits say that Central Banks just need to reduce the demand for Excess Reserves by charging a negative interest rate and that this…

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What This Nerd is Reading: X-CAPM – An Extrapolative Capital Asset Pricing Model

Just passing this paper along which I missed.  Noah Smith mentioned it yesterday on Twitter and it looks pretty interesting.  If any fellow nerds have thoughts feel free to use the comments… X-CAPM: An Extrapolative Capital Asset Pricing Model Nicholas Barberis, Robin Greenwood, Lawrence Jin, and Andrei Shleifer Yale University…

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After the Beta Trade in Emerging Markets

By Sammy Suzuki and Morgan Harting, AllianceBernstein It’s getting harder to generate equity returns in emerging markets (EMs). Simply chasing the index—the so-called beta trade—won’t do the job anymore. But with a more discriminating, active approach, we believe investors can still capture opportunities in the next phase of the EM growth evolution….

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Facts (and Minds) are Stubborn Things

Facts may well be stubborn things essentially, but our mental mindset ( a less redundant concept than you might think) means that they are not nearly stubborn enough. That’s because our minds are far more stubborn still.


Lies Investors Tell Themselves

“The reason I talk to myself is because I’m the only one whose answers I accept.” – George Carlin


Q&A – Answers

Here are the responses to this week’s Q&A:


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.”