It’s no secret that I am skeptical of the approach to stimulus via Abenomics. I think it’s potentially creating a very dangerous disequilibrium in markets like their stock market that could cause more economic turbulence than stability. But one thing I definitely don’t think is that Abenomics is going to bankrupt Japan or cause the bond vigilantes to suddenly spring [...]
Myth Busting
Debunking Reinhart & Rogoff’s “Growth in a Time of Debt”
Few papers have received so much unwarranted attention as Reinhart & Rogoff’s “Growth in a time of debt”. Two years ago Robert Shiller of Yale wrote a very critical piece on the paper stating: “if one reads their paper carefully, it is clear that Reinhart and Rogoff picked the 90% figure almost arbitrarily. They chose, without explanation, to divide debt-to-GDP [...]
Sell in May and Go Away?
As May rolls around you’re bound to hear an endless number of pundits and market participants discussing the “sell in May” phenomenon. CXO Advisory has an excellent data analysis of the sell in May theory. In short, buy and hold beats “sell in May”. So maybe we can all move past this silly seasonal pattern that adds little value to [...]
Japan Isn’t Bankrupt
I’ll keep this short and sweet. I’m not a big fan of the Japanese economy at present or what the policymakers are doing to drive the economy/markets higher. I think they’ve made a mockery of their stock market and that this “wealth effect” is a misguided approach to fixing their woes. But I am equally critical of those who think [...]
Bernanke on Why Rates Might Rise
One of the more common questions I get in the Ask Cullen section is “what if interest rates rise in the USA?” Of course, that would have broad ramifications on the cost of US government debt, asset prices, the recovery, etc. But you have to keep the sequence of events in order here and ask yourself first, “what will [...]
Social Constructs, Self Constraints & Monetary Myths
I really liked this piece by Paul Krugman on money in general. Of particular importance is this paragraph: “For people like me, on the other hand, the economy is a social system, created by and for people. Money is a social contrivance and convenience that makes this social system work better — and should be adjusted, both in quantity and [...]
Bad Inflation Bets and Why They Were Bad
Brad Delong rightly slams Austrian economist Robert Murphy this morning for a bet he made in 2009 regarding inflation. Murphy stated that headline inflation would hit 10% by January 2013. Well, here we are with 24 hours to go and the latest monthly CPI reading is 1.8%. I don’t want to just pile on Murphy with personal attacks. Instead, I think [...]
The Mainstream Economists (Finally) Realize Bond Vigilantes are Mythical….
It’s interesting to see the mainstream economists now telling everyone how there are no such things as bond vigilantes in the USA (see DeLong and Krugman here). This wasn’t always the case. Krugman and Delong were once fearful of bond vigilantes. So it’s nice to see some flexibility in understanding here. Anyhow, over the last few years I have published [...]
Outperforming the S&P 500 is not Easy. Don’t Be Fooled Otherwise.
I was browsing MarketWatch and noticed this article titled “Beating the market is easy”. It’s a catchy title and I like to beat the market so I clicked on the link. The article outlines 10 ways you can beat the market. The market, in this case is the S&P 500. The author outlines a few different strategies: Implementing leverage [...]
How Much Larger Could the Budget Deficit be?
This one’s really going to throw everyone for a loop. Now, I know all we can talk about these days is how to cut the budget deficit. We need to tighten our belt so the government can live more responsibly and halt the risk of becoming the next Greece, right? Wrong. Let’s explain why. But let’s remember a few things [...]
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