The State of Macro is Awful

In his latest piece Paul Krugman defends the state of modern macro citing how much of the modern modelling was used quite effectively by certain economists (basically, himself and a few others).  He says this was a big deal because it led to many accurate predictions.  Which is fine except…

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Understanding the Deposit:Loan Discrepancy & Why It’s Not Scary

I’ve received a number of emails about this post at Zero Hedge which shows the deposit:loan ratio at JP Morgan.  The authors cite this as a sign of “all that’s broken with the US financial system”.  That description isn’t far off, but I do think it deserves some clarification. First, forget…

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Five Ways to Keep Out of the Bond Liquidity Trap

Bond investors are used to managing interest-rate risk and credit risk. But the financial crisis should have taught us that there are times when liquidity risk can be just as important to manage. Now is one of those times.


Economics is a Social Science, not a Natural Science

Economics is categorized as a “social science” alongside anthropology, psychology and sociology.  Which makes complete sense considering that economics studies the relationships that dictate how we produce and consume goods and services within the society.   But you wouldn’t know that from the way many economists discuss economics.  Too often…

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The Changing Face of the Global Bond Market

This meshes nicely with my recent discussions about the importance of understanding the global financial asset portfolio for the purposes of portfolio construction (see here and here).  I’ve emphasized that the only truly “passive” portfolio is the portfolio of total outstanding financial assets.  Of course, that portfolio is constantly changing…

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Confessions of a Financial Services Worker

I’ll never forget the day I got officially fed up with Wall Street.  I was in my early 20’s and I had been working as a broker on a big team in what was basically a dream position at the time.  I was handed a huge amount of assets, being…

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What Are the Odds We’re Heading For Another Crash?

“The fundamental law of investing is the uncertainty of the future.” – Peter Bernstein


The Great Mortgaging

The Global Crisis prompted Lord Adair Turner to ask if the growth of the financial sector has been socially useful, catalysing an ongoing debate. This column turns to economic history to investigate whether the financial sector is too big. New long-run, disaggregated data on banks’ balance sheets show that mortgage lending by banks has been the driving force behind the financialisation of advanced economies. Real estate lending booms are chiefly responsible for financial crises and weak recoveries.


Investing for Tax-Efficient Portfolio Income

With tax-exempt income from US municipal bond portfolios still near historic lows, investors spending from their portfolios can no longer get the income they need by simply increasing their allocation to high-quality, intermediate-duration bonds. As a result, many investors today are chasing yield into dangerous territory.


Are There Flaws in Ray Dalio’s “Machine”?

I was recently asked in the Forum to critique Ray Dalio’s popular video describing how the “economic machine” works.  If you haven’t seen the video you should take a look.  It’s very good.  But I do have some issues with his description of the economic machine.  Here are some of…

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What Will be the Most Likely Cause of the Next Big Downturn?

Predicting a tail risk event is just about always a silly thing to do.  The markets are too complex to predict such things.  Of course, this doesn’t mean we can’t be prepared, but you get the point.  So, knowing that we shouldn’t try to predict what the next big black…

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It’s Always the Same Novel

the truly useful and sound investing principles will always stay the same.


Risk, EMH and Grocery Store Lines

Proponents of the Efficient Market Hypothesis are masters at marketing their concepts by simplifying them into easily discernible ideas.  For instance, I ran across this post by Tim Harford who writes for the FT in which he discussed how the grocery store makes for a good EMH analogy.  The story goes…

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Good versus bad

The Deficit is Down Because the Private Sector is Up

Yesterday’s CBO report on the deficit is being hailed as a demonstration in budget cutting by some people.  Which is weird because total government expenditures are actually UP on a 1 year, 5 year and 10 year basis (not to mention the fact that a “deficit means”, you’re, um, still in…

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The Fed: Easy Peasy

The market was “shocked” by today’s Fed Minutes which showed that the Fed is much more dovish than many think, that is, they aren’t raising rates any time soon.  The hot topic of late has been all about how the Fed is going to transition from Tapering to tightening interest…

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