Download this and thank me later
The brand new Credit Suisse Global Investment Returns Yearbook 2012 is out!* This is a must-download for any one seriously interested in investing. In addition [...]
Against Risk Parity
Many investment ideas are promising so long as few do them. Yes, there is an opportunity, but it is limited. “Shh, don’t tell everyone about it.” Thus, the concept of “risk parity.” Lever every asset class up until it has the same volatility as common stocks. Under theoretical conditions, one could make extra money doing...
Nothing in excess, including momentum
“Nothing in excess.” – Inscription from the temple of Apollo at Delphi (Wikipedia) The financial crisis and ensuring bear market threw the traditional idea of [...]
Faith, reality and financial models
Wall Street runs on models. Indeed one could argue that the misapplication of models helped cause the financial crisis. As Felix Salmon wrote back in [...]
Improving Publishing in the Social Sciences
I’ve been toying with an idea that I think would improve economic and biometric research, but will never get adopted. Split research into two components: Generating research ideas Doing the research But here’s my twist: economists and biometricians could submit ideas to a central database, but would be barred from doing that particular project. No...
Equilibrium
Equilibrium is a concept that economists believe in so that they can get their easy math to work, so they can publish. The truth is that the economy and financial markets are always outside of equilibrium. Capitalist economies are complex, and do not fit the models of neoclassical economists. Goods and services come and go. ...
Financial Complexity, Part 1
FT Alphaville had an article recently where they featured an academic paper Complexity, Innovation and the Regulation of Modern Financial Markets by Dan Awrey. It’s not a mathematically complex paper, though it deals with complex financial instruments and it is quite relevant to our present troubles. Let me start by quoting the beginning of the...
Leverage Isn’t Free
I’ve been running across an idea that outperformance is possible with safe assets, so why not take those assets and lever them up until their volatility is equal to common equities, and earn more at the same level of volatility? That was my only significant disagreement with the book Expected Returns. I think this is...
Rationality is Overrated
When I was in school, I was the “class brain.” (sigh, I had a hard time with it, but after I became a Christian, I won people over by offering homework help for free) I even have this glow-in-the-dark rubber brain that my senior class awarded me. But it’s not worth that much. There are...
When I was Young
I can’t place it, but when I was 5 years old or so, sometime in 1966, my Mom showed me The Milwaukee Journal, and pointed me to an entry for Litton Industries preferred stock. She told me that I owned some shares of the stock, and that it was good for me if the stock...
Why your company should embrace March Madness
March Madness, and the pools that come along with it, are often blamed for productivity losses in the American economy. It might be the case that companies should embrace the distraction that is March Madness and not block employees from visiting Internet sites in search of the latest scores and updates. Or that is at...
The power of connection
One need not look far for the influence of social media these days. The value of the primary social networking companies these days (Facebook, Twitter) seems to climb ever higher. Fortunately for investor these are real businesses with real profits. More so it highlights the belief that these companies will be central to the way...
