Low Risk, High Rewards: The Low Volatility Anomaly
It’s an axiom of standard economics that you don’t get above average returns without taking above average risks. No risk, no reward. It’s an appealing idea, an extension of the entrepreneur's creed: you don't become successful without taking chances. It’s a meme that’s gone viral, an idea that permeates discussions about investment, drives hard headed analysis and leads us to celebrate the risk taking achievers in society.Investment focus - Emerging markets face painful carry trade pay-back
Emerging economies may be on the cusp of a great unwinding of borrow-low invest-high carry trades, through which an estimated $2 trillion has flooded mainly into their debt markets in the past five years.Goldilocks and the bears
EQUITY markets started 2014 in a buoyant mood, after 30% gains for American shares in the previous year. Investors seemed to believe that the worst of the financial crisis was at last over and that the global economy was returning to “Goldilocks” mode, with growth neither so strong as to cause inflation nor so weak as to squeeze profits, but “just right”.Know your limits
"You don't need to be an expert in order to achieve satisfactory investment returns. But if you aren't, you must recognise your limitations and follow a course certain to work reasonably well. Keep things simple and don't swing for the fences."Keynesian Economics’ Dangerous Return
There is not an economy anywhere whose long-term prospects can be said to have been improved as a result of the Keynesian policies that were applied in the aftermath of the GFC scuttles. A sober appraisal of the consequences scuttles any and all attempts to argue the contrary.Collective emotions and the European crisis
Nationalist, conservative, and anti-immigration parties as well as political movements have risen or become stronger all over Europe in the aftermath of EU’s financial crisis and its alleged solution, the politics of austerity. This development has been similar in countries like Greece, Portugal, and Spain where radical cuts to public services such as social security and health care have been implemented as a precondition for the bail out loans arranged by the European Central Bank and International Monetary Fund, and in countries such as Finland, France, and the Netherlands that have contributed to the bailout while struggling with the crisis themselves. Lessons Learned from the Financial Crisis
The five-year anniversary of the stock market bottom in March 2009 may be a good time to look back at what happened and how investors reacted. With the benefit of hindsight, the financial crisis provides an opportunity to learn and apply those insights to help become better investors.How animal spirits drive the market
When John Maynard Keynes famously said that “animal spirits” drive investment and market sentiment, he didn’t specify what these spirits were, as he didn’t have any training in biology.Are Economists Conservatively Biased?
Economists get asked a lot of questions. Some of the classics are why we don’t recommend raising wages to increase demand or why shouldn’t the central bank print money and distribute it to every household so that we are all richer? We use economic logic to explain that increases in wages will have the opposite effect of boosting demand because higher labour costs will reduce employment and GDP growth.Seth Klarman: Fed Created Truman Show Style Faux Economy
Saying the fund “drew a line in the sand” when it decided to return roughly $4 billion to clients at year end, Seth Klarman reflected on the decision, saying he wanted to control the fund’s head count, noting “we could not allow the firm to grow without limit. We are wise enough to know a good thing when we see it, and cautious enough to want to cherish, protect and nurture it so that we might maintain its essential qualities for a very long time.”Planning an Economy Is Not Elementary
In the absence of prices, could a central planner efficiently run an economy? Before you answer, I’ll drop the Hayekian proviso that the planner be vile. Instead, I’ll only ask you to consider a planner who is a soccer mom wanting to maximize happiness among all. Would you still answer in the negative?Forget GDP — We Need Numbers That Matter for the Questions We Have
No single number has become more central to society in the past 50 years than GDP — Gross Domestic Product. Throughout the world, it has become a proxy for success and for failure. It is a profoundly important indicator. It is also a profoundly flawed one.Visualizing the Economic Ties between Russia, Ukraine, and Europe
As the situation between Ukraine and Russia continues to unfold, Europe and the U.S. are mulling what effect economic sanctions may have — not only on Russia, but on their own vulnerable economies. The Sherlock Holmes of Accounting: Howard Schilit Explains the Mystery of His Art
Because of his track record in detecting the manipulation of financial results, Howard Schilit has been called the Sherlock Holmes of accounting. Whereas most forensic accountants come in after the fact for the investigation and litigation, Schilit is the rare exception who comes in to detect accounting manipulation before it is widely. The Illusion of 'Investing'
History exhibits a long and deep pool of empirical evidence for thinking that a mean-reverting process dominates price behavior in financial and commodity markets through time. Embracing this idea in real time, however, is devilishly difficult, which helps explain why so many investors find it tough to earn a satisfying return over one or more business cycles. Marketers Look to Channels, Buying Stages When Measuring Content ROI
Content has become a beneficial marketing tool for companies of all sizes looking to engage buyers, collect valuable behavioral data and educate prospects. While content can be a precious asset if used correctly, many marketers are struggling to understand its impact on the company’s overall revenue.The Myth of Resource Efficiency: The Jevons Paradox
'This book is the most comprehensive attempt at dismantling the efficiency myth: it examines the subject from a variety of practical and theoretical perspectives, and while it may leave an unsuspecting reader rather depressed it leaves all of us better prepared to face the reality.'How Inflation Destroys the Wealth of Nations
In this book, Brown deploys his formidable expository skills to argue the thesis that the current crisis and the impending collapse of the EMU (European Monetary Union) are attributable to profound flaws in the original monetary foundations of the euro. These flaws rendered the EMU particularly vulnerable to the asset price inflation virus which was originally unleashed on an unsuspecting world by the Federal Reserve shortly after the euro saw the light of day in 1999.Secular Stagnation and Capital Goods’ Prices
According to Krugman, if the natural rate of interest has become persistently negative—i.e. new capital projects are expected to yield a negative return—then investors will look to existing durable assets like gold or land that yield no less than a 0% return. The prices of these goods will be bid upwards, bubble-like. Instead of laissez faire economics, root values in our shared humanity: column
Know the history of markets to know how we can advance. In its 17th century roots, “free” is not an adjective, but a verb. Before we had what came to be called capitalism, we had mercantilism: merchants enabled to engage in business enterprise when empowered by the monarch.