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Home / Tag Archives: Finance: stocks, options, etc.

Tag Archives: Finance: stocks, options, etc.

Bubble mutual funds

Over the last decade, I’ve done numerous posts explaining why the bubble hypothesis is not useful. The bubble hypothesis claims that asset overvaluation is often “obvious” in real time, and implies expected future underperformance, on average. I’ve also argued that the lack of successful “bubble funds” is an indication that asset price bubbles do not exist. If they did, then mutual fund managers would be able to outperform the market by taking short positions in a...

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Is Fed policy “premised importantly” on market monetarism being true?

Market monetarists favor a policy regime where the instrument setting creates a policy stance that the financial markets believe will achieve the Fed’s policy goal. Thus, if the Fed’s goal is 2% inflation, then the monetary base (or the fed funds target) should be set at a level that the market believes will result in 2% inflation. Here’s Yahoo.com: Is the Federal Reserve beholden to short-term volatility in the financial markets? A handful of Fed-watchers argue that...

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You’re Not Using the Money for Anything

After watching scary British crime dramas, my wife and I often turn to a rerun of The Big Bang Theory for comic relief. I find myself laughing almost as hard the 10th time I see an episode as I did the first time. Last night, though, one comment of Penny’s stood out and it bugs me every time I hear it. She learns that even though she is the high earner in her marriage, her husband Leonard has squirreled away over $6,000 in a secret bank account. She’s upset. I get...

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A (strong) letter on inheritance taxes

High(er) inheritance taxes are relatively popular among people otherwise not unfriendly towards private property, including the great James M. Buchanan. On July 20, the FT has published a letter, from Mark G. Brennan, that claims that targeting inherited wealth as “unearned” may be but the first step on a slippery slope. It is per se quite a surprising fact, as these philosophical arguments (of a libertarian kind) seldom get into letter pages. So writes Mr Brennan: As...

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Tim Herrera’s Confusion About How to Get Rich

Think on the margin. Earlier this month CNBC generated an outrage cycle about money advice by tweeting this story, in which the personal finance professional Suze Orman claimed that buying coffee means “you are peeing $1 million down the drain as you are drinking that coffee.” (Even the legendary writer Susan Orlean weighed in.) Earlier this summer, USA Today generated a similar negative buzz when it published an article from the money website The Motley Fool that...

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Is the Fed inflating asset prices?

I recently spoke with some very smart people who work in the financial industry, and encountered a widely held view that asset bubbles are created by easy money policies. I think that view is wrong, but first let me acknowledge that there is a great deal of evidence in favor of that hypothesis: 1. In recent years, asset prices have often been unusually high by historical standards. 2. In recent years, the Fed has often adopted a low interest rate policy, with QE. 3. ...

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Save us from the (economic) puritans

[Disclaimer, this post uses “puritan” as a term for those suspicious of pleasure, not actual members of the Puritan religion.] Bret Stephens recently had this to say, in defense of Trump’s tweets on issues such as tariffs: And as an astute friend pointed out to me recently, Trump’s scary tweets even seem to have the effect of tempering market exuberance, acting as a kind of check in lieu of interest-rate hikes. Stephens’s friend may be astute, but this comment fails...

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Oregon Government Rips Off Workers

One myth – perpetuated by the National Employment Law Project – is that state mandates expand opportunity to retirement savings, especially for low-income workers. They don’t. OregonSaves initially defaults worker contributions into a conservative capital preservation fund before redirecting contributions to a life-cycle fund once balances exceed $1,000. Since inception in 2004, the capital preservation fund has offered a paltry nominal return of 1.52% (essentially...

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Bitcoin is not a bubble

Over the past few years, I’ve noticed that people tend to predict that Bitcoin is a bubble, and then later suggest that a subsequent price drop shows that it was a bubble. Thus lots of pundits said Bitcoin was a bubble when its price was at $30. Then when it was at $300, even more suggested that it was a bubble. Each time the price plunges they say “I told you so.”  Now the price of Bitcoin is over $3300, and even more people are saying it was a bubble.  Noah Smith...

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Don’t be afraid to catch a falling knife

Here's the Economist: JOHN KENNETH GALBRAITH, a quotable economist, observed that one of the deeper mysteries is why, in a falling market, there is still a buyer for every seller. It is a conundrum that bond investors must now contemplate. Since January the yield on a ten-year Treasury bond has risen (and thus bond prices have fallen) with scarcely a backward step. It is above 3% for the first time in...

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