In the following paragraphs, we shall defend the assertion that Modern Portfolio Theory is for Nitiots. To begin, let us define our terms...
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Economics & Theory
Modern Portfolio Theory is for Nitiots
What if Recovery is Actually Bearish?
If it sounds absurdly counter-intuitive that a recovery could be bearish equities, just consider the impact of central banks as a counterbalance. Losing that counterbalance could tip the scales lower (in terms of equity prices) to a greater degree than organic improvement tips them higher...
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Is China the Biggest Malinvestment Case of All Time?
If there is a credible counter-case as to how China will evade all the lessons of history, slip past its egregious mistakes unscathed, mimic the worst sins of the West while paying no penalties, and turn the essential tenets of free market economics upside down in doing so, we would love to hear what...
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The Federal Reserve is Terrified of the Tea Party
The Fed may have further decided that President Obama's reelection is so important, it is worth risking all manner of bad optics to make it happen (by juicing the economy prior to November as much as it possibly can)...
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The Magical World of Charles Evans
The Magical World of Charles Evans: Can someone, anyone, make a credible case for the chain of logic that Evans assumes - the if / then assertion that "if" the Fed buys more bonds, "then" unemployment will fall?
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The Bernanke Cargo Cult: Bankrupt Policy for a Bankrupt Generation
There is a class of equities we call “cult stocks.” Roughly speaking, a cult stock is a high-growth concept stock, with an extraordinary degree of emotionally invested ownership. The classic cult stock typically has all of the following: An excellent story Excellent earnings / growth trends Leadership in its market space Membership in a...
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In Defense of U.S. Treasuries (or, Debunking an Ideological Rant)
As a general rule, it is wise to avoid debates on emotionally charged topics. This extends to certain areas of trading and investing, where schools of thought take their differences as seriously as competing religions. It also extends to certain macro topics — relating to “moral” matters such as debt, the corruption of the...
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With Uncertainty Rampant and Politics Dominant, Charts Matter More Than Ever
In times like these it is very important to understand the message of price, and the value of charts as an extremely efficient short-hand means for communicating broad-based fundamental assessments. But first a quick (or maybe not so quick) aside: There is a false dichotomy between ‘fundamental’ trading on one side and ‘technical’ trading...
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In case you still thought markets were efficient…
I love this Barry Ritholtz quote, re, Facebook: The ongoing decline in Facebook stock is little more than a reassessment of the private market’s valuation — now recognized as somewhere between wildly optimistic and clinically insane. Cooler heads are now giving Facebook a more realistic valuation somewhere in the teens. Even at $20 the...
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What Bowling and Trading Have in Common
There is a fun WSJ piece out: “The Secret to Success in Bowling: Getting Hot.” Basically two guys from Yale discovered that, while “the hot hand” in basketball and other sports is a myth, in bowling it’s the real deal. In basketball, for example, a shooter’s “hot streak” really just represents fluctuations around the...
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Living in a Zero Percent World
After last week’s Federal Reserve announcement, investors are mentally adjusting to an extended ZIRP mentality — three more years of Zero Interest Rate Policy (’til the end of 2014). The jobless rate is near a three year low, but that’s still too high for the powers that be. So what are some of the...
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Inflationary Boom-Bust Cycle Redux
In December of last year, via The Trouble With MMT, we laid out an explanation of the inflationary boom-bust cycle, as driven by unproductive spending and excess debt. Given the “busts” in various inflated assets as of late, it seems timely to revisit that particular section of the post… JS ~~~ Productivity – tangible...
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A Casual Introduction to the Theory of Constraints
Some off-the-cuff thoughts from 30,000 feet (both literally and figuratively, via coast-to-coast plane trip)… There is a guy named Eli Goldratt whose ideas I like a lot. Goldratt is a sort of industrial management theorist. His specialty (from what I understand) is lean manufacturing – greatly increasing the efficiency of factories and businesses with...
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A 22nd Century Thought Experiment, Or, A World Without Modern Monetary Theory
Over at the Mercenary Seeking Alpha page, the debate on Modern Monetary Theory (MMT) continues to chug along. Like the Energizer Bunny, it just keeps going and going — 175 comments and counting. You can see them here. I’ve tried to extricate myself multiple times, but keep getting pulled back in. Below is an...
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Weekender: Stores of Value, Feedback Loops, and Gresham’s Law
In between family, presents, and the eating of Christmas cookies, the holidays gave time to revisit a book or two. One such book was Paper Money by Adam Smith (aka George Goodman). Paper Money is a timely chronicle of 1970s economic conditions — housing bubble, energy crisis, runaway inflation and so on — published...
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