Economics & Theory

Lessons From The Palindrome

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February 26, 2014
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George Soros, aka “the Palindrome,” recently reclaimed the top spot among the top ten hedge fund managers of all time. A fitting opportunity to revisit his wisdom...
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Take Your Lame Consensus Forecasts and Shove ‘Em

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December 18, 2013
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Rant warning: The annual predictions from Wall Street are obnoxiously worthless. You'd be better off listening to Britney Spears or Spongebob Squarepants...
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Modern Portfolio Theory is for Nitiots

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December 21, 2012
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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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What if Recovery is Actually Bearish?

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October 25, 2012
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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?

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September 19, 2012
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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

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September 14, 2012
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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

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August 28, 2012
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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

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July 25, 2012
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)

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June 26, 2012
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

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June 19, 2012
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…

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May 30, 2012
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

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February 23, 2012
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

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February 2, 2012
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

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May 10, 2011
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

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April 10, 2011
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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