Macroeconomics

This category contains 18 posts

Book Review of Bear Market Investing Strategies by Harry Schultz

The full title of this book is Bear Market Investing Strategies by Harry D. Schultz (2002). Harry Schultz wrote the International Harry Schultz Letter for 45 years, with his last newsletter in January 2011 when he retired at 86. 45 years is a pretty amazing run! This book is a quick read coming in at ~150 pages. The … Continue reading

Book Review of The Permanent Portfolio by Craig Rowland and J. M. Lawson

The full title of this book is The Permanent Portfolio: Harry Browne’s Long-term Investment Strategy by Craig Rowland and J. M. Lawson (2012). This is a book about the Permanent Portfolio investment strategy suggested by Harry Browne, which is a simple asset allocation strategy that historically has provided steady returns over the long-term while having very low drawdowns. … Continue reading

Ray Dalio at DealBook Conference: Interest Rates Could Turn in Late 2013

Watched a video where Ray Dalio (founder of Bridgewater Associates), David Rubenstein (co-founder of The Carlyle Group), Stephen Schwarzman (co-founder of Blackstone Group) participated in a panel discussion at New York Times’ DealBook “Opportunities For Tomorrow” conference. The conference took place on December 12, 2012. Below are some notes I took from the discussion. Ray Dalio … Continue reading

David Einhorn on Fed’s Zero Interest Rate Policy

Just read this article written by David Einhorn on the Fed’s zero interest rate policy (ZIRP), dated May 3, 2012. Einhorn’s View on the Fed’s ZIRP Near zero interest rates make traditional risk-less instruments like CDs and Money Markets unattractive to savers. The Fed thinks that it will make people buy stocks, which pushes up … Continue reading

U.S. Still in a Secular Bear Market

Came across two interesting pieces from Barry Ritholtz today. A presentation that he made on May 23, 2012 in a UBS Investment Conference which he has kindly shared. Link: http://www.scribd.com/doc/94545487/UBS-Morning-Call-May-23-2012 Key Points U.S. is still in a secular bear market, we are over halfway in a rebound rally, once that rally tops, the next correction is … Continue reading

Book Review of Unexpected Returns by Ed Easterling

The full title of this book is “Unexpected Returns: Understanding Secular Stock Market Cycles” by Ed Easterling. How I came across this book in the first place was when I was looking into the relationship between stock market returns and a number of other factors, such as interest rates, inflation, earnings, dividend yield, unemployment, GDP, … Continue reading

Federal Reserve Led by the Stock Market

David Einhorn was interviewed by Charlie Rose on 6 Dec 2010. See here. One interesting thing that David pointed out was that the Federal Reserve is inappropriately concerned with the reactions of the stock market. He said he realized it when on the Martin Luther King holiday in 2008, the U.S. markets were closed but … Continue reading

Singapore’s Energy Policy and Combatting Debt Deflation

Just read an interesting news article on a speech made by Singapore’s Minister of Trade and Industry on setting Singapore’s energy policies to achieve cost competitiveness, energy security, and sustainability. Some interesting points: Regulatory measures need to account for the underlying economics and give certainty over the amount of carbon reduced. Putting a price on … Continue reading

Meflation

Jason Zweig wrote an interesting article on the fact that what really matters about inflation or deflation is how it impacts you, and either one can be beneficial or detrimental depending on your own personal circumstances (read the full article here). Key Points: Deflation negatively impacts (conversely inflation positively impacts) people’s job security, value of stocks, makes … Continue reading

Bernanke’s Brilliance

I am reading a book called The Holy Grail of Macroeconomics: Lessons from Japan’s Great Recession, by Richard Koo. His explanation of how and why Japan is in a recession is logical and convincing, and made me realise just how brilliant Bernanke’s ‘credit easing’ move was. It was simply an amazing masterstroke that has never … Continue reading

Book Review on A Concise Guide to Macroeconomics

Book: “A Concise Guide to Macroeconomics: What Managers, Executives, and Students Need to Know” by David A. Moss. Review: This is an excellent book! Can’t recommend it highly enough! This lays down clearly the basic relationships among economic variables without going into equations or formulas. It is what makes macroeconomics interesting. Key Points: Output The … Continue reading

Notes on Article on U.S. Debt by Alan Greenspan

A summary of a WSJ article on U.S. debt here, by Alan Greenspan (18 June 2010): Federal debt to the public has surged from $5.5 trillion to $8.6 trillion in the past 18 months. This is a sign of fiscal excess, which typically shows up as inflation and high long-term interest rates, but have not. … Continue reading

Gold is a Currency, Not an Inflation Hedge

Just read a WSJ article on Gold here. Thought that its pretty interesting. Main points: Gold is not a commodity, but is a currency. A commodity’s price is driven by inflation (e.g. silver, wheat, pork bellies). Gold’s correlation with inflation from 1978 is only 0.08. However, from 1973 onwards (when the dollar is no longer … Continue reading

Thoughts on Macroeconomics

Some thoughts: How wealthy or economically strong a country is depends on the real output (goods and services) of the country. The real output is independent of the currency. Another way to think about how wealthy is a country is in terms of how much is consumed by the country in terms of real goods … Continue reading

Effects of the Liquidity Crunch on Financing by Mortgage Companies

I was doing a very quick compilation of the effects of the liquidity crunch on the financing of some of the mortgage companies that I’m looking at. To set the background, the average interest rate for traditional 30-year fixed-rate mortgages is 6.25%, and the average interest rate for one-year adjustable rate mortgages is 6.34% (from … Continue reading

Reasons for the Current Liquidity/Credit Crunch

Thought I’d write a short note to document the reasons for the current liquidity/credit crunch. Lack of risk controls in underwriting: Loans were given to weak credit without documenting income, balance sheets, and without appraisals. These weak credit folks typically obtain ARMs with a low teaser rate for a first few years, but adjust back … Continue reading

Quick Compilation of Market Crashes

With the current liquidity/credit crisis, I thought it will be interesting to take a look at past crashes. Here’s a quick compilation (not comprehensive): 1901 – 1903 (17 Jun 1901 – 9 Nov 1903) – 46.1% drop in DJIA. 1906 – 1907 (19 Jan 1906 – 15 Nov 1907) – 48.5% drop in DJIA. 1916 … Continue reading

Buying on macro “trends”

Just read a Motley Fool article titled: 4 Critical Errors You Must Avoid http://www.fool.com/news/commentary/2005/commentary05122308.htm which reminded me of another Fool article titled: How to Double Your Money The lesson is the same. Basically, do not buy a company _just_ purely based on a peceived macroeconomic trend (aka hype). E.g. Nanotech is the next big thing, … Continue reading

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