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Observation Number 11: Do some estate planning
Often, when it comes to questions of personal tax, I hear people say that it’s an issue for their accountant; usually followed by a woeful story about how bad that one year was when they had a tax audit. And economic policy gets a dull glazing of the eyes. Which is fair enough, I guess. […]
read moreObservation Number 10: Yuan Convertibility won’t be good for America
If media coverage were a gauge of importance, China’s fixed exchange rate regime would be almost entirely responsible for America’s ills. But someone needs to point out to the Americans that a weaker Yuan would not necessarily be a good thing. The current Argument: China keeps the Yuan artificially weak by building up foreign currency […]
read moreObservation Number 9: Paul Krugman isn’t always right
Paul Krugman has a blog on the New York Times Website. He’s a professor at both Princeton and the London School of Economics (LSE). And in 2008, he won a Nobel Price for his work on New Trade Theory and New Economic Geography*. He did not, however, win a Nobel Prize for his work on […]
read moreObservation Number 8: All Hail the Limited Liability Company
The world would not be the same without limited liability companies: the veil behind which all debtors can hide. Maybe it’s because we no longer read Dickens; but I think we forget that there was a time when failing to pay your debts resulted in jailing. I also recall a New Testament parable about a […]
read moreObservation Number 7: Short-term Gratification Killed the West
Somewhere in all the economic growth, we have forgotten that long-term sustainability (however you define it) usually comes at short-term cost. But for a world of instant-gratifiers… That’s not so easy. Here are some graphs showing how long we tend to own a particular share: Traditionally, the long-term holders of shares are the big pension […]
read moreLies and Statistics
If there is one thing that categorizes politics, it’s statistics. If only because it has the drama factor. For example, two headlines: “WORLD POPULATION TO DOUBLE BY 2050” and “World population increases by 1.8% in 2012. Trend expected to continue.” They are, in fact, the same headline*. But the impact is not the same; and […]
read moreObservation Number 5: Efficient Market Hypothesis?
One of the underlying principles of finance is the efficient market hypothesis (EMH), or a semi-strong version thereof*. The EMH says that all relevant information about a share/bond/commodity/index gets rapidly absorbed by the market (being the group of investors interested that particular asset) and included in the quoted price. The price thus becomes the great […]
read moreObservation Number 4: More on the Value VS Price Misconception
The Occupy Wall Street movement is a complete enigma. I mean – I know what they’re trying to say. But they’re just so so so wrong. To the point of frustration and the bringing of many tears to my eyes. And their main gripe, from what I can tell, is that the OWS protesters are […]
read moreObservation Number 3: Value is not a Stock Price
For anyone reading this that’s not an accountant, I should tell you that one of the big debates rocking the financial-reporting world is the concept of “fair value”. Because that’s what every investor wants to know: “yes, I know that’s the price you bought it for – but what’s it worth, man?” The answer is […]
read moreObservation Number 2: Free Markets are a Lie
I am very skeptical of “free-market” economists that promote deregulation and the worship of Alan Greenspan. Free Market Economists make the argument that if people were left to their own devices, they would naturally make the most efficient allocation of resources. And the reason for market inefficiencies (like crashes) is government intervention. If the government […]
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