Uh-oh: Emmanuel ‘anti-establishment’ Macron joins the establishment

Within minutes of polling the highest vote tally of the French Presidential hopefuls, the Independent Emmanuel Macron received a slew of endorsements from the defeated conservatives, socialists and communists, as well as the leaders of the EU, the media and even the German chancellor Angela Merkel. Welcome to the Establishment M. Macron. The outpouring of […]

The free traders dirty little secret PLUS what happens when the Fed starts selling?

Free traders’ dirty little secret It all started with Adam Smith and David Ricardo who together formulated the theory of absolute and comparative advantage. Basically, they opined that the reason countries experience rapid growth is because they get to specialise in the industries which have the lowest resource cost to themselves, and then trade with […]

The ingeneous man Don Trump of la Mancha

Just like Cervante’s classic “The ingeneous man Don Quixote of la Mancha”, Don Trump will provide many enjoyable hours of entertainment as he tilts at the establishment windmill that is ‘the US Government’.  Just like Don Quixote, Don Trump will find his windmill impossible to beat…an impossible dream. But whereas Don Quixote led a self-important […]

A property developer’s approach to policy

There is an old joke about the guy who dies and has a choice between heaven and hell. He first visits heaven and sees a bunch of bored people being good. Hell, on the other hand, is a party atmosphere – bars, dancing, action. So he chooses hell. But when he turns up, its all […]

Low cash rates and manager skill….plus the First Degree US election special

Low cash rates and manager skill The Finance field has many strong statements about the structure of relative returns but it is weak when it comes to statements about absolute returns.  For  example, the risk-return paradigm suggests that asset classes which exhibit low volatility should have relatively low returns compared with high volatility asset classes. […]

Don’t fool yourself: Gold is not an inflation hedge

A JPMorgan banker asked me many years ago what I would recommend as an inflation hedge.  “Inflation-indexed bonds” was my first response, however I recanted that suggestion a few minutes later, noting that Inflation-indexed bonds still carried substantial real-interest rate exposure.  Further reflection led me to suggest cash, since the cash-rate is targeted by Central […]

Falling velocity: A note on falling (or is that rising?) money demand

The velocity of circulation of money has fallen dramatically since 2008. The diagram above demonstrates that velocity has fallen to half of its peak in 2008, back to levels last experienced in the 1970s. In previous posts I claimed that this is an indication of lower demand for money for transactions purposes – that is, […]

Life after credit rationing

My 7 year old son has 2 close friends, J and S. Like my son, J has been unrestricted with his access to his Ipad while S has been limited to 1 hour surfing per day. When the 3 boys get together, J and my son spend most of their time running, riding their scooters, […]

Meet the NEW real interest rate

In Japan, short term Tbills have a negative yield of -0.25% while inflation is negative -0.4%.   The real interest rate is positve, roughly +0.15%. In the US, short term Tbills have a positive yield of 0.25% while inflation is positive 1.0%.   The real interest rate is negative, roughly -0.75%. It may come as a surprise […]

The ‘Brand EU’ Dilemma

The ‘prisoner’s dilemma’ is the classic sub-optimal equilibrium example in Game Theory. 2 prisoners are being interrogated separately. Each faces the same decision – if they remain silent they each get 3 months jail. But if one blames the other, and the other remains silent, the whistleblower walks free while the other gets life imprisonment. […]