The Dow cannot defy gravity. The higher it rises, the harder it will fall.
Category: Macro
Three Things Investors Can Learn from Surfers
Ocean conditions can be calm one day only to be rough the next. This volatility is an important aspect of surfing because different ocean conditions call for different surfboards. Avid surfers know they are required to own a diverse collection of surfboards, allowing them to ride a variety of waves. From an investor’s perspective, market conditions are also constantly changing and, as in surfing, no single investment vehicle works well in every market condition. Thus, diversification is as imperative when investing as it is when surfing.
Beggar Thy Currency Or Thy Self?
Unlike the old days, the threat of currency wars is not directly related to trade imbalances and balance-of-payments crises. Rather, an important driver is major central banks’ pursuit of experimental measures in order to compensate for policy inadequacies and political dysfunction elsewhere.
Credit Supernova!
Credit is now funneled increasingly into market speculation as opposed to productive innovation. Asset price appreciation as opposed to simple yield or “carry” is now critical to maintain the system’s momentum and longevity. Investment banking, which only a decade ago promoted small business development and transition to public markets, now is dominated by leveraged speculation and the Ponzi finance Minsky once warned against.
Innovation Crisis or Financial Crisis?
In a forthcoming book, they argue that the collapse of advanced-country growth is not merely a result of the financial crisis; at its root, they argue, these countries’ weakness reflects secular stagnation in technology and innovation. As such, they are unlikely to see any sustained pickup in productivity growth without radical changes in innovation policy.
Abnormal Capitalist 