Thursday, February 25, 2010

2.25.10 "the only measure that really matters: the Most Widely Respected Finance Blog that No-one Ever Reads."

Ten Wall Street Blogs You Need To Bookmark Now. David Wiedner, WSJ. Not on there yet. Maybe next year.

Resistance is futile: Why buy-and-hold beats value investing. Pop Economics. The market may or may not be efficient in some philosophical or theoretical sense, but to YOU, owner of a Schwab account and more gonads than grey matter, it probably is efficient. Cruelly so.

Two Points on Greece and CDS from felix: here and here. At risk of referencing pop culture and murdering a few metaphors, Credit Default Swaps don't kill people, and kvetching about CDS's role in the financial meltdown is a little bit like complaining that guns kill people during wars.

Jeff's Intermediate Micro Course. Because we all had so much fun drawing lines on white boards and then shifting and rotating them.

Friday, February 12, 2010

02.12.10 "Its major role is to transform the forms of wealth that exist in the economy into forms of wealth that savers want to hold."

Our title today is from an off hand comment that Brad DeLong made (in subsection 5). It is worth quoting at length, as it seems to be a good summary of "the money markets" which I suspect we will be getting into shortly:

The financial-monetary sector does a lot more than facilitate exchange--a problem that was solved by the invention of coinage under Gyges King of Lydia 2800 years ago. The financial-monetary structure does facilitate exchange, but that is only one of its roles. Its major role is to transform the forms of wealth that exist in the economy into forms of wealth that savers want to hold. The forms of wealth that exist in the economy are long-term illiquid risky projects and organizations that require a good deal of supervision and oversight. The forms of wealth that savers want to hold are short-term liquid safe assets that can be left to manage themselves. To move from one to the other financiers must (a) find people tolerant of bearing risk, (b) people willing to monitor and oversee, (c) people to make markets to create liquidity, while (d) betting that the law of large numbers can keep the whole thing from crashing down as they try to maximize their profits by paying the minimum to outside risk bearers, monitors, and market-makers.

Inventory cycle and GDP. Calculated Risk. A wonderful illustration of overinvestment in inventories.

Economists' Hubris - The Case of Risk Management. SSRN. Yet another in the ongoing series of "models are guidelines."

Microlender Accion USA Avoids 'Antipoverty' Pitch. American Banker (H/T Felix, i think).

Paying Zero for Public Services. WorldBank

The Nordics in the global crisis . VoxEu

An Interview with Paul Samuelson. New Yorker.

Time to go read the Macro Chapter 4.

Tuesday, February 9, 2010

02.09.10 Scientifical Learnings of Kazachian Macroeconomists for Make Benefit Glorious Nation of America

The title of today's blog post comes from the byline of The Money Demand, who links to three posts on the EMH

More from Scott Sumner on the EMH

Which leads me to post my favorite chart on the supply and demand of EMH:

From: The supply and demand for (belief in) EMH

The downward-sloping (hence "demand") curve shows the extent to which EMH is true as a function of the extent to which people believe EMH is true. At one extreme, if nobody believes that EMH is true, so people believe there is no relation between market prices and fundamental values, then each individual has a strong incentive to research carefully the fundamental values of assets before buying and selling, and so market prices will reflect all the information available to everyone, so EMH will be true. At the other extreme, if everyone believes EMH is true, so that market prices already reflect all available information on fundamental values, then no individual has any incentive to collect and process that information, and everybody picks assets by throwing darts, or buys the index, so market prices will not reflect any available information on fundamentals, so EMH will be false.

Markets, in general, reflect all available information because people don't believe that they can figure out something that the market doesn't know. This has different implications for an asset manager than it does for a central banker.

In which I read more of Brad DeLong's back catalogue: The Triumph of Monetarism? which is a great history of whatever war we pretend Monetarism and Keynesian to be in.

Profits are Good. Falkenblog.

Sunday, February 7, 2010

02.07.10 Post-Modern Theories of Central Banks

Interest rate targeting as a social construction. Worthwhile Canadian Initiative. Up next, Lacanian Mirror State and the Flow of Funds Model.

d short's newest graph: The Road To Recovery. d short.

Is the International Role of the Dollar Changing? NY Fed.

For the marketing majors: What's more persuasive: fiction or non-fiction? Barking up the wrong tree. The takeaway: Bonding with characters makes people lower their guard.

When you can deduct the cost of your MBA. NYTimes

If a 10-pound note is lying on the ground in Davos, will a billionaire pick it up?

An Historical Look at the Budget

Brad DeLong linked to a very old post he did about the Keynesian Counter Revolution, which basically melded both Monetary Theory and Keynesian Theory, but the site is intermittent.