Is the Bond Market Threatening the Deficit Spending Consensus, and Will It Reverse the Inflationary Asset Boom?

With the interest rates the U.S. Treasury having to pay rising almost daily now, despite the Fed’s renewed Treasury bond-buying program, the expectations the government has had for its interest expense are looking low now.  We shall just have to see whether tax receipts are rising by at least the same amount as interest costs [...]


Investors Remain Optimistic in the Face of Declining Stock Market Prices

Last weekend, I said that risk assets were getting frothy, and showed that speculation was rampant in several financial sectors.  I also pointed out that essentially the entirety of the total return to investors for several years, and perhaps for several decades, might be able to be explained by the appreciation in price (decline in [...]


Why It is No Longer a Good Idea to Be in The Investment Industry

A spurious tail is the performance of a certain number of operators that is entirely caused by luck, what is  called the “lucky fool” in Taleb (2001). Because of winner-take-all-effects (from globalization), spurious performance increases with time and explodes under fat tails in  alarming proportions. An operator starting today, no matter [...]


Looking Forward to the FOMC Meeting and Beyond: Speculations

Here’s a guess about what the Fed will say Wednesday following the FOMC meeting.  There is no justification for another formal QE program, so I would be very surprised if one were announced (rather than hinted about).  The two main reasons for this view is that the major crisis is in Europe, and the U.S. Federal [...]



Here is a long-term chart of Bank of America stock (which includes its stock under its prior name of Nations Bank).  This is on a semi-log scale, courtesy of Yahoo.


What the graph is shows is that since the stock’s peak a few years ago, it has been in a sharp [...]


John Paulson Needs To Go Austrian

John Paulson, the hedge-funder who made a personal fortune of $5 billion in 2010, is now seen as a goat rather than as the “top kid” on the hedge fund block because of recent big losses.

Paulson suffered a huge loss on his firm’s investment in Sino-Forest Corp, a Chinese tree plantation grower. Reports of balance [...]