Median stock prices show just how expensive the current market is: http://t.co/RSfcpGg9l8 pic.twitter.com/5fF3CQyJgn
— MarketWatch (@MarketWatch) February 14, 2015
Why do economic consulting firms exist?
02 Feb 2015 1 Comment
in applied price theory, economics of bureaucracy, economics of information, financial economics, law and economics, managerial economics, organisational economics, survivor principle Tags: advice giving industries, corporate law, Deirdre McCloskey, directors duties, economic consultants
Directors’ duties are the reason why the companies hire economic consultants. What consultants say isn’t important; the fact that simply the directors of a company sought advice is what matters. Same goes for the public sector: you must know what you’re doing, you took advice from outside experts.
Central to avoiding being sued if the company goes broke, or otherwise gets into a spot of bother, is the directors show that they acted responsibly.
Central to this is they can show they took advice from esteemed advisers: an accountant, a lawyer and an economist. If they did so, they must be responsible prudent directors because they took advice.
Deirdre McCloskey argued that the advising industry lives off 19th century case law on directors’ and trustees’ duties.
If you take advice – from an accountant, a lawyer or an economist – and the business or investment still fails, it can’t be your fault that you lost the widow’s and orphans’s inheritance.
You took advice. That is what that 19th-century court held with regard to what directors do and do not have to do given the fact that are not involved in the business on a day to day basis.
James Burk, a sociologist and former stockbroker… found that the advice giving industry sprang from legal decisions in the early 19th century.
The courts began to decide that the trustee of the pension fund or a child’s inheritance could be held liable for bad investing if they did not take advice. The effect would have been the same had the court decided that prudent man should consult a Ouija boards or the flight of birds…
America decided through its courts than an industry giving advice on the stock market should come into existence, whether or not it was worthless.
Therefore, it doesn’t matter what you say as a consultant economist to a company, the fact you’ve said something to them is more important to them than what you are saying. Seeking and receiving your advice excused them from being sued for breach of their directors duties for a couple of days.
Would Keynes Have Been Fired as a Money Manager Today?
30 Jan 2015 Leave a comment
in entrepreneurship, financial economics Tags: active investing, efficient markets hypothesis, index linked investing, John Maynard Keynes
An excellent link by a great blog I have just come across.
Interesting post by Ben Carlson.
Keynes managed an average return of 13.2% in the period 1928-45. The markets gave a return of -0.5% in the same period. This was an exceptional performance albeit came with much higher volatility. So would he have been fired for this performance?
View original post 360 more words
Can you invest in a trend?
14 Dec 2014 Leave a comment
in entrepreneurship, financial economics, industrial organisation, survivor principle Tags: creative destruction, efficient market hypothesis, market selection, survivor principle, The meaning of competition
What are the rewards of investing in vice?
05 Dec 2014 Leave a comment
in entrepreneurship, financial economics Tags: efficient markets hypothesis
What is the Vice Fund? It invests in a collection of sinful stocks. As its managers describe it:
Designed with the goal of delivering better risk-adjusted returns than the S&P 500 Index.
It invests primarily in stocks in the tobacco, alcohol, gaming and defense industries.
We believe these industries tend to thrive regardless of the economy as a whole.
via Investing in Vice.
Technology IPOs
25 Nov 2014 Leave a comment
in financial economics, industrial organisation, survivor principle, technological progress Tags: financial economics, IPOs
Offsetting behaviour alert: KiwiSaver and the Accumulation of Net Wealth (WP 14/22) — The Treasury
18 Nov 2014 Leave a comment
in applied price theory, applied welfare economics, economics of regulation, financial economics Tags: KiwiSaver, offsetting behaviour
Abstract
The objective of this paper is to analyse the extent to which membership of KiwiSaver has been associated with greater accumulations of net wealth.
The paper utilises two linked sources of data which cover the period 2002 to 2010: Statistics New Zealand’s Survey of Family, Income and Employment and Inland Revenue Department administrative data on KiwiSaver membership.
Two approaches are employed: difference-in-differences (where the outcomes of interest are changes in net wealth) and various panel regression techniques.
Results appear consistent with earlier evaluations of KiwiSaver. Neither approach suggests KiwiSaver membership has been associated with any positive effect on net wealth accumulation.
via KiwiSaver and the Accumulation of Net Wealth (WP 14/22) — The Treasury – New Zealand.
David I. Levine on entrepreneurial alertness and the efficient markets hypothesis
13 Nov 2014 Leave a comment
The share market speaks: the boom in marijuana shares
03 Oct 2014 Leave a comment
in applied price theory, economics of crime, economics of regulation, entrepreneurship, financial economics, industrial organisation Tags: marijuana decriminalisation, marijuana legalisation
Over the past two years, investors bid up penny stocks, which are stocks that trade for less than $5 a share, for marijuana from a $500,000 market to more than $7 billion.
The sale and use of marijuana is now approved for medical purposes in 22 states and the District of Columbia and is legal for recreational sales in Colorado and Washington state.
Among those will have to put their money where their mouth is, their entrepreneurial forecast is marijuana legalisation is only going to spread and the legal marijuana market is going to grow. Florida will vote on legalizing medical marijuana, and recent polls suggest the measure has the support needed to pass.
In February 2014, President Obama signed a law that allows states to experiment with industrial hemp. In response, 17 states have removed barriers to hemp production.
HT: Vox.com/marijuana-legalization-maps-charts-facts and https://twitter.com/business/status/479287579263524864
The reality of green investing
28 Sep 2014 Leave a comment
in environmental economics, environmentalism, financial economics Tags: green investing
How to beat the share market
15 Aug 2014 Leave a comment
in economics of crime, financial economics, Public Choice, rentseeking Tags: insider trading, official corruption
Become a United States senator. Their share portfolios out-perform the best of the best hedge fund managers, and the best hedge fund manager was paid 3 1/2 billion dollars last year; to get on the list for the top hedge fund manager, you make at least $300 million a year. Good things that politicians know how to outperform them on their modest salaries and busy schedules of public engagements and parliamentary sittings.
Using the financial disclosures of politicians, "Abnormal Returns From the Common Stock Investments of Members of the U.S. House of Representatives," built model portfolios and charted their performance. They found that House members outperform the market by 6 percentage points. Senators do even better, the authors say, citing their own earlier research from 2004.
Senate portfolios "show some of the highest excess returns ever recorded over a long period of time, significantly outperforming even hedge fund managers," with gains that are "both economically large and statistically significant."
These results suggest that congressmen and senators have access to non-public information on particular businesses, industries or the economy as a whole and invest on the basis that information. The good returns of Senators and Congressmen last far too long to be no more than luck.
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