Five Mysteries Surrounding Low and Negative Interest Rates

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Zero and negative nominal interest rates are something new under the sun. In 3,800 years of history, we’ve only observed near-zero rates a few times, and almost never negative ones. Of course, real rates have been negative for extended periods, but this is different. There is much that we do know about the relationship between nominal interest rates, inflation, real …

Middle-Class Wage Stagnation Is a First-World Problem – The World is Getting Richer

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A common lament during the presidential campaign was middle-class income stagnation and the wealth of the top 1%. But are most people getting poorer while the rich get richer? In a sparkling – and delightfully short – new contribution to the econo-optimist genre, Johan Norberg, author of Progress: Ten Reasons to Look Forward to the Future, emphatically answers “no.” Consider …

The Bromance that Turned Economics Upside Down

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Who would guess that the modern sciences of behavioral economics and the psychology of decision-making owe their origin to a love affair (no, not sexual) between two men born early in the last century and so different that one could barely imagine them speaking to each other? Yet that is the story chronicled by the extraordinary nonfiction writer Michael Lewis …

Defined Contribution Retirement Plans Should Look and Feel More Like Defined Benefit Plans

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Why have defined contribution (DC) retirement plans delivered such uneven—and, on average, inadequate—results? How can DC sponsors, who are charged with most of the responsibility for retirement security in the United States and elsewhere, do better—much better? Can DC sponsors learn from defined benefit (DB) plans, which did achieve desirable outcomes in many cases? Can they hold on to the …

A Prediction for the Future of Active Management

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What effect will the index fund revolution and the Department of Labor’s (DOL) fiduciary rule have on active managers? The data shows that active management is still a healthy business model. But industry consolidation is coming and advisors will need to change the way they construct portfolios. Indexing is a very low-fee business, with the standard-setting fund Vanguard Index 500 …

How Should History Judge Alan Greenspan?

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If you care about finance and markets, you may think that the Fed chairman or chairwoman, not the U.S. president, is the most powerful person in the world. Thus, Alan Greenspan, who held that position longer than anyone else except William McChesney Martin a generation earlier, was arguably the most influential public official in the lifetimes of most readers of …

The Only Saving Rate Article You Will Ever Need

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How much do savers need to save in order to meet their retirement income goals? While a great deal of effort has been expended in search of answers to this question, it turns out that a very simple and practical answer is almost in plain sight. It is under a small rock, the rock being the ordinary and familiar time-value-of-money …

Floods and Deserts: Why the Dream of a Secure Pension for Everyone is Still Unattained

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Why have defined benefit (DB) pension plans, arguably the most elegantly engineered financial service ever created, stumbled so badly? Less than fifty years after achieving wide acceptance and providing predictable and secure benefits to their participants, many DB plans have been terminated, while others struggle to attain adequate funding levels. Many of the terminated DB plans have been replaced with …

Is It Science or Is It Baloney?

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Which currently popular investment fads are flashes in the pan, and which are actually worthy innovations? Which are somewhere in between? Because the theoretical or academic pedigree of an investment strategy helps mightily to sell it, marketers often represent whatever they’re selling as “real science,” with roots in the work of Nobel Prize-winning financial economists. Some of these claims are …

How Should History Judge Alan Greenspan?

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If you care about finance and markets, you may think that the Fed chairman or chairwoman, not the U.S. president, is the most powerful person in the world. Thus, Alan Greenspan, who held that position longer than anyone else except William McChesney Martin a generation earlier, was arguably the most influential public official in the lifetimes of most readers of …

CAPMing the CAPE: Shiller-Siegel Shootout at the Q Group Corral, Part 2

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The CAPE ratio, Cyclically Adjusted Price Earnings ratio, is a version of the price/earnings (PE) ratio popularized by Robert Shiller. It is widely used to assess the richness or cheapness of the equity market relative to its own history, and to make forecasts of the long-run return on equities, a vital input into asset allocation processes and retirement saving and …

McKinsey Assesses Future Stock and Bond Returns – AJO

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Are stocks’ glory days behind us? What about bonds? As the late Merle Haggard asked in song, “Are the good times really over for good?” A widely circulated McKinsey Global Institute (MGI) report, Diminishing Returns: Why Investors May Need to Lower Their Expectations, suggests that they are. The report makes the case that both stock and bond returns over 1985-2014 …

McKinsey Assesses Future Stock and Bond Returns

Laurence Articles 0 Comments

Are stocks’ glory days behind us? What about bonds? As the late Merle Haggard asked in song, “Are the good times really over for good?” A widely circulated McKinsey Global Institute (MGI) report, Diminishing Returns: Why Investors May Need to Lower Their Expectations, suggests that they are. The report makes the case that both stock and bond returns over 1985-2014 …

Five Mysteries Surrounding Low and Negative Interest Rates

Laurence Articles 0 Comments

Zero and negative nominal interest rates are something new under the sun. In 3800 years of history, we’ve only observed near-zero rates a few times, and almost never negative ones. Of course, real rates have been negative for extended periods, but this is different. There is much that we do know about the relationship between interest rates, inflation, savings, real …

Busted! Nine Hoary Myths of Investing; Be Not Afraid

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On April 29, 2010, I spoke on “nine myths of investing” at the Terrapinn Brasil Investment Summit in São Paulo, Brazil. Popular myths do not die quickly but they gradually change — as do markets, which have doubled in the meantime — so here is an update.

Debunking Nine Myths of Investing

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On April 29, 2010, I spoke on “nine myths of investing” at the Terrapinn Brasil Investment Summit in São Paulo, Brazil. Popular myths do not die quickly but they gradually change — as do markets, which have doubled in the meantime — so here is an update.