"Some people who seem crazy turn out to be smart after all. Apparently that is what Fama thinks. I think they are just crazy," Shiller said, conceding his remarks "may be insulting" to his fellow laureate.
More here. I'm with Shiller, of course.
Tuesday, December 10, 2013
Friday, November 22, 2013
Tuesday, November 19, 2013
Quotes of the Day
"One of my few economic heroes, Kenneth Boulding, said that while mathematics had indeed introduced rigor into economics, it unfortunately also brought mortis."
"Being wrong on your own, as Keynes describes so eloquently in Chapter 12 of The General Theory, is the cardinal crime for an investment manager. To avoid this, the professionals try very hard to ensure that if they are going to run off any cliff they will: a) have a lot of company; and b) that most of the company will be one step ahead."
Both of these are from Jeremy Grantham's November letter to clients, available here as a PDF. An excellent letter from Ben Inker, a younger colleague of Grantham, is part of the same document. Both are well worth reading, as usual.
Thursday, November 14, 2013
How Janet Yellen Misvalues the Stock Market
A careful argument by Andrew Smithers, at the PBS NewsHour's Making Sen$e page.
One hopes that central bankers will be better at spotting market excesses in the future than they have been in the past. I applaud Andrew for trying to keep them more focused on this important topic than they tend to be, and for backing his argument so thoroughly with data.
One hopes that central bankers will be better at spotting market excesses in the future than they have been in the past. I applaud Andrew for trying to keep them more focused on this important topic than they tend to be, and for backing his argument so thoroughly with data.
Sunday, November 3, 2013
How Econometrics Got Used as a Weapon in WWII
Sounds surprising, but a set of econometric equations was essential to the wartime development of the gunsight of the B-29 bomber.
I recorded an interview a few months ago with Charlie Roos on this topic.
Charlie is an emeritus professor of physics at Vanderbilt University. His father, Charles F. Roos, was the chief economist of the National Recovery Administration under FDR, and one of the founders of econometrics (along with Irving Fisher and Ragnar Frisch).
The video I have linked goes for three minutes. There is a much longer interview with Charlie about his father's work and more, which you can get to via the pop-up at the end.
I recorded an interview a few months ago with Charlie Roos on this topic.
Charlie is an emeritus professor of physics at Vanderbilt University. His father, Charles F. Roos, was the chief economist of the National Recovery Administration under FDR, and one of the founders of econometrics (along with Irving Fisher and Ragnar Frisch).
The video I have linked goes for three minutes. There is a much longer interview with Charlie about his father's work and more, which you can get to via the pop-up at the end.
Friday, November 1, 2013
Friday, October 25, 2013
Matt Brice's Blog, and More
I am really enjoying Matt Brice's blog. He is the principal at The Sova Group, a new money management firm.
Very smart guy.
Here is a typically nice post of his. In it, he contrasts two economists who won Nobel prizes earlier this month, Eugene Fama and Robert Shiller. Like Matt, I am a Shiller fan. (If you have been reading this blog, that's not news.)
At the link, you'll see a description of one finance course offered by Fama, and another offered by Shiller. Fama's course is, in esssence, really about math; his models capture somewhat less of the world than Fama believes. Shiller, on the other hand, is actually trying to study reality directly, in all its messiness.
The world is big enough to house both modes of thought, but I agree with Matt that studying with Shiller's approach is going to be a much better use of time.
Matt and I think in similar ways about investments. Coincidentally (?), we each are non-practicing lawyers; and we each worked, prior to becoming investment managers, in mergers and acquisitions. Observing the workings of financial markets up close will cure almost anyone of the tendency to be overly impressed with pure math as a way of describing them.
Speaking of which, there is a wonderful new interview in the Finanical Times of Alan Greenspan, by Gillian Tett. Of interest: Greenspan's own belated, post-crisis realization of the limited ability we have to model financial markets mathematically. Link is here (registration may be required). What took him so long?
Don't get me wrong; I believe in valuing companies largely based on numbers. But that's very different from predicting where securities will trade in the market in the short and medium term. As Ben Graham put it, the market is a voting machine in the short run, and a weighing machine in the long run.
De gustibus non est disputandum -- and non est computandum, too.
Very smart guy.
Here is a typically nice post of his. In it, he contrasts two economists who won Nobel prizes earlier this month, Eugene Fama and Robert Shiller. Like Matt, I am a Shiller fan. (If you have been reading this blog, that's not news.)
At the link, you'll see a description of one finance course offered by Fama, and another offered by Shiller. Fama's course is, in esssence, really about math; his models capture somewhat less of the world than Fama believes. Shiller, on the other hand, is actually trying to study reality directly, in all its messiness.
The world is big enough to house both modes of thought, but I agree with Matt that studying with Shiller's approach is going to be a much better use of time.
Matt and I think in similar ways about investments. Coincidentally (?), we each are non-practicing lawyers; and we each worked, prior to becoming investment managers, in mergers and acquisitions. Observing the workings of financial markets up close will cure almost anyone of the tendency to be overly impressed with pure math as a way of describing them.
Speaking of which, there is a wonderful new interview in the Finanical Times of Alan Greenspan, by Gillian Tett. Of interest: Greenspan's own belated, post-crisis realization of the limited ability we have to model financial markets mathematically. Link is here (registration may be required). What took him so long?
Don't get me wrong; I believe in valuing companies largely based on numbers. But that's very different from predicting where securities will trade in the market in the short and medium term. As Ben Graham put it, the market is a voting machine in the short run, and a weighing machine in the long run.
De gustibus non est disputandum -- and non est computandum, too.
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