Pragmatic Capitalism

Practical Views on Money & Finance

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What if There Are no Reliable Factors?

I’ve always been bothered by the notion of “factor investing”. In case you don’t know, factor investing is derived from Eugene Fama’s various factor models (which have expanded over time to account for increasing inconsistencies in the Efficient Market Hypothesis). Fama started with 1 factor to explain the market’s movements, expanded it to 3, then… Read More

Which is it Paul: Natural Rate or Not? (Nerdy)

This will only interest the super nerds in the audience, but Roger Farmer has a great post up in which he discusses the idea of multiple equilibria in the economy and the underlying models at work. Roger is talking about how the economy doesn’t have a single equilibria, but instead shifts into differing equilibria at… Read More

The Operational Dominance of Inside Money

I’ve argued over the years that inside money must, by necessity, take precedent in our monetary system over outside money. That is, bank money (which is created INSIDE the private sector by banks as deposits) exists as the dominant form of money in the monetary system and OUTSIDE money (which is created outside the private… Read More

The Fear Trade Is Still Being Demolished

I wrote this post about two years ago, but its message and lessons are as relevant today as they were back then: The economy continues to do okay, the stock market is hitting all-time highs every day, real estate is back on the up and up, interest rates remain very low by historical terms, the… Read More

3 Valuable Lessons From the Nasdaq Bubble

It only took 15 years, but the Nasdaq has finally set a new record high. I always like to say that the biggest mistakes make for the biggest lessons. So, what can we learn from this grueling 15 year round trip? 1) Diversification Works. The biggest lesson from the Nasdaq bubble is the simple lesson of… Read More

Why Financial Stability Has Become Increasingly Important

One of the hottest debates in economics today is about the topic of financial stability and whether the Federal Reserve and other policymakers should be concerned with trying to stabilize the financial markets at times. Many prominent economists argue vehemently that the Fed shouldn’t be concerned with such matters while many others argue that financial… Read More