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Pragmatic Capitalism

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Why Would Anyone Buy a Negative Interest Bearing Bond?

how

Good question here from the Q&A section about negative yielding bonds: Hi Cullen. The Economist had a good article explaining why people buy negative yielding bonds. http://www.economist.com/blogs/economist-explains/2016/02/economist-explains-6 Do you agree with their explanation? The Economist’s explanation is a bit odd as it leaves out the main reason that someone might want to buy a negative… Read More

Central Banks Didn’t Eat Your Lunch

macro

One of the consistent trends you’ll find in my econ and finance work is that I don’t think much about Central Banks. In other words, I think mainstream macro puts far too much emphasis on the efficacy of things that Central Bankers do.  This is why I said QE wouldn’t do much back in 2009… Read More

We’re in Uncharted Waters

macro

Last year I expressed the concern that the global economy of the future might be excessively influenced by a black box economy – China.  But as 2016 has picked up the turmoil that 2015 started, it’s become clear that this is not the global economy of the future.  It is the global economy we are dealing… Read More

Fiscal Policy Has Failed the US Economy

macro

The story of the post-crisis economic period is simple: The housing boom left the household sector mired in a deep debt hole. This was further exacerbated by the leverage Wall Street added on top of the household sector’s debt. This left the banks and household sector needing a great deal of support. Since 2008 we’ve… Read More

The Best Asset Price to Know Twenty Years Out

macro

Tyler Cowen asks a fun question here: “You are an investor with $10 million planning to cash out in 20 years. A genie appears and offers to send you the price of one but only one asset 20 years from now to inform your investment decisions (a stock, currency pair, commodity, equity index, etc.). What… Read More

Why Do Corporations Pay Dividends?

how

There is increasing chatter in recent years about share repurchases, dividends, corporate investment and the ideal way for firms to use capital.  But one question that economists can’t really agree on the answer to is why companies pay dividends at all?  As noted in an excellent Twitter conversation initiated by Matthew Yglesias, even great thinkers… Read More

Let’s Talk About the US Government’s Interest Burden

myth

Greg Ip had a piece in the Wall Street Journal yesterday discussing the debt burden in the USA and how low interest rates have “moved back” the “hands on the doomsday debt clock”.  The article touches on the important topic of entitlement spending and whether it’s sustainable, but does so in a manner that misleads readers… Read More

The Importance of Global Asset Allocation – Japan Edition

myth

I’m a big fan of owning a global financial asset portfolio consistent with something resembling the Global Financial Asset Portfolio (though, I would also add that this portfolio isn’t necessarily ideal).¹  If you’re a US investor this has looked like a pretty silly idea in the last few years as foreign stocks have been poor performers… Read More

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