In 2008 Warren Buffet made a big bet against hedge funds. He claimed that an investor would be better off following a passive investment strategy by dumping his savings into a low cost index tracker than by handing them to a hedge fund that would actively manage the money for an expensive “two and twenty”…
In my blog Don’t Fight The Fed, Fight The ECB, published last week, I said that investors face an epic opportunity to short bonds, as the risks of doing so are very narrow while the upside potential is huge. Buying an asset just because you believe someone else will buy it from you at a…
An Opinion Worth Millions Whoever thought Ben Bernanke’s golden age was terminated on 1st February, 2014, with the end of his tenure as chairman of the US Federal Reserve, was just plain wrong. The ex-chairman has been on a tight and busy schedule for the past year, travelling from town to town, disseminating his wisdom…
The Election Day Is Nearing… Five years have passed since the last General Election and the UK is preparing for a new one. All parties involved are now aggressively marketing their political plans with each of them greatly amplifying its strengths while trying to cloak its weaknesses. The fight will be fierce and eventually extend…
While central bankers look tranquil and trustworthy on their television appearances, giving investors reassurances that a brighter future is just around the corner and praising their timely and bold policy actions, there is a growing number of other professionals that still raise questions about the real effectiveness of such action and that are not at…
The problem with central banks is that they initially wanted to be independent from us but now they want us to be dependent on them. Many years ago, there was a time when economic policy was part of a government’s list of affairs, with both fiscal and monetary policy being part of it. But, for…
Featured in this month’s Master Investor Magazine. Planting the Seeds The financial crisis of 2007-2009 is often seen as one of the worst ever crises faced by the US economy. The capitalisation of the S&P 500 was halved, the unemployment rate was doubled, and the Federal Reserve had to go out of bounds in rescuing…
Featured in this month’s Master Investor Magazine. On 22nd February, Patricia Arquette came to the stage of the Dolby Theatre in Hollywood to be awarded the Oscar for the Best Performance by an Actress in a Supporting Role for her superb performance in Boyhood. But while her award did not take many of us by…
One of the most important concepts in modern finance – and one that I always insist my students master – is that of arbitrage. Unlike speculators (or investors) who seek risks for the sake of netting a profit, arbitrageurs don’t take any risks for the same sake. They exploit differences in prices for similar financial…
While the US Federal Reserve and the ECB have been busily adopting counter-cyclical measures aimed at stabilising economic growth and price increases, commercial banks have been at the other extreme, always frustrating such measures and acting pro-cyclically. The Fractional Reserve system that allows for faster credit creation than the economy can absorb is the main…
